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tv   U.S. Senate  CSPAN  May 20, 2011 12:00pm-5:00pm EDT

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>> history, as you know, is much more than politics, soldiers, social issues. it's also a medicine, science, art, music, theater, poetry and ideas. and we shouldn't lump things into categories. it's all part of the same thing. >> no one succeeds in life by themselves. you must be willing to lean on others, to listen to others and yes, love others.
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>> about a hundred journalists attended a news conference with russian president dmitry medvedev. in a 35 minute proportionate tax about the antimissile defense system in europe and warns that a new code with it u.s. and russia failed to agree on this. he looks at brescia and relationship with vladimir putin and avoids the question on whether he will run for reelection in 2012. [applause] >> thank you. >> translator: esteemed colleagues, please allow me to welcome you. there are a lot of reporters
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here. i have been informed that there are over 800 media people here and i'm very pleased there's so much interest in this conference. i can't complain that i'm not spending enough time with the press though. i need them all the time, both during my daily work and during my travel to the constituents and the russian federation. and over the last two years when i worked at the government, i had quite a few of those and i have virtually all the different regions of this country, except for two. but i will soon visit those remaining two as well. i have met many of the members of our regional press. there has not been such a major
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press conference before. also there is a reason for that and it makes sense to have a press conference like that to share impressions about this country has been what is going on internationally. once again i'd like to thank you for your interest in the press conference and i'm positive that i am headed toward some interesting questions although i don't know how interesting you find the answers. i'm excited to start work, so let's get to it. and that was nice. just one last thing -- one logistical remark. it seems to be the first press conference in the history of this country, where the president is going to also be the emcee, there's not going to be anybody taking questions. if you don't have a problem, i
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will simply point my fingers that you can simply say so of those segments by so and so sir or ma'am and i will then expect you to, you know, get up and start asking questions. to get going, i think it would be appropriate to first pass for two television. i just insert a per love here. serge, there was an interesting conversation. so by way of responding to that, i would like to give you the right to ask the first question. transco thank you. what i would like to ask about that irreversibility. we are used to calling kosovo capital of innovation and it is outside the beltway, which is a vicious circle, if you will.
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it also has its own fans. so to say, how would you evaluate the deaths in reversibility of modernization in this country since the article, russia was published? >> translator: you know, i don't think we should proceed from the premise that russia has come. i remember a certain point in time in the past week were celebrating the first year we all know the latitude. organization is approached as a very different process. from my perspective the most important thing is to acquire a new dimension of development. organization is just a momentum going forward and successes we have achieved over the last 10 years. we are talking about an invitation and i'm absolutely positive this is not achieved
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here. although it does not mean we should change the flags and talk about a new wave of modernization. the five priorities i have outlined should remain as technological, yet very important use of work. and there are government and state run programs apply to all of these avenues. they are being funded and implemented. had he done anything extraordinary? no, we have not. this is exactly what will be my biggest motivation, mine and my colleagues in the government so we can work very vigorously, day and night and change the very life in this country. that is what i would like to emphasize one more time modernization is the most important avenue of development in this country and in my view, they should flee to qualitative change in this country and not just to us marking some kind of
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anniversary. however, it is especially important for me to talk about this here in skolkovo he can this was a very special place, one that has greater significance -- landmark significance because it exactly here that the skolkovo university, skolkovo school were sent out. it is here that the innovation center will be established and i would like for this brand to be truly known around the world. and not because it is the only place that wendy's to make investments in, but rather because in any kind of development, any kind of pause, there should be essential, most important elements, which becomes a structure for the entire effort. and the sense i'm hoping that said hicks will become the single most important link in the chain of modernization. the most important one, but not
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the only one. i would like to thank everybody was working it out or in the subject, including the fact they have provided this room for us so that we can have a press conference. i think it's more interesting to have it here. i would like to ask you is the head of state and a trained lawyer. first come in your view, what is the relationship and what is your good that relationship has with the united states and the west and nato? what are the problems and what is the progress that has been made? another question is also international, but it is also legal. it concerns the domestic russian life. recently it has been debated the russian government about whether or not it is manageable for russia to comply with decisions made by the court for human rights because their many decisions that have to do with
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the imperial subjects in the very spirit of compliance. what to think about russia's compliance with each of our decisions? thank you. >> translator: the subject of russia's relationship with nato is very fast. it is some name that concerns me every day because literally every day this is one of the things that i spent time on when i hear reports by ministers, when i read reports by special services or when i prepare myself for functions at which i have meetings with foreign leaders, many whom represent me know. i believe the relationship with nato at this point in time is decent and i believe it works well for both sides. we did have an intense dramatic theory when we essentially
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stopped the relationship that came from the north atlantic alliance. as that at this point it's up to them. if they don't want to cooperate, i'm talking about august 2008. a lot of water has come under the bridge since then. i think in general everything is developing. i am looking forward to lisbon for the russia nato summit. we agree to incorporate what are the most important strategic items on the agenda, including afghanistan, counterterrorism, drug trafficking. there are new issues of which i believe we simply must agree. otherwise everything will of follows in a very master manner. i am talking about the defenses. this is a stand-alone subject and i will very briefly cover
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it, though i've repeatedly offered assessments of this. what i would like to happen is for the development of missile defenses to follow understandable, clear-cut rules. it must be obvious for everybody that time is that the essence is a method of walking or cutting back on the strategic capability of the whole number of countries when we are told this is not against you. i do take note, but i do understand that other countries that are being referred to here do not have the capability russia has an likely they will have the capability over the next two years. if iran or something like that. is that against us? as that is against is the brightest incorporate. the issues i have raised in
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communication with my colleague and my counterpart, those questions will be given answers to and will be able to develop a portal of cooperation. unless that happens, we will have to take some kind of action in response which is something i would not like to do it all. we would have to speed up and build up the potential of the nuclear forces, a scenario that would roll us back to the cold war era. i set by 2020 when all the four stages of the appropriation approach has been completed, it's quite likely that decisions will no longer be made by you and perhaps not even by me, but somebody will be making those decisions and most likely, russian leaders will be guided specifically by considerations. that's what we have to think now about how we will hand over this
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problem to future generations of politicians. this can learn everything we have done, including what i think to be a very important treaty on limitation of strategic offensive arms. it does have a direct provision that is the abm system is developed, which means that it will be upset, the treaty may suspend it, even terminated. something that i call my partners to take note of, but also to say at the same time were hoping to maintain guarantees the capabilities are now targeting us. i'm not dead yet. and the diligent person. he gave me two questions and i'll answer both questions. russia is an h.r. member aside of the documents in mess comply with them.
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we will continue to do so. two eyes in the european institutions it's important to do that. and yet, we cannot fail but see certain circumstances because we are an emerging democracy with quite a few problems and occasionally this word will have russian consideration, including the russian treasury for the benefit of claimants. but on certain occasions amazing that is what you're referring to, there is a feeling that the court has not made the decision in an unbiased way and at some times a decision as politically motivated. it's not something we talk about out loud. that is why such decisions are being discussed in the legal courts. that does not mean we have
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terminated and abandoned her involvement in the h.r. this is something i would like to call special attention to give any court must act in a way that creates a feeling that is not engaged by anybody. there is unbiased court or international court. >> translator: well, i promise to give the floor to somebody from st. petersburg. >> thank you very much, nick talia from petersburg. i would like to go back to st. petersburg in a more general terms he is just talking about international affairs. i like to ask you, would you like to be a magician?
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would you like to be able to work miracles? the reason i'm asking one more time and before and after that is really heartbreaking to read about for veterans sending their orders and medals to the kremlin, returning to the kremlin how they would like to ask is for residence permits that they can live in the united states. perhaps this country should finally provide proper vehicles to veterans and not act in a shameful manner so that nobody can take the housing from our world or veterans and use them as collateral. there are people who do that better than that being homeless. is it possible to watch every veteran proper housing? you can do it.
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you are the president. >> well, of course i'm not a magician although i do try to make decisions that people expect me to and that's the beauty of any executive, any leader. you know, just over three years ago, may 7, 2008, i signed an order whereby all world veterans with the given apartments. now you're asking me this question. perhaps it is time to make those decisions and not to abuse and humiliate our veterans. you know, i have already made those decisions and that's first. second, it's pointless to talk about that. but everybody who could have made such decisions at different
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points in time after world war ii was over, when there were so many were veterans, i can remember the mid-1970s, how victory do is being celebrated with. they were not that much older than i am out and yet they had the very same problems and the government just didn't give a about them and that is something that really hurt. so that is why i believe that everybody must do today what he or she can. i was in a position to make a decision to make sure that all veterans for giving housing and i did make the decision. either way, that was not an easy decision at all. we are still talking about group oseberg of housing. people are telling me where you make a decision? second veterans will not get the housing. their children were.
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unfortunately, veterans don't have that much longer to live their children and grandchildren is somehow immoral to think like that. the government must at some point in time recognize. if it leaves a life that understanding to take ken will make him happy. these decisions must be executed completely. that is very significant amount of funds are being spent on them. the fact unfortunately this is not happy with how blooms will be looked into. pavlik at this situation you're talking about. it was enough to call attention to this, for which i am grateful to the price and the problem was solved. unfortunately, this is an ordinary situation.
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it does not mean they should not respond to it for decisions that are embodied in the may 7, 2008 quarter. it's whatever the cost is for the government. okay, village, yes. i will let them ask their questions of course. but i would like to give the floor to our major media outlet that would just be wrong to not let the three major network asked their questions as well as others. thank you for not forgetting about us. i did want to ask the question, but the newspapers saturday then. i'll ask you one more time. no, i will phrase it differently. when i was coming to the first conference, i was sure that the
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question about the second presidency and my relationship with vladmir putin would be asked about every other minute. yes okay, i will ask about your relationship. in principle, could there be a situation that there would be two candidates at the presidential election, say you and prime minister pruden and everybody will run independently >> translator: you may run independently, but take heart together? >> well, it's clear when party cannot nominate candidates. in that case you'll have to read party. by the way recently in the long term, the president should have this moment be brought closer. could you lead an existing party? thank you. >> let's talk about it one more time as i was answering a question from our colleague for
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the independent newspaper. i said any political decisions have to be thought through very fairly. we are holding our hands, the future of vast numbers of people. like i said, this is not something we are making decisions on to appease their own ambitions and decisions on whether or not to read must be based on that. my relationship with my colleague and political partner, vladimir putin is not just something that is commonly known as tandem. this is a relationship that is over 20 years old. we've done it quite well. we feel each other. we are indeed, nurse in her. we do have approach is to the key issues develop to that country. that does not mean we see eye to eye on everything. every individual has the right to be heard on their own
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sensations, feelings and approaches. as far as strategy, who served with would not be able to work together. it would have been entirely different political landscape in this country today. that is what the decision must be based on as to what to do next. i believe there is competition that is healthy, competition that leads into the blind alley -- leads into the dead-end. i am hoping as proper decisions are being made about who will run for one opposed and who will do it in the future will be guided by this kind of responsible approach, responsible above fall vis-à-vis the nation and people who live in this nation. as far as party information, if
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i were to run for president, i of course would like to be able to rely on certain political forces. issue is not possible otherwise in these have to be political parties. what kind of parties? we don't have many political parties. i believe it's not a bad thing because we -- we have 30 left behind from stanford leave the area when the numbers of political groups. that's a good thing to relying on. and that to be able to rely on those who nominated me before. that's first. second, can the president establish his own political force? the answer is yes, there's nothing wrong about that. can the president become the member of a party? i believe most likely this is exactly what will happen because democracies are evolving based on this scenario.
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we believe the president leaves one of the parties that will spell the end of the consensus that this country needed badly at a certain point in time. now we do have political forces that have evolved. they're different ideas of how this country needs to be developed and improved. so yes, the president can lead one of the political forces. there's nothing wrong about that. reuters has two ask a question. readers, please. are we not going to use the microphone? just yell it out loud? >> translator: you have been making reference to improve russia. over the last two years, a great deal has been said in a great deal has been done and yet there have been situations like the recent failure of this section to swap shares.
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this is something that is seen by investors of a major setback. in this sense, here's my question. what mistakes did you government make as the transaction was being prepared? and what should be the conclusions the government can draw? and if i make on the u.n. said as far as strategy, you input and do not differ and yet a number of statements, jurors on some recent issues have been opposite. just remember the libyan koski case. by the way, investors are very serious about a quart koski case and democratization. could you explain this, please? clarify this. >> translator: investment climate is the single most important component of our success. i discovered this subject so today i'm not going to say
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anything extraordinary, but i don't promise i will revisit this issue shortly, including a form that will be taking place in st. petersburg, st. petersburg economic forum, where i would like to invite each of you to attend. .. more thorough due diligence done by the government if we were to employ business partners. and i don't think this was done which eventually led to
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complications and to collisions with other shareholders. this is something that must be avoided and one has to reach agreement before in advance, then there will be fewer problems. if at the end of the day the deal does go through i will be very happy. initself it is not bad for this country. now as far as strategy, you know what i was saying we have similar or identical positions me and prime minister putin, here is what i meant. indeed we have the same kind of education, legal education. we're trained as lawyers and we have very similar sets of values. indeed we both want this country to be modern. we want it to be effective. we want it to look good. we want people to have a decent standard of living. we want reasonable decisions to be made that actually can be executed and implemented.
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we want human rights to be complieded with. we want there could be a modernized, diversified economy but that does not mean that we eye-to-eye on tactics in an absolute complete way. what i mean is that i don't think it's bad because truth should be the product of interaction between positions. sometimes maybe even collisions and this is what guaranties forward mow men mum. as far as mod other thanization perhaps my position is somewhat different from that of the prime minister because to some extent i understand what he says, he believes modernization is calm, gradual movement. i believe we do have a chance and we do have the strength to carry out the modernization faster without any damage to what has been done before and to achieve good results. and to make a quantum leap forward but that requires a
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lot of work. everything else i think is tangential. so the final subject and i our colleague has asked the question and the colleague that represents the radio, asked a question. mr. president, it is exactly a year to go before your first 10 years as president is over. there will be, there will be still many important events. however looking back at the three years that have already passed could you tell us about your main achievements and could you speak frankly about your setbacks? and that is essentially what the colleague from skolvo is asking about. i don't think i will surprise anybody or amaze anybody that i think the obvious successes and the
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important achievements over the last three years are that what might have been the most difficult period of development of this country over the last decade. that is, the period of the global financial crisis. when you talk about unemployment we did not drop the ball as far as development of this country. we carried on. all the key programs remained in place. there was not a dramatic deterioration of the standard of living. on the contrary, just the opposite. we recovered fairly quickly and we're moving forward. i believe that is very important, especially if we remember the sentiments, the emotions that are still quite strong in many european countries. countries that in certain ways are more successful and more affluent than us but we don't have the processes that are taking place in the financial sectors of spain, portugal and greece. this is very important that we were able to consolidate ourselves over what was a
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very difficult. i think that one should rank among achievements the fact that we were able to execute a very clear-cut, foreign policy which has resulted in a decrease of tension between our countries which is great. >> just a couple minutes left in this address. we'll leave it at this point to go live to the heritage foundation here in washington for a look at the regulation of the commodities futures trading commission. scott owe maul yaw is one of two republican commissioners on the five-member cftc. he has been critical of some of the rules passed by this organization for implementing the new financial regulation law as well as the pros sees devising those rules. this is live coverage on c-span2. >> the cftc is rather crucial agency. as i was working in the house banking committee and the cftc comes under the house agriculture committee,
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back when i was in the house area at that point it took a while, but the cftc in brief, the commodities future trading commission and this is their words here, assures the economic utility of the futures market by encouraging competitiveness and efficiency, protecting market principle, market participants against fraud, manipulation and abusive trading practices and by insuring financial integrity of the clearing process. now, back when i was doing financial regulatory work in the house of representatives as a staffer, any time we had a complex question of how will we actually do what we're proposing? the answer was always, well, we'll just pass it over to the regulators because they will know how to handle this and they will be able to take care of the details stuff. and in the event they don't do right, that allows us to hold some hearings criticizing them for that implementation in the process
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today we'll hear from the other side of that process, people who end up having to interpret congressional requirements and amend dates and issue the various and sundry regulations. -- mandates. scott o'malia has been the cftc since october 8th, 2009 as a commissioner. he was sworn in on the 16th. he has a term that lasted until april 15th. i'm pleased this is an example of a hill staffer made good as before he joined the cftc he was staff director to the senate appropriations subcommittee on energy and water development and held a variety of other positions for various senate committees and other senators. he grew up on a small family farm and actually has experience in dealing with agriculture and commodities issues. so it's a honor to introduce someone who both made good
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from the hill and actually knows what he is talking about. commissioner? >> thank you. [applause] well, many people have not heard, known about the cftc and when my mother explained what i do in washington she had a hard time explaining it. it is less difficult now. more people have heard of us since passage of dodd-frank and we're beginning to really put a lot of the, the regulatory pressure and provide the details that dodd-frank outlined. so let me thank the heritage foundation and david, for your warm introduction and i appreciate you hosting this event today and inviting me to speak. we have a lot to cover with the cftc and i would like to share with you some of my thoughts where the regulatory direction we're taking. i don't have to tell many of you where the commission has been extraordinarily busy. we're working on a
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significant regulatory overhaul, the largest since the great depression and we're putting our work together with all the other regulators to make a comprehensive solution that makes sense and is cost effective. to date the cftc has put forward 66 proposed and final regulations under title 7 of the dodd-frank act. not even counting the last three proposals which have yet to hit the federal register the commission has voted on we're over 1868 federal register pages. filled with legal and regulatory jargon. if you were to run the comment period on these consecutively, it would last over eight years. we don't have the luxury of allowing the market to comment for eight years. we have to get on with our work and we're going to try to integrate and take as much comment under as short as time as possible that is frustrating for many people and i appreciate that concern but we do have, to implement these rules and to do so in coherent manner. i don't need to give you much context for these rules
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but just for fun, if you were to lay all these pages end to end, all the federal register pages would go up the top of the washington monument and back down. so it's a massive chore to integrate and understand what these rules will do and the impact they're going to have on the market. we're halfway through the regulatory process. we proposed nearly all of our regulatory proposals. we're taking comment. and then we'll go into the second phase which will be uply meanting final rules. as winston churchill once advised if you're going through hell, keep going. so i'm going to take that advice but i have two recommendations that i have made to chairman gensler to make our trip a little better. first i've asked the chairman to put forward a proposed sequencing of the final rules. this will allow the market to comment where you think we got right and of course where we got it wrong. second, and even more importantly the commission should put forward an implementation schedule of all the dodd-frank rules and it should be published in
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the federal register for comment. this will allow the market to suggest changes before the commission misses a mark. the market needs to know where they are to be expected to implement these rules and under what time frame. appropriate investments, staffing, and reorganizations which are inevitable under these rules need to be put in place before compliance is, they're going to be able to comply with the rules. until a final schedule is published, market participants continue to play very high-stakes of pin the tail on the donkey. providing an additional level of transparency is entirely appropriate. have already conceded we can meet congressionally mandated deadline. providing a timeline now will not delay the commission. recently the ftc and cftc conducted a roundtable to discuss this very issue of implementation. i took away three very clear messages that the public was sending to the commission. first, they said give us an implementation schedule so we can make our investments to comply with the rules.
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second, there isn't anything that the market can not build, can not integrate or execute but the commission must provide clear rules and enough time to implement them. the panelists made it very clear they need months and not years to implements these rules. this makes it clear to me asking for a plan is not about a delay tactic it is about getting right. finally, phased implementation of the rules is essential to insure all pieces will be able to work together. the ball is in our court and the market has been frank about the challenges and has only asked for schedules, regulatory certainty and patience. understandably part of the challenge for the market is the speed which all the regulation haves come out. admittedly we're making a great deal of progress. in fact we're exceeding expectations. my compliments to the staff in the commission for all their hard work. they have worked nights, weekends and holidays to put these rules together and have been very responsive to all the commissioners inputs and thoughts. so i greatly appreciate their efforts. at our last, last commission
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meeting, we finally released the much-anticipated joint proposal with the sec on product definitions including swaps. as you know the commission has previously released proposed, proposals addressing swap execution facilities or sefs, the definition of swap dealer and major swap participants. we all share as common ground the goal of reducing systemic risk but we do have some differences of opinions on the commission and as to the best way to meet these goals. for example, i believe our proposed definition of swap dealer is overly brord. it will likely capture commercial entities that use swaps primarily to hedge their risk. as a result these entities which do not propose systemic risk in my opinion will see their costs going up. in contrast i think the user definition was crafted too narrowly. that proposal even missed an uncontroversial opportunity to clearly exempt certain
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farm credit system financial entities or fcs banks from a clearing requirement. congress made it clear that regulators were permitted to exempt banks but the commission failed to make clear that the swap transactions would qualify for bonafide hedging exemption. we should be focused on dealing with those entities that present the most systemic risk and not posing undue costs on commercial businesses. they are the core of our nation's economic recovery. my concerns are with the swap dealer and end user definitions also have implications in the risely proposed cap rule and margin rules. for example, if the wall dealer definition captures commercial end-users then they will be required to take a direct capital charge for the credit market risks associated with each swap they enter into with another commercial end user. there is no language in the margin proposal that makes it clear that end-users will not be assessed march begin.
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instead the proposal says each swap dealer may accept margin and in the manner agreed to by the parties through credit support arrangement. in contrast the prudential regulators put forward draft rules that prohibit swap dealers posting margin to their counterparties. it is a one way margining rule. these rules provide no capital thresholds for end-users. seems clear to me when you examine all the rules you will see difference in margin swap transactions. for example a five-year swap cleared on dcm and cleared through a dco, market participants must post sufficient margin for one day timetable. for the same swap executed on swap execution facility the liquidation timetable table is five days. finally what that swap is traded in uncleared space, the liquidation rules provide for a 10-day period. this will clearly make the costs of trading all these different venues higher.
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they have a real cost to end-users and signal to me this rule is, is intended to drive swap transactions into central clearing and undermine the end user exemption. so when we look at the cumulative cost of these rules i have to question whether or not we got right. it seems i have company with my, with some of these concerns because recently a, the commission received a letter from number of prominent democrat senators questioning the commission's margin rules as well. the letter pointed to the potential disadvantage u.s. businesses with foreign affiliates compared to their foreign counterparts. the letter urged the commission not to ignore the realities of international markets and to avoid unduly burdensome regulations. i know that congress was concerned about protecting end-users, non-bank commercial end-users from increase of costs of clearing. the legislation and subsequent direction from congress made it clear the rules should focus on only systemic relevant entities and should minimize the
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impact to nonsystemmally relevant first. we should not force the firms to decide between hedging risk and investing in their business. unfortunately i believe the draft rules having ignored this direction to some extent. if a commercial entity does not pose systemic risk it should not be subject to the same requirements as a dealer. and those that pose the most threat to our financial system two years ago. with regard to swap execution facilities which is a brand new and exciting kind of trading venue, it does make sense to me through a provided execution platforms that products can be cleared. platforms are flexible and responsive to the needs of the market and at the same time will help us address systemic risk. one element of the new market structure which seems to have captured everyone's imagine is the swap execution facility. this new exchange offers the best opportunity to improve swap market transparency and improve our ability to
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manage risk in the market. i'm often reminded that the swap market developed in a parallel fashion to the futures market. and one of the most important differences between these two markets is that we don't apply a one-size-fits-all correction, namely a central limit order book in the transaction space that will not work in the less liquid swaps market. the commission's sef proposal louse for limit order book and request for a quote approach in order to bring flexibility and encourage liquidity formation which i am very supportive of. i believe the number and variety of sef platforms in exist tension and under development highlight innovation capabilities within the market and confirms that no technological challenge is too big for this space. to highlight what the market is capable of, capable of when it is given clear direction, back in the end of march i hosted a sef showcase at the cftc headquarters in washington. i offered any sef that wanted to come present their
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technology the opportunity to show it off to the commission and staff and the public. so one was turned away and we had over 16 platforms come in and show us the variety of technologies at that they're considering and it was a very worthwhile event representing all asset classes. i was impressed quickly and creatively potential sefs met the proposed requirements outlined in the commission's rule making. i don't think, i do think we need to provide flexibility to aplou the rules to allow all those sefs to innovate and compete for business. that will make the market much better. i want to make sure the market can transact sufficient size without penalty. we have received some feedback from the public on the sef rule and there are concerns with regard to less liquid swaps. with regard to some of the provisions regarding showing all bids to five, five dealers and a requirement that any order be visible in the market for at least 15 seconds. and, in addition there are
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some noticeable differences with regard to how many people you can transact with between the cftc and the sec proposals. we have a difference of, in our rule-makings that we will of course have to address. we have massive new responsibilities under the dodd-frank act. this will require a heightened focus on technology investment, data management and analysis by the commission alone. we can not continue to use yesterday's solutions for today's problems. today the futures and swaps markets are by and large electronic markets, heavily dependent on advanced technologies. the market has evolved in its time the cftc evolved as well. if we're going to establish a credible surveillance and oversight program of both swaps and futures markets the commission needs to move past the antiquated ways of doing business. i'm repeatedly struck by the lack of technological capability at our agency. our forms and filings are not required to be filed electronically. those that are don't automatically populate our
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surveillance database. this requires a lot of manual entry and reentry to make sure we got right and it will not work going forward. we only have a few automated surveillance alerts and none of these monitor in realtime. while we, and in fact, yesterday, we had, and advisory meeting and i asked one of our surveillance staff what it would take to put together a comprehensive real-time trading and monitoring program? and if they had a cost and schedule to implement this? and they admitted they don't yet. which we need to correct that going forward. while we rely on designated contract markets or the dcm, to police its own trading at a certain degree we have long recognized the interconnectedness of the market as a whole but we've done little to address that reality. as markets make investments in their own technological capabilities we need to keep up with the ever-changing speed of business as well and make our own
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investments. for the past year i've requested a commission reorganize to create an office of data collection and analysis. this office should focus on securing and managing all of the trade and surveillance data. it should work with all the other divisions within the cftc to monitor futures and swaps markets for providing broad, risk analysis as well. this office can drive automation of cross-market surveillance programs including the development of our own algorithms, enabling the commission to keep pace with the markets. using additional resources provided by congress in this last year, this year, we should focus our attack on the lightest priority technology challenges just as the statute says. we must automate our surveillance and integrate the swaps and futures market data together so we can surveil it appropriately and consistent with the dodd-frank act. we are facing very tough budget decisions. every part of our government is being asked to think how we can provide a better value for the taxpayer.
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wheel we're very fortunate to receive a small increase i think we need to think very closely about how we invest that money and i believe it should be put on technology. congress provided an appropriation that included a subappropriation of 37.2 million in our budget must be used for quote, the highest priority information technology activities of the commission. for me that doesn't mean blackberries, copiers or toner cartridges. it doesn't mean, it also doesn't mean the commission should only invest in 37.5 million, 37.2 million that number should be the floor which is what congress provided. said no less than 37.2. we should not, we should not be using the rest of our budgets to increase staffing levels and renovate office space. these are yesterday's solutions. you can't keep throwing bodies at a market that trades electronically. we need to be smart about regulating our markets and we need to be efficient. investing in technology is our best way for doing more
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with less. unless i have this budget debate all wrong, rising budgets are not in our future. that is quite, and it is quite possible the commission will be praying for a cr this fall. we could see our budgets go down. so we should be careful about how we commit to hiring new staff based on our own current funding levels. since i opened with winston churchhill let me close with a other piece of advice, his, once said, quote, however beautiful the strategy, you should occasionally look at the results. it is easy to focus how much is changing with dodd-frank. it's easy to point out to an ever-growing list of regulations and thinking about the rules as we continue to pile them on in addition. we should better think, we should also think of how the rules are going to affect the market. the cftc and other financial regulators are writing rules at a frenetic pace and the market is already positioning itself to deal
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with changes to come. so i recognize there is no doubt about it, much ising chaing and it could happen very quickly but i also want to make sure we have our priorities right. let's focus what is systematically risky. we should not write rules for the sake of writing rules just for saying, just for the sake to say we have done something. if we're going to put on extra costs on the market we have to understand if they are warranted. when we're looking at our rules and deciding what makes sense and what doesn't, i often find myself asking if we're really changing fundamentals in the market. if we take the flexibility out of swaps market by trying to make those unique instruments trade as though they were futures and ignore the characteristics make them useful tools for hedging, aren't we sacrificing market innovation of lazy comfort sticking with what is familiar. the way, the way draft rules seem to be shaping up the dealers will remain in a key market-making rule albeit a much more expensive responsibility. do we want the market to
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leave dealers as the prime market makers offering less, not more competition in the area of swaps? much will depend whether we move to more standard products and reduce the valuable customization of those products. what is the potential impact of establishing two different march beginning reg goals for the futures market and swaps market? will there be opportunity to better manage this exposure between markets. and, i have a concern about whether the capital will flee to more esoteric scope or foreign markets and we will not have access or over sight to those markets. if we perpetuated concentrations of risk and harmed competition have we fixed the nemesis that is too big to fail? finally it is more important to give financial entities, is it more important to give financial entities access to taxpayer money than it is to recognize the real value commercial entities provide to our economy? wouldn't we rather put our
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faith in commercial entities, producers, farmers, ranchers, energy producers that are the heart and soul of our economy, or then than disadvantage their efforts to grow and thrive in this economy? we need to think about this as we develop the rules. as we, as well deal with these questions i'm grateful for the opportunity to meet with you and to take your thoughtful suggestions and ideas about how we should proceed going forward in, as we finalize all these rul rule-makings. thank you very much for your attention and participation today. i would be happy to take any questions you have. [applause] >> thank you, mr. commissioner. heritage foundation. i'm very interested, sir, with the perspective on the current market valuation across asset classes. currently we've seen obviously gold move lower, oil being very volatile. even we saw some dramatic movement with silver.
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analysts predict in the future we'll see continuing changes with ending program like qe with programs from glen cor and higher gas price. there is lot of spokes in speculation wheelhouse. how does dodd-frank play a role in curbing that volatility? is that its intention? thanks. >> that is a lot. i think dodd-frank is focused primarily on solving systemic risk. that is probably something that's probably more appropriate for us and certainly our agency, we have a number of responsibilities. we're not a price-setting agency and the idea that we could implement policies that would allow things to with within acceptable bands, whatever those are, would be folly for us to attempt that. so our main mission is to make sure the market creates a function appropriately. we have the foundations of the futures market is price discovery and hedging commercial risk. that is our primary responsibility. we need to continue to
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maintain that and we have a responsibility for oversight to make sure nobody is manipulating these markets and we have new manipulation, trade authorities, practices to make sure we can police those things. we need to adjust to the trading styles of the market and the markets are no longer trading in the pits. this is not a, this is an electronic market and we need to adapt our own capabilities largely through technology to be able to surveil markets that trade at least in the swaps market millions of trades a day with vast message traffic exponentially larger than the actual trades and be able to understand how electronic trading is affecting this marketplace. we do not want to create an environment where fundamental traders, those that have commercial risk, that are looking to hedge don't believe these markets are for them anymore. and it was yesterday we had the agriculture advisory committee and it was a collection of ag interests and professionals in the market that have been watching these markets for
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years and i was really struck by the concern that many of these fundamental traders had. they lost, they're losing some faith in the market. we have to restore that. they had some concerns about price volatility. but they also had concerns about, you know, the margin and capital requirements that they're going to have to invest in and they're being priced out of the market. when we developed these rules we have to keep that in mind. we have to understand what impact and what costs these are going to have on all those fundamental traders. and we have to balance that. we have to do a good surveillance job. we to make sure these markets are still for those individuals. if we don't do that we fail. this should not be a playground for just high frequency traders. this is about fundamentals, market fundamentals. we have to protect that. . .
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and if a pension plan engages any transaction with a slot dealer, they can't be fiduciary and so i realized the statute uses the worst fiduciary, but there's a real difference between the webster's dictionary definition. we continue to work with the department of labor to get that one right. the second one deals with the margin requirements for pension plans. i know some of the preliminary guidance that the cftc released at the end users wouldn't necessarily be responsible for margin at this point.
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but the pension plans are definitely under the proposed rule, a risky financial end-user and therefore subject to margin. we've calculated the cost to our company and trained to be significant and we think that congress -- an outcome he talked about national filibusters, but -- congressional intent. and we think that we're trying to expand pension plans from regulation, especially on the definition that's unfortunate that the cftc or the chairman of the cftc is of the opinion that pension plan and end-users should be subject to more regulation than i think congress can. >> you know, the nice thing about the rulemaking process, it
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does give us an opportunity to get feedback from the market. they really appreciate you and any other association out there that are listening to comment. we need to understand the impacts, the cost of impacts is a very good point. what impact will post the margin and capital sloppier counterparts have under performance? what does that mean for retirees? but will benefits look like and five, 10 years down the road? we have to understand where he draws the line on buddha systemically relevant. pension plan probably not a leverage plan that would have a different risks were higher risk profile. trying to generate returns for your retirees. we have to look at those. in calculating the actual cost of the margin would be very beneficial to the commission. so please send them in. the other part i'm having your
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swap dealer be your fiduciary, i don't think anybody thinks that's a good idea. swap dealers had a very important role in the market. being your fiduciary is probably not one of them. if you want that will come you would've fired them. you don't want to give them too much information. you do not want to show them in your. davis job to ask eager soccer transaction and you should keep them at arm's length that is appropriate. i definitely have heard from people with that concern and you have a list of plants mature which are experiencing also tall, dealing with the plan and very sympathetic to that. i want to make sure the relationship between you and the dealer or completely clear as we go forward and we have to clarify that with the department of labor. thank you for the question. >> commissioner jumper wrote that the dependence enterprise, thank you for being here. a lot of prestige touched on
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systemic risk and that is enough justification for dodds frank was to prevent or minimize systemic risk. yet ironically derivatives ruled parts of it as well as other parts of dodds frank have now may be believed to be systemic risk. i wanted to ask unattributed smoke, forcing more trading into clearinghouses when they're already in concentration, which at that create more systemic risk? and also the idea entities would have to rely more and market to market accounting for swaps every day would market to market accounting was one of -- believed by, you know, both sides took contributed to the financial crisis in the first place and was eventually that down after bipartisan criticism quite so is there a teacher that actually creates more systemic risk interrogatories from
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dodd-frank what commitments minimize that? >> well, you're absolutely correct. this bill does -- it's got good elements of the transparency were going to get through swap facilities. we understand that the overall market looks like. swap market data repositories will provide linkage about the swaps market with the systemic relies on trading participants. so that's great. that information will be extraordinarily helpful as we do not have it today. the next part of your question is are we concentrating this? we need to understand we are. we're taking -- aggregating risk throughout the financial system and putting them in clearinghouse. they think chairman bernanke made a speech a couple weeks ago was something of putting their eggs in one basket. really neat to watch the basket.
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that's absolutely true. we need to go in at their eyes wide open about the risk is. i post a couple questions in the speech as well. if we are reducing competition in the dealer space and concentrating the trading by making a lot of these end-users legitimate end-users, dealers, are we concentrating the risk in the business with the dealer community? if we take commercials and nathan dealers, but get out of the business. make business too expensive or too onerous, they have better things to do with their time, whether it's produced domestic energy or whatever it is, to be an agriculture customers. all of these people are in the sense of what the theory dealer or end-user. we had them with the dealer definition and say you've got all these business conduct requirements, all these new training requirements, n. marginals that you must trade. i think the kid out in this
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commercial space. that concentrates at the wall street dealers. again, is that we were trying to solve here as we consolidate risk for trading in the swaps in that community? there are a number of areas where we are taking concentrated risks. the feedback on the until now that people have really seen the panoply of regulations and how they relate together, which is what i started with at the beginning. let's make sure we understand what the rules are going to be talking in totality and get comment and see how they'll be implemented because they think we definitely need to understand the market at this point, rather than monthly employment is down the road. so again, import comments from your organization would be helpful. >> i just want to touch upon the issue you just raised in the process and concerns about the braves. i see no, the person so far that
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chairman gensler described as a mosaic and there's been a lot of concern about medium of understand, not just the impacts of the rule of cost-benefit analysis, but how rules interact with each other. i think your suggestion is a more courtney did approach we can have a chance for a comment on what the financial rules look like in their schedule. if there is some concern. the purpose to get that right is don't want a delay tactic, but there is skepticism on some parts of the people on the hill that republicans are trying to delay this for no good reason. could you get comments and explain how the sequencing of work? the final rose, helen of a delay would it be to have some public comments about the implementation schedule? what appears longest a font is an 18 month delay bill?
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what can you do to get more color and say this is an attempt to get it right? >> great question. as the chairman would say, were in a natural pause right now. we are taking comment. in fact two weeks ago, we extended the comment period for an additional 30 days to get input on major roles in the connected to days of roundtable hearings on the implementation, basically taking from the market their opinion on but we have to be doing. out of the roundtable discussion , everybody, whether you were public interest, commercial, bank, et cetera, everybody said tell us what the rules are going to be and when to implement them. that's what everybody said. he said understanding the implementation process is the most essential thing. they wanted to comply. as i noted, just tell us how many months it's going to take or what time frame you want. then we can put our resources
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behind this reform and make investments necessary to reorganize -- they've got business reorganizations that will have to deal with the push-ups or any of these other organizations we require. they're going to have to bring our capital to the table. these rules or can i make it work honestly declared we need to make sure they have the right resources to meet margin capital requirements to back up their trading. we need to put in place the transaction facilities, whether it's a slap execution facility or the clearinghouses and ultimately the sake of repositories to bring it back and that's essential for our office to see where the market is and what the systemic risk is. people are saying they're ready to go when there's no technology that we can't -- technological solution to cant software. give us a timeframe in which he won us to build and so that's what i've asked for.
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this name to the respondents, it is clear that we will get to this endpoint faster if we tell them where recoding is supposed to have been intense. and so i don't believe it will delay or process simulator. we are not going to meet the one-year signature the july 2011 day. it's not going to happen. the chair and admits it. everybody in the commission admits it. we're then trying to figure out what the next day days. any other date with the arbitrary date is not based on the statute. so i tried to get there as quickly as we possibly can. again, we'll get there much faster if we tell -- on the road map and tell them what. the criticism this is a delay tactic based on what we've heard he simply wants to complain. nobody wants out of compliance to pay that price. so i think sooner rather than later if we put out a rule them out for a proposal strategy,
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it'll move the process that much quicker. so i think that the way to go. >> do we have more? >> do you have sufficient flexibility or do you need additional payments? >> i think everybody is asking about how long it's going to take. i think members of congress are asking us come in the market is asking. we're trying to get there. and for not going to meet the statutory date, then what kind of infinite territory of people trained to grasp for us. i think solving a lot of our problems will be associated with implementation. at the commission is going to be transparent and put forward a plan and a roadmap for implementation, everybody will
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be much better off. >> anyone else? >> please join me in thanking scott o'malia. [applause] >> thank you very much. [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations]
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[inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations]
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>> no one succeeds in life by themselves. he must be willing to lean on others, listen to others and yes, love others.
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>> to the american economy. thursday the senate small business committee held a hearing on the small-business jobs back last year. committee reviewed the ax implementation and mothers for filling the purpose of helping small businesses. this is an hour and 45 minutes.
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>> good morning, everyone. i'd like to call a meeting to>>g order thisoo morning. and i'd like to thank all of our witnesses for joining us this us morning, particularly our mis witnesses on the second panel who are going to be bringingpace real-life testimony to be bringing real life testimony to the issues that we are looking at and reviewing this morning. as many of you know, this week is national small business week. president john kennedy started this tradition in 1963 to recognize the contributions of small businesses to the economic vitality of our country. the following year, president johnson awarded the first small businessman of the year. i underline the word businessman of the year, to mr. berkeley
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bedell. he was from spirit lake, iowa. he was president of berkeley company, a manufacturer of fishing lines. his business was started in the bedroom -- in his workshop, while he was still in high school at the time. president johnson said that mr. bedell represented millions of american small businesses, who as st. paul wrote, were not slothful in business but fehr vant in spirit. that would be romans 1211. while times have changed since then, i believe it's still our responsibility as policy makers to lift up these entrepreneurs that are not slothful in business but are fehr vant in spirit. that's the purpose of today's hearing. we want to recognize the 27.2 million small businesses in america that are struggling to recover from the great recession. more specifically, we'll hear from our federal government, how our federal government is implementing the small business jobs act passed last year with
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the help of many members of this committee. this legislation has been touted as a single most important piece of legislation in decades for small business. let me just mention a few other things and i recognize senator shaheen who is here for her opening statement in just a moment. i do want to put a few things into this record. last congress, the 111th congress, the committee heard compelling testimony from small business owners from across the country struggling to keep their lights on, their doors open and stretching to keep valuable employees on the payroll. many business owners could not yet conventional bank loans. others saw substantial reductions in their existing lines of credit. still others had cutting edge products but did not see an opportunity to contract with the federal government. the results were alarming. since 2008, small business firms accounted for between 64 and 80% of all the net job losses in our country.
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that is beginning to reverse. we're excited about that, and we'll hear more about that today. to address these issues, i'm proud to have led the senate efforts to enact the small business jobs bill of 2010. the bill was signed into law by president obama on september 27th. the jobs act provided many things. support to small business in many important ways. providing 12 billion in immediate tax relief. increasing access to capital by increasing sba loan limits and establishing the small business lending fund and strengthening core programs of the small business administration which resulted in more money for counseling services for small business development centers, increased export opportunities and provided a more level playing field for small businesses looking for opportunities to contract with the federal government. first the jobs act included multiple tax cuts effective for 2010 that provided incentives
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for small businesses to make new investments in property and real estate and expand their operations. for example, small business owners who bought new equipment in 2010, the jobs act included enhanced expensing provisions that allowed the immediate write off of the first 500,000 of tangible personal property and up to 250,000 for certain investments in real estate. also, for the first time ever, self-employed business owners could deduct 100% of the cost of health insurance for payroll tax purposes. in my home state of louisiana alone, there were over 234,000 self-employed individuals eligible for this tax break. altogether, the bill included over 12 billion in tax cuts for small businesses at a time when they needed them the most. next, the job acts focused on the major hurdle limiting small business growth. that was the lack of access to
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capital. in particular, the jobs act continued, vital programs from the american recovery and reinvestment act which spurred lending to small businesses. it eliminated the bowers fees, increasing the federal government guaranty on sba loans from 75% to 90%. at the time our bill passed, these provisions had already supported 30 billion in lending to more than 70,000 businesses since 2009. the extension of these recovery act provisions in our bill allowed an additional 1,500 businesses to receive more than 750 million in loans. in addition, the act permanently raised the maximum loan size from sba's two largest programs, and the maximum 405 loan size from 1.5 to . 5.5 million.
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these were extraordinary accomplishments. in addition, the treasury department was tasked with implementing two new programs designed to support private sector lending to creditworthy small business. the small business lending fund makes billions of dollars in capital available to roughly -- which is several thousand healthy community banks in our country. we'll hear more about that today from mr. don graves and from the honorable marie johns. this partnership could leverage billions of dollars in additional lending to small firms. treasury has already received applications from 700 banks for roughly $10 billion. that's encouraging. we're making progress. let me say just a few more things. the small business credit initiative which was pushed by several members of our committee, much to my joy, will support at least 50 billion in
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new lending by strengthening state small business programs. i know senator hagen is going to be particularly happy, because there are really wonderful opportunities that will be shared today from that part of the country. under the jobs act, key enhancements were made to enhance and improve sba programs. as we know, only 1% of small businesses export, with 95% of the world's consumers outside of the united states, it's important that this committee took the opportunity to strengthen our export programs. we're going to hear some testimony today about how that is working. our bill improved sba export financing programs by significantly increasing the maximum size of export loans and by expanding the network of sba export finance specialist that counsel exporters can help them
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underwrite the loans. it created a state trade and export program which provides 60 million in grants in states to bolster their programs. in closing -- let me say one other thing before closing. in addition to all of the things that i mentioned, this bill also increased enhancements to the small business contracting program. the federal government has over $500 billion a year available for purchases of goods and services. we're opening up opportunities for small business, women-owned businesses, hub zones and service disabled veterans to participate in that program. in closing, i just want to highlight a couple of provisions. i give you one example in closing, of how this specifically worked for a business in louisiana. baker sales is a small business that operates in louisiana. it's operated for many years. when the construction slump
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occurred, it saw its sales drop by 20%. when the deepwater horizon explosion happened and the moratorium was put in effect, its sales were lower. they had been in business 30 years. they imported steel products and sold them within a 2000 mile range. they wanted to export but it was simply a pipe dream. last march, however, they received assistance from the regional director of the u.s. commercial service staff in new orleans to travel to panama to identify potential clientses. baker sales lacked the capital to make these investments. when the collateral and collections were in panama, they couldn't enforce, in the event something went south on this, but with this new program, baker sales received $3 million from a 7a loan that helped them to secure the contracts in panama, expand their export opportunities and give them a
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path forward out of what has been a very difficult economic time for them. they've hired two additional employees and they expect to expand sales in the future. so today, we will hear some additional success stories like baker sales. i'm proud of the work that this committee has done and we're going to get some testimony from our key witnesses about what more we can do to improve the outlook for small businesses in america today. let me turn it over to my ranking member, senator snowe and then we'll receive opening statements from senator shaheen as well. >> thank you, chair landrieu, for holding this hearing here today to examine the implementation of small business jobs act of 2010. i think it's fitting that we would be exploring the implementation of this legislation at a time which is coinciding with national small business week that highlights and celebrates the accomplishments rightfully of our nation's nearly 30 million
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small firms. now perhaps more than ever, we will rely on small businesses to lead us out of our continued economic problem as they have done time and time in the fact. i appreciate the fact we have small business administrator marie johns and deputy assistant secretary don graves for updating us. i especially want to thank our small business witnesses for offering their perspective as well. as ranking member, i certainly know firsthand, there's no more urgent emperative than job creation. our nation has endured 27 straight months with unemployment at 8% or above. last month, unemployment once again reverted to an unacceptably high 9%. we cannot allow these persistently high levels of unemployment to become the new normal. it is essential that we focus on bolstering our economy and creating jobs. the best way to spur economic
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growth is to empower our nation's small businesses. whether reducing regulatory burdens, increasing access to capital, supporting pro growth tax policies or encouraging exporting, we must continue to seek ways to create a better climate for small businesses across the country. it is with this in mind that we developed a framework for the jobs act through a series of small business bills. the act includes as the chair as indicated many of the committee's long standing priorities. for instance, increasing the maximum loan limits for the sba, 7a and micro loan programs. it expands export technical assistance and trade promotion. it includes tax measures like those to permit general business credits to be carried back five years and taken against the alternative minimum tax. unfortunately, i had serious misgivings about the treasury small business lending fund that was included in the legislation on the floor.
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i was particularly concerned by congressional budget office wanting while analyzing the lending fund with the most comprehensive methodology, it could cost taxpayers more than $6.2 billion. furthermore, lack week, the treasury inspector general's office issued a report on the implementation of the lending fund which you suggests that the program is tepid at best. according to the report, treasury expects to distribute only one-half to two-thirds of the authorized $30 billion. as of april 18th, only 626 lending institutions out of more than 7,000 nationwide had applied to participate in the initiative. only $9.2 billion in funding had been requested. moreover, the top recipients, otherwise known as the troubled asset relief program, requested 64% of that the.2 billion. these institutions would essentially be paying off one
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taxpayer funded credit card t.a.r.p. with another in the form of the lending fund to obtain lower interest rates without restrictions like those on executive compensation. the report revealed that t.a.r.p. recipients are not expected to get much additional capital beyond their t.a.r.p. investment balances, placing in doubt how much new lending will actually take place. so this begs the question, isn't this lending fund proving to largely be a t.a.r.p. refinancing program? it's obvious, been demonstrated that there has not been great interest in the initiative and i know the administration is extending the deadline for applications from march 31st to may 16th of this year. i would like to explore that with you, mr. graves, concerning those issues. while i clearly have concerns with the lending fund in particular, i hope that we can have a constructive dialogue with respect to its implementation but also the outcomes occurring with all the other initiatives incorporated in this legislation that
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ultimately became law last fall. i'm eager to hear about the desired effects of these initiatives because it is critically important in the final analysis to ensure that we have the efficiencies and the effectiveness of these programs and that they are producing results. we've got to turn this economy around. we've got to create jobs. i know we created 244,000 jobs last month. but we have to continue at that rate for every month for five years in order to achieve the prerecession levels of unemployment of 2007. i think that that underscores the challenge before us as a country. that's why many of these initiatives in this act, i think, are going to be very good in terms of working in that direction. we have to make sure it's done well and it's implemented efficiently so we can achieve the results more immediately than otherwise is being felt on main street in america. i want to thank our witnesses here today. i want to thank the chair for convening this hearing.
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>> senator shaheen. >> thank you. chair landrieu and ranking member snowe for holding the hearing today on the implementation of the small business jobs act. it's fitting that we're doing it during small business week. the jobs act was a very important effort to help small businesses that create two-thirds of the jobs in this country. we all know there's more work to do because too many small businesses are still struggling with access to credit. i unfortunately can't stay to hear your testimony, but i did want to raise two issues that i hope you will address. first of all, both senators landrieu and snowe have talked about the export provisions in the new legislation. in new hampshire, we think those are critical. we've got to give small businesses access to international markets to help them grow. and i think new hampshire is one of the 53 states that has
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applied for funding through the state trade and export promotion program, so clearly, there's a lot of interest, and i think the role that sba can play in coordinating the export efforts across the federal government will really be critical. the second provision that i wanted to call your attention to has to do with the 504 refinancing provisions. my understanding is only 20 loans have been approved since the passage of the bill, and these are provisions, as we all know, that will be very important in giving businesses access to working capital. so anything that can be done to help facilitate those loans, i think, will be very important. so thank you very much for being here. i look forward to reading your testimony, and hope you will give real consideration to moving on those two provisions. >> okay.
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why don't we go right into the testimony from administrator marie johns and mr. don graves. >> good morning. chair landrieu, forgive me, ranking member snowe and shaheen and members of the committee. as has been cited a time or two, this is national small business week, it's a week we empower small businesses that drive our economy, keep america competitive and importantly create jobs. the sba is hosting a three day conference here in washington, d.c. where we're honoring small business owners with awards. small business persons, chair landrieu of the year, and more. these small business owners and others like them have gotten a big boost from the small business jobs act. since the passage of the jobs act in september 2010, the sba has worked hard to implement the
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many provisions that affected our programs. the jobs act affected all of sbab's largest programs including our support for access for capital, small business contracting, counseling and training and exporting. some of these provisions were quick fixes and easy to implement. others take more time, but rest assured that sba is working diligently to implement every provision as soon as possible. to begin with almost immediately, the agency began making loans with a temporary increased guarantee and reduced fees authorized by the jobs act. this helped us put $12 billion in loans into the hands of small businesses at a time when they needed that lending support more than ever. second, the jobs act also raised limits on our loan sizes from $2 million to $5 million. this increased size will help manufacturers, exporters and other small businesses. for example, great falls marketing in auburn, maine rereceived approval of a $2.6 million loan for purchase of an
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existing business. they anticipate creating 80 jobs as a result. the jobs act contained 19 provisions making it easier for small businesses to compete for and win more of the $500 billion federal contracts awarded each year. for instance, the law reaffirmed the equal treatment or parody across federal contracting programs. this meant when awarding contracts that are set aside for small businesses, contracting officers are free to choose among businesses owned by women and service disabled veterans as well as businesses participating in the hub zone. the sba quickly implemented the repeal of the competitiveness demonstration program which will help small businesses compete for contracts in areas such as construction, landscaping and pest control. third, the jobs act also provided funds for counseling and training which included $50 million in grants for our small business development centers around the country.
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all of this money is out of the door and going to fund innova innovative funds such as regional innovation clusters and support for young entrepreneurs. the fourth way the act is helping small businesses is through increased support for exporting. the jobs acted raised the size limits to $5 million and export express loans to $500,000 that also made the export express program permanent. and chair landrieu already has cited the great success of baker sales in louisiana as one of the examples of how these tools have been put to use by small companies and creating jobs. at the same time, sba is reviewing and evaluating the first year proposals for the trade trade and export promotion grants pilot which will fund $30 million to state programs this year to increase exporting. as we implement provisions of the jobs act, we have
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continuously sought input from small business owners, lenders and other stake holders. the sba's jobs act tour visited ten cities with three more planned in the very near future. at each tour stop, top officials are sharing information on how small business owners can take advantage of the jobs act as well as talking with them about what works, what we can build on what needs to be improved going forward. the response to the jobs act tour has been overwhelmingly positive. in the surveys conducted after each tour stop, 92% of the respondents felt they had a chance to give input to the sa sba on its programs. 94% of respondents learned new, valuable information about sba programs and 95% of respondents thought they would be able to use the information they learned to help their business. we had over 1900 attendees thus far and are expecting 2600 at
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the end of the tour. thank you for this opportunity to discuss the small business jobs act. i'm happy to take your questions. >> thank you very much. mr. graves? >> good morning, chair landrieu, ranking member snowe and other members of this committee. thank you for the opportunity to be here today, along with my colleague, marie johns. i'm grateful to discuss our efforts to create the opportunities for small businesses to thrive. small businesses are vital to our economic growth. small firms employ approximately half of all americans, and are responsible for two-thirds of net job creation. that's why supporting the economic conditions in which small businesses and entrepreneurs can thrive through improving lending conditions, tax incentives has been and will continue to be a top priority. the administration also recognizes the unique hardships faced by small businesses today. through no fault of their own, these businesses have borne much of the burden from the financial crisis.
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in the aftermath of that crisis, small businesses have been faced with aa cycle of decreased customer demand. with no other options many have been forced to downsize and lay off workers. to help them recover, last september, president obama signed into law the small business jobs act, the most important comprehensive piece of business legislation in over a decade. certainly the both of you in this room were instrumental and thank you so much for your work on that. i commend you for that work and we're excited to continue to implement that legislation. since the bill was signed into law, treasury has been hard at work implementing two of the programs crucial that were part of that small business jobs act. the small business lending fund and the state small business credit initiative to help small businesses access affordable credit in order to expand and create jobs. the jobs act contained eight small business tax cuts, part of 17 small business tax cuts the
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president signed into law that provide additional tax relief to help small businesses invest and create jobs. at treasury, i oversee the state small business credit initiative and lending fund. the credit initiative is a $1.5 billion credit program to support lending for small businesses by strengthening capital access programs, loan guaranty and loan participation programs. and other innovative small business initiatives. as a result of the financial crisis and state budget shortfalls, many of these programs have been cut back at the moment they're needed the most. the state small business credit initiative was intended to help reverse that trend. as a result of the good work of my treasury colleagues, 48 states, the district of columbia and all five territories have notified treasury they intend to participate in this program. we've received 13 applications from states thus far that would collectively leverage over $3.2 billion in lending to small businesses.
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treasury has approved allocations to north carolina for $46 million and california for $169 million. and their programs have utilized the funds to increase lending to small businesses in those states. allocations for vermont and missouri have been approved and missouri reports that applications to its state small business credit initiative program, state run venture capital fund has totalled $50 million exceeding the fund's initial capacity. additional approvals for hawaii and indiana were announced earlier this week. the second program i oversee is the small business lending fund, providing capital to institutions with assets over $10 million. it provides capital through treasury purchases of preferred stock or debt instruments from each bank. since banks leverage the capital, the small business lending fund will increase lending to small businesses in an amount that is multiples of the capital provided to participating banks, helping to
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expand and crete new jobs. the interest rate banks pay to treasury helps incent them to lend to small businesses in need of financing. the rate will be reduced as the bank increases its lending to small businesses ensuring the benefits only go to banks that use capital to extend additional credit. i'm pleased to report, we've received 702 applications and total requests for $10.1 billion in funding. we expect to complete these in the next few weeks and complete the fundings in june. we believe the fund will have an impact towards small business lending across the country which will help create jobs and grow the economy. we're looking ahead to identify and address challenges facing small businesses that will be important to overcome to build a competitive economy. in march, treasury co-hosted a party that had business leaders
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and academics to draw additional attention troubles facing small businesses, reducing barriers to their success and find new ways for the private and public sector to work together. with that, let me thank you again for the opportunity to be here today and reiterate how appreciative i am of this committee's work and the commitment to america's small business. i'm happy to answer any questions you may have. >> thank you very much. we'll have a first round of questions by the members. we've been joined by senator cardin from maryland. we appreciate him being with us this morning. before i want to get into the questions, i want to submit things for the record that i found quite encouraging. one is a document i received about a couple of weeks ago from the vistage confidence first quarter report. it's the largest survey of ceo. this is a for profit company operated for many years.
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they polled their members that represent businesses from 5 million to 50 million, some are smaller, some are larger, that's their average member basically. the wonderful outcome is that 65% of these ceos stated that compared to a year ago, overall economic conditions in the u.s. from their perspective have improved. 54% of the ceos expect the firm's total number of employees will increase during the next 12 months. 47% said the best way the government can help create jobs is expand access to capital. and 76% anticipated their firm's sales revenues will increase. i wanted to submit that to the record. i think that is one evidence -- one piece of evidence that suggests we're moving in the right direction, although we have many challenges ahead. the second is a document about the unemployment rate.
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i think that it's important for us to understand the facets of the unemployment rate which we don't always by just talking about the averages. but the rate for individuals 25 years or older is only 7.6%. it's higher than we would like, but it's 7.6%. interestingly, unemployment rate for workers with a college or graduate degree is only 4.5% in our country today. unemployment rates for high school is 9.7. with some college or an associate degree, it's 7.5, but unemployment rates for workers with less than a high school diploma is 14.6%. while this committee can lower the unemployment rate by the work that we do, passing laws and new programs and policies, to help get small businesses up and operating, some of these
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challenges are structural. in terms of how this country is either investing or not wisely in the workforce to provide them the skills they need to create jobs. so while i will, as chair of this committee, take a good bit of responsibility to end this recession, i would suggest that the committees of education, the committees of health and welfare and education have a similar challenge in bringing these numbers down. i think that the administration understands that and it's why they have a broad array of programs to end this recession, not just small business bills, but we're doing our part. let me start with the question to you, mr. graves, because as a strong supporter of the small business lending fund, which is a new and innovative approach, 700 banks have applied. that's less than about 20% of
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those that are eligible. as you know, i intended for all the community banks to be eligible but we've run into some difficulty there because of some restrictions in parts of the law. however, about 3,700 c corporation community bankses are eligible, yet only 20% have applied for funding. that's about 600 banks. one way to look at it is that's 600 banks more than there was a year ago that have access for money to lend. can you explain why treasury has not made your investment decisions yet? when can some of these banks anticipate receiving the green light from you all? there are several in louisiana that are actually quite excited about this opportunity? can you shed some light on this for us? >> we have worked very quickly to try to get these two new
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programs that treasury is implementing under the small business jobs act up and running. we worked expeditiously. we have a very strong team we've put together to stand up these two new offices within treasury to get these programs off the ground. i think it's important to remember that while we're moving as quickly as we can on those programs, it's important and in fact you required us to ensure that we balance both the speed with which we get the programs implemented with the need to ensure that we're making prudent investment decisions and protecting the taxpayers' dollars. so we have instituted a fairly robust, very robust system of reviewing potential investments, ensuring that every institution that applies meets the eligibility criteria that we then consult with federal banking agencies and in some cases the state regulators when appropriate, and then treasury
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performs its own individual assessment on the financial standing of that institution and its aability to participate in the program. once we make our approval decision, we then will let the banks know and they will be able to close within 30 days of receiving that approval. we have conducted a significant amount of outreach with community banks all around the country. we've conducted more than 30 webinars, teleconferences across the country. we have a dedicated web page and a call center with our small business lending fund team. we talk with community banks all across the country every day of the week. we look forward to announcing our first round of funding very soon. in fact, i expect within the next few weeks, we will be making those decisions for the institutions and we will be getting some closings beginning in june. >> okay. i'm going to ask you, not right
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now, but in a few minutes, your response to some of the gao report findings that just came out on this program. but let me ask marie johns, mrs. johns, if you could put the chart up, the 39 programs that were either created or enhanced under the small business jobs act of 2010, most of them are completed by your agency, and you were the implementer for this, i understand, and most of them have been completed. but there are two particularly, there are 28 provisions that have been completed. that's 72%. nine provisions in the process of being completed and two provisions that are not complete. the two i understand that are fought complete are the export assistance centers and one on contracting policy. can you comment on why the delay on those two particular programs? or do you have any comments about that at this time? >> yes, chair landrieu.
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thank you for the question. i also want to thank you for your leadership on the small business jobs act and to ranking member snowe, we greatly appreciate your support. many of the provisions that made their way into this act. export -- overall, i'm very proud of the way that the sba has moved forward to implement these provisions. we took this role very seriously, because we know that small businesses were waiting for these critical tools to be in their hands so they could grow their businesses and create jobs. as far as the export provisions are concerned, a lot of work has been done. very shortly, we will be naming a new associate administrator for the office of international trade. individuals have been hired in additional trade counselors have been hired in two of the usiacs around the country.
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the process is ongoing and there's a requisition out for additional hiring. that process is well under way. we have provided reports to this committee regarding travel and other -- >> the contracting policies seem to be slow in being implemented. >> the contracting policies are -- first of all, one of the primary contracting policies that the bill advanced was the clarification of parody, regarding parody, that provision in the bill immediately gave contracting officers across the government clear signal, clarified rule so that they had a much more available at their hand in order to meet the government's 23% contracting goal for small businesses, because as you know, prior to the small business jobs act, there was confusion about ow our programs lined up, but the parity issue in the small
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business jobs act resolved that so that was an important provision under contracting. as far as other of the contracting provisions in the act, as you know, the contracting process is not immediate. that is not a process the sba owns and we can't stand up those new provisions on our own. we have to go through a process through the federal acquisition council and it takes time. we are moving apace. many of those provisions are poised to become effective in the very near future. >> thank you. my time has expired. senator snowe? >> mr. graves, with respect to t the treasury lending program, first of all, the 702 institutions that are now participating in the program, how many loans have actually been issued? >> we've actually not made investment decisions on any of those 700 institutions that have
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applied, so no loans yet have come from capital that comes out of the program, but part of the -- the deadline for this program was september 27th, and we expect that all applications that meet the eligibility criteria will have been aapproved by september 27th, so we'll get those dollars out the door to the community banks so they can do the business of supporting small businesses. >> so it would be this fall, i mean when small businesses could actually receive the actual dollars? >> that's a good question. we believe that, beginning within the next few weeks, dollars will begin to go out the door to community banks and that those banks will then lend based on the incentives based on the small business jobs. >> based on what i was saying in my opening comment, ultimately
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what it suggests is that there's going to be minimal new small business lending that you can actually -- very few new institutions will be participating in the program. in fact, as i understand it, it's only about, i think $3 billion that would represent new institutions. only $3.3 billion. is that true? >> you know, it's a good question, because a number of people have asked that of us as well before. it's important to remember that this legislation -- that this program is not a t.a.r.p. program. i just want to make that clear at the outset. any institution that meets the eligibility criteria, regardless of whether they are a t.a.r.p. institution or a nont.a.r.p. institution is eligible to apply and participate. the other thing that i would say is that this isn't a program to
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assist cpb banks. in fact, there's no opportunity for an institution to decrease their interest rate without increasing the amount of small business lending that they do. >> i guess the threshold you're using as a standard, they only have to increase it by 2.5% i mean essentially. they can exchange, you know, what they're receiving under t.a.r.p. for this at a lower interest rate, and they only have the increase their small business lending by 2.5%. that's just a minimal increase frankly. you are replacing one with the other. the objective isn't to assist the t.a.r.p. recipients but the net effect is that it is happening. so i think that's the point here, is that are we just turning over the same money now benefiting those who have already received, you know, a great benefit from the united
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states government that we like to invite other institutions into the fray to expand the loan portfolios among banks and other entities that can issue these loans. i guess that's my concern, and i think it's one that needs to be addressed. from what i understand, is that the t.a.r.p. recipients seeking investments that exceed the remaining t.a.r.p. balances by only 10 to 30%, so it really does beg the question of how much new lending will actually occur under this program? if they meet the 2.5% loan increase in lending. >> i share your concern. in fact, no cbp institution will get to an interest rate of 1% unless they increase their lending to 10%, just like any other institution that participates in the program. the program was really meant to, as i understand it, to increase small business lending. it's really to get capital out
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to small businesses all across the country. >> the question is how that happens. i'm just not -- from what i'm understanding, it's not exactly happening with the maximum effect? that's the problem here, because of the perverse incentives it's created in the program. for example, you know, from 2008 to 2010, lending institutions, small business lending declined by 9.2% to $652 billion, the second lowest since 2005-2006. the latest index shows that small business lending in march of this year already increased by 12% compared to a year ago. you're using an exceptionally low benchmark, four quarters, june 2010 to incentivize banks when in fact the small business lending is already occurring without this program having been
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implemented yet. that's the problem. >> would you like me to answer? >> yes. >> i think it's important to remember that the baseline that was set in the legislation was done so because it was really looking as a means to increase small business lending from where we were as you suggest, just last year at the low water mark in recent years. if institutions were given a baseline that was significantly higher, those institutions would not participate in the program. so what we're trying to do is incentivize banks to increase their lending, giving them all the tools at their disposal. giving them the capital they need so they can get the dollars to all the small businesses around the country that are looking for capital. >> just a follow-up. i know my time expired, but if they have maintained the 12% trend that's already occurring, they can lock in on the interest
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rate of 1%. that's the point. that's the incentive for them to transfer from one program to another, the t.a.r.p. program to this program. >> thank you. >> let me thank senator landrieu and snowe for this hearing. one of the most important responsibilities of this committee is oversight. it's one thing to pass laws but it's another sure those have th intended effect. i know that's sometimes hard work for the committee to do and applaud our work of this committee. the legislation, the small business jobs act had many important provisions. . i was a little late getting here today because i was attending a conference from our small business centers, development centers on export activity. and that was one of the major issues in this legislation. and we're making some progress on export activities. we also had tax credits, i think it's important for us to
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understand how they're working. but the first point that's been mentioned here, this bill was aimed at proving access to credit. we need to get better answers. this was a major initiative. some of us would've preferred this money going into direct loans. and we were told, no, this is going to be the incentive to get the community banks more interested in making loans to small businesses. and this was a large commitment to federal resources. so we need better answers. we need to know how much is getting out there. i'm a little disappointed it's taken this long. many of us thought this would get out a lot quicker and there'd be more interest. so i just want to support the questions that have been asked by our two leaders. we need to have better information to this committee as to how this program is working. and the question senator snow asked as to whether this is just what would've happened and we're giving incentives that community
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banks are not needed or whether we really have leverage of new activity. it's a question we need answered. so i'm going to ask our leadership here to follow up and make sure we get information in this committee to make sure that we are accomplishing what we intended to do. i want to talk about another part of the small business jobs act. and that was to improve government opportunities for small businesses. i helped draft a provision in the small business jobs act that requires federal contracting officials to complete small business training before receiving certification. there is a real concern as to whether the procurement officers in our agencies have a bias towards existing relationships with contractors, mainly large businesses, to the exclusion of opportunities for small businesses in our community. and that this committee wanted
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to do something about that by requiring that the contracting officers have greater sensitivity to the -- not only the letter, but the spirit of our law to engage smaller companies. there was also a second provision added that requires reports to congress dealing with better known disadvantage businesses. can i ask either of you or both of you if you can give us a status as to how the implementation of those provisions are working and how you intend to comply with your requirements on keeping us informed as to the progress being made in regards to those targeted small businesses? >> good morning, senator. we are also grateful for your support of this important piece of legislation for our small businesses. our government contracting organization works regularly with contracting officers across
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the federal agencies, we meet on a regular basis, monthly, actually. in addition we have a senior level effort focused on contracting and ensuring across federal agencies that at the deputy secretary level that those individuals are aware of what the contracting goals are across the different certification programs that the sba manages. and they understand how their agencies need to organize and to ensure that information flows so they are also able to focus on meeting their particular goals for federal contracting. >> are they bringing the employees in responsible for train sng. >> yes. we are working with the federal acquisitions institute and the defense acquisition institute to develop a curriculum for contracting officers that will be an enhancement to the training work we're already doing on a regular basis. >> and what is time frame for being able to implement this training curriculum? >> within the next few months. >> can you be more specific?
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>> probably in the september/october time frame. >> and will all contracting officers be required to go through this training? >> yes, that is the -- >> how long will it take for the contracting officers to be able to get the benefit of this new curriculum? >> senator, i don't know the end date. we've not established an end date. the focus has been getting the curriculum in place and getting the training. and we have a commitment to the training as long as it takes. >> i think my office and i think the committee may also be interested in reviewing the curriculum you are changing and the time schedule for contracting officers in which agencies you anticipate being the first and the time schedule necessary to get all contracting officers up to speed. >> certainly. >> with this new curriculum. >> be happy to. >> and the reports to congress that are required, i take it
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you'll meet the deadlines and get us information as the specific progress being made with better known disadvantaged businesses. >> yes, senator, we will. >> one more question, getting back to credit. there was a second part initiative other than the sba guarantees, we also provided funds to state governments who had programs dealing with credit. i know what's being done in maryland, but i would ask our committee be kept informed that you provide to us the specific activities that have been generated by states as a result of the additional resources made available to federal level -- my reason for asking that, madame chairman is following up on senator snow's part. i'd like to see if you could the relative activities generated by our partnerships with the states versus the additional money so we can see where we're getting the most activity for the resources. so if you could make that information available to us, it
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tells us where we need to put our attention. >> i thank you. senator, you raised several excellent points. and our next panel that will have specific information about how those state programs are working. but i want to remind everyone that one of the reasons we couldn't do direct lending is because of the strong opposition from the minority party. they would not approve of direct lending from the sba. so in order to get money out to small businesses with that not being an option, the only option we really had was to work either with state programs, regional programs, or the community banks. so we will see. we've crafted something, we hope it works. we're not sure it will. that's what this hearing is about. i myself as a lead architect of this bill are interested to see. because there were different views on both sides of the aisle, we didn't have all options available to us, but we did the best we could. let me ask a question and we'll go through a second round and
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get to our second panel. one of the things i was most interested in. and i'm not sure we were able to be successful, was giving some relief for debt refinancing for the commercial real estate section. we wrote a section in the bill entitled small business access to capital trying to provide some relief refinancing. our understanding, however, is that there has been minimal usage of this program. we're hearing from banks that the rules that are written which we think might be much more narrow than what our law intended is not helping to provide the relief that we had hoped for. so mr. graves, do you have any comments about this particular section? or ms. johns? >> yes, senator. i'd be happy to respond. the 504 commercial refinancing initiative was a new program for us.
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and in every instance with a new program, we're always balancing two key objectives. that is getting the program into the hands of small businesses as soon as possible, but also ensuring that we are delivering the program in a way that ensures we're good stewards of the federal resources. and so those are the objectives that we were balancing as we rolled out the 504 re-fi. once we put the initiative into the marketplace, we also are constantly gauging how the market is responding. and in the case of 504 refi, it became clear to us that we needed to take a second look at -- pardon me, opening up the provisions of the 504 re-fi to include more businesses, and that we have done. we have made a mid-course correction. the comment period on the change has just closed. we made sure that we contacted all of the industry associations and talked with them and we're in close contact as we were
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developing the mid course correction. and so we're very -- we're looking forward to getting the new 2.0 version of the program in place. and we're sure we'll see some -- >> because this is very, very, very important. many, many, many small businesses have seen, of course, the value of their buildings that they own or their, you know, commercial collateral basically decline. but they still have fairly strong balance sheets. and a refinancing opportunity could really help them. and if it's done correctly, it will work. and if not, it's going to be another missed opportunity for businesses out there. and contribute to the spiralling down of this market. so again, our committee can't do everything in this regard. but this is a very special initiative. please keep us posted as to how. and if the it's the language of the law that's preventing you, i would be open to some modifications. but hopefully you can take the language as it was written and
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implement the rules so it actually works and people can take advantage of it. and one more question, then i'll turn it over to senator snow for her second. let me see. the jobs act we talked about this, but it's worth repeating again. the state trade and export promotion grant pilot program, can you provide the committee with an update on the status of this program. specifically how many of the 56 eligible states have submitted applications for this particular program. >> yes, senator. i would be happy to do that. we have received applications from 53 of the 56 eligible. and in fact, as we speak, there is an inner disciplinary team of reviewers who are meeting at the sba. they have been there all week. we compiled a team of folks from around the agency to bring various expertise to the review process. in addition, we also sought out
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reviewers from other federal agencies. so we have a reviewer from xm bank, from the department of commerce because we wanted to have the strongest possible team. so they're hard at work this week and intend to complete their work by the end of the week. so we are very eager to make these selections, get these proposals, the proposals back out to the states. >> just finally as i turn it over, i want to be very clear that i agree with the senator that the oversight of this committee is very important. we've tried instead of sitting he here, we've tried many different things. we're now in the process of evaluating, what works well, what's not working, but you can't stand still in a situation like this and do nothing. you must move forward aggressively. so we've started new regional programs, export programs, partnerships with our community banks.
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we did everything but direct lending because we were blocked from doing so. but we could potentially revisit that later on. but let's see what's working. and then make the adjustments as we go forward. but getting capital into the hands of main street businesses, not businesses on wall street, not big multicorporations that have many ways to access capital, but main street businesses remain our goal to drive down these unemployment rates and provide opportunity for the american dream. >> may i make one comment in response? i just want to assure the members of the committee that at the sba we share your sense of urgency on that and the notion of constantly looking at how the programs as we get them out into the hands of small businesses, we are constantly looking at how those programs are being received and what tweaks -- what mid-course corrections we need to make. as we did in the 504 re-fi we acted quickly toward that. i am out, i'm traveling
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regularly -- since the first of the year, i've been to over half of our regions talking to hundreds literally hundreds of small business owners asking them about the small business act. we've had a small business jobs act tour, 13 cities planned, we were down to the last two cities. we are out and about talking regularly to small businesses and seeking their input on how we can do -- what we're doing better, how we can make these programs work more effectively for them. so i want to assure the members of the committee that we share your sense of urgency. >> we appreciate the effort. and we're going to be looking for some very clear results as the weeks and months unfold. senator snow? >> thank you, chair landrieu. just to follow up on the issue of direct lending. the administration opposed direct lending, as well. essentially did not want to become a bank. a big difference between guaranteeing loans than it is to write and be directly involved in issuing those loans.
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in fact, there's an article right here that "new york times," today is march 10th, why won't the sba lend directly to small businesses? it's an indication that the government would have to stand up in his words a massive bureaucracy and it'd take too long, you'd be frustrated. there's a point to legitimate issues there in direct lending. and in any event, i think the point is here now is that we have to get into the oversight issues and to make sure that this program is working. i do have strong concerns about on the t.a.r.p. side. and i've already indicated that to you. one other issue, i've introduced a bill on a couple of issues concerning the lending program, but one i wanted to raise with you today because you may already be addressing it is that my bill would prevent the treasury from issuing a loan to any institution that has been deemed by its regulator to be unhealthy.
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that entities regulator. what would you be doing in that regard? do you get reports? how do you evaluate those who are seeking loans under this program if their regulator deems them to be unhealthy. you're not prohibited from continuing to issue those loans. >> thank you for that question, ranking member snowe. we share your concerns about ensuring every investment made in an institution is done so in an institution that is healthy, that has the financial wherewithal to increase lending to small businesses. in fact, as i mentioned at the beginning, we've implemented a very strong and robust system of reviewing every application that comes from a community bank. each institution has an initial eligibility assessment performed by the treasury team. then we conduct a consultation with the federal banking
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regulator of the institution. in some cases where it's appropriate, we conduct a consultation with the state regulator, as well. and then treasury has its own internal investment team that conducts a separate, independent analysis and evaluation of each and every one of those applications that comes back to us from the federal banking regulators before we make any decision to make an investment in a community bank. really what we're trying to do is make sure while we're trying to get these dollars out the door and support small businesses, we want to make sure that we make prudent investment decisions and do our very best to protect the american taxpayer. >> thank you. >> thank you. >> administrator johns, one of the issues i wanted to explore with you some expressed interest in increasing the loans. it would crowd out small borrowers. what's your response to that? i know that according to the most recent data, 60% of the
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agencies, loans have been under $150,000, and over 80% have been under $350,000. it appears the small loans have been growing faster than the larger loans. but can you comment on this issue? because clearly we want to make sure that smaller entities -- smaller businesses are having access to these loans. and it looks like it's certainly possible that it's occurring. but i'd like to hear comments. >> actually, there is no indication of crowding out effect. in fact, i'm sure we have shown you data that there was a major spike in lending at the end of the year. that was as a result of the fact that there was much pent up demand for the 90% guarantee. so there was a lot of activity at the end of the year. that spike was not due, pardon me, to the larger loan size. in fact, our data shows that
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really just 3% of our loans are in the larger loan sizes between the $2 million and $5 million. and that has been very consistent over the course of time since the passage of the small business jobs act. so the notion of crowding out effect has not at all occurred. >> that's great. also as you know, the loan guarantees, we reduce the borrows, fees, and lender fees, and that's not going to reoccur in this economic climate. do you think that will discourage lending at all? i mean, do you think it's going to have any affect on loans? >> well, certainly that was -- those were initiatives that were very well received by the market. but we are still continuing to see general uptick in loans. and the other reality is that the small business needs for capital are not monolithic. yes, we have businesses that need the higher loan limits,
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which is why it was an important provision in the jobs act. but we also have small businesses who have reacted very well to the increase in microlending. so we have businesses who need -- small businesses need capital across the spectrum from the relatively small dollar loans in the microlending space to the small $5 million available through the 7-a program. so what we are charged to do as an agency is making sure we're looking across that spectrum and continuing to identify gaps that may still exist and to keep this committee apprised of that and to seek your help in addressing those. >> thank you. >> thank you. >> senator? >> thank you, again. thank you both of our witnesses. and i didn't mean to get into a debate on direct loans. but if i might just point out two points. first, sba does make direct loans in emergency situations. number two, when there's a 90% guarantee of the sba loans, in
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other words taxpayers in line for 90% of these loans, seems to me making it 100%, we can have direct accountability when you're dealing with a third party bank, it's much more difficult for us to get the results that we want out quickly. that was my point on it. but i am very proud of the small business jobs bill. and i really do congratulate senator landrieu. i was at caucus meetings when you're trying to get floor time, and there's no stronger advocate on behalf of smaller businesses and doing our work and senator landrieu. and it's not easy to get the floor time to get the bill passed. and this is a major bill, major new tools available to help small businesses. and we're very proud of this bill. but our responsibility's oversight. and to make sure that every dollar made available is used to the maximum advantage to create jobs. and that's through small businesses. and i come back to procurement.
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and i know i represent the people of maryland. and because of maryland's location we have a lot of government agencies located here. and we have a lot of small businesses that depend upon government procurement. so it's of great interest to the people of maryland. there has been documented abuses by agencies. and one of the things we've been able to do in this committee is to support the sba and give it the tools. it was this committee -- i serve on the budget committee. it was a direct result of senator landrieu and senator snowe's efforts that we are able to expand the budget. and that gave the sba the tools so you could be the advocate for small businesses within the administration. we know agencies at times want comfortable relationships who they're already doing businesses with. so they bundle small contracts could be given to small companies into large contracts
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which only large companies can compete. and we want you there fighting on behalf of small businesses saying, no, don't bundle these contracts and elbow out small companies from being prime contractors. because we know in the prime contract subcontract relationships there are abuses there also. better off to get small companies really into the game. so we do put a lot of confidence in the sba being there as the advocate on the behalf of small businesses taking up the fight within the cabinet room and within the administration. so the curriculum you're developing for training we see as a major step forward. and i just urge you as you implement this law that you bring in the small companies and listen to their stories as to their experiences with the department of defense or with the department of agriculture, or all the agencies of government. because there are horror stories out there as they try to get through the mine fields of
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getting their fair share of the procurement work of government. so i appreciate your response as it relates to the curriculum, training sessions, et cetera. but it's also going to take the sba as an advocate to fight. in the relationships they have with large contractors where we've got to get small business in the door there. >> thank you, senator cardin. i have to say to you, i couldn't agree with you more about the importance of the sba's role as the voice of small business. we take very seriously and wear very proudly that mantle of being the advocates of small businesses within the government and beyond. and as far as my personal commitment, i've been involved in small business issues long before i have had the honor to serve in this administration in this role. and i'm a local person. and a lot of people have my phone number. so i'm regularly taking phone
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calls on a saturday. people stopping me at church, small business owners. i know a lot of them talking about issues and giving feedback on how our agency can work more effectively. so believe me, you have my 150% commitment. and that's why i do make it a point of talking to small businesses whenever possible. we've got to know how these programs are really playing on the field and so that we're prepared to make adjustments as we need to and that's what we do. >> thank you. you're going to be getting more calls. i'm looking at six i picked up this morning. >> hand them over. >> i'm taking this case work myself. so i'll be contacting -- >> we'll be happy to come to your office and get you an update. >> thank you very much. and the contracting of small business has no stronger advocate than senator cardin. and thank goodness for him. i thank you. i have one question, but i'm going to ask for a response in writing about the tax provisions in the small business lending
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bill to treasury can supply this in writing. when will you be able to provide an analysis of whether small businesses were able to take full advantage of the tax provisions in the bill? i know that some small businesses have not yet filed their returns and do a delayed filing in october. but i'll ask -- i'll submit that to you and you can respond in writing. >> we'd be happy to do so. >> thank you all very much. i appreciate it. and we'll move to the second panel now. thank you. as they are moving to save time, let me begin introducing our second panel. we'll be hearing directly from small business owners. from their view and perspective how this new bill is helping them or providing opportunity. we'll also be hearing from the association of the self-employed, and the vice president of a rural program from north carolina. so first, let me introduce eric
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blenderman, a founder and owner of a highly rated new york city restaurant. he's currently constructing with the help of an sba 504 land a second raund. restaurant. so we're looking forward to hearing his testimony this morning. this association represents the interest of america's smallest businesses. employing themselves. one person. she is a new yorker. and finally, patrick woody, vice president for north carolina's rural center. at the rural center, he oversees capacity building programs in the area of infrastructure, business development, workforce development. we're very interested to hear this morning mr. woody, how one
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of our state programs that many of us supported so whole heartedly how it's working. >> thank you, chairman, members of the committee for inviting me to testify this morning about issues pertaining to implementation of the small business job act of 2010. to understand, i think, how the small business job act has impacted main street and specifically my restaurant in new york city, i think it's important to get a little bit of background around where my restaurant came from. it's a small business success story that was conceived initially after the tragedy of september 11th in new york city. and those trouble times, my business partner and i turned our attention from grieving to reconstructing. i was then a 27-year-old kid focusing on financial models, preparing the business plan, otherwise taking the business sidesteps to turn our broad
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ideas into reality. the chef, of course, focused on the artistic side. i went to the place that had the money, banks. i would leave my day job at my law firm, go to the teller at hsbc, chase, bank of america, you name it, in my best business suit say to the teller i was a small business owner, here was my partner and we were looking for about $500,000 to open up a restaurant in new york city with no experience, no capital, and nos a sets. fortunately after being turned away by just about every bank up and down manhattan, wall street, 5th avenue, 6th avenue, you name it. i persisted with a consortium of other banks, one called the new york business development corporation. the purpose is to provide creative underwriting solutions for non-traditional lending risks. the category into which we
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clearly fell. because of the relationship with the united states small business administration and conventional banks, they were able to mentor me through what was a complicated and difficult sba lending process. but with their assistance, i was able to procure a $500,000 sba 7-a term loan, a $50,000 small business development loan, and was able to open and construct. in terms of public/private partnership, the lending package worked exactly as designed. my partner and i used funds to renovate a restaurant that had gone bankrupt as a result of september 11th and converted it. now more than seven years after opening, we employ approximately 35 individuals, generate hundreds of thousands of dollars in city, state, federal tax revenue every year. of course, all good stories must come to an end.
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but from our small business, that ending is unclear because despite our successes, our continued existence is bounded by the terms of our commercial lease. which has less than three years left before it expires. more over, despite my best efforts to arrive with business terms, we have not been able to extend that lease because of various economic conditions that the landlord has placed as a condition of lease renewal. enter the small business stimulus package of 2010. the small business stimulus package of 2010 was initially put to vote in july of 2010, which was around the time that the chef and i had located an alternative location within which to either open up a sister restaurant to my current restaurant or to relocate my current restaurant should the time arise that relocation is required. about that time, i began approaching the nybdc once again to request financial assistance,
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not to lease the property, although the property was available to lease, but to purchase it outright. to attain what i call a forever home. that place that i would have the ability to sit there and manage my business in perpetuity without ever having to run the risk of being thrown out from my place of establishment because of rent increases, other conditions, or various other provisions which could attach as a result of a leasing relationship. and unfortunately, i was told by the nybdc that although we were a credit-worthy business and we were qualified to obtain lending through various programs, the sba's lending limit of $2 million prohibited us from purchasing that property outright or conducting our expansion plans. in addition, the sba informed me that the requested financing package was going to result in a total of nearly $60,000 in lending fees, which for a small business like a restaurant owner
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is a very large sum of money. notwithstanding the nybdc courted aggressively, many lenders, citibank, hsbc, and others, and we ultimately decided on citibank, which was the recipient of troubled asset funding. and were able to obtain to permit construction. broken down in the form of a 504 sba loan, $1.5 million from citibank, and a further 7-a loan in the span of $420,000. the importance of this expansion to my business cannot be understated. the sba 504 program has allowed me to buy this outright. because we work on tight margins, we would've never been able to purchase this property but for the existence of the small business stimulus package.
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second, the collective terms will result in my restaurant paying thousands of dollars less a month than i currently pay in fixed costs for my existing restaurant. most importantly, we are in the process within the next 90 days of hiring 65 new people to staff and run my new restaurant. importantly, these benefits do not just appeal to me as a business owner, but the city and state. in addition, each of my 65 anticipated employees will pay federal, state, and local taxes and contribute their fair share to social security, medicare, medicaid, and related entitlement programs. payments to the hundreds of food vendors, beverage, and other vendors who serve my restaurant which include locals and others provide additional revenue for local federal and state. these have begun accruing
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despite the fact we are under construction as we're using our funds to employ dozens of architects, electricians, plumbers, and dozens of others. it should be measured by the cash flow and profitability. i believe the same metrics should be used to utilize the small business package of 2011. as businesses take advantage of this, this committee should analyze whether they're contributing to economic expansion, creating new revenue streams for government entities, and repaying their debt with interest and without default. if on balance the net sum of loans made to the stimulus package of 2010 achieves these objectives, i think the united states will have benefitted great through from it. i'm confident we will meet these objectives, and i'm grateful and thankful for the passage of this bill. thank you for your time this morning and i apologize for having run slightly over. >> that's okay. with a testimony like that, you can run a half an hour over your time. it's music to my ears to hear how helpful our efforts have
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been here to you and your restaurant. but i want to say how extraordinarily pleased i am that you took your time to come to this committee to share your story of fighting so hard to create a business in the united states of america. i can only say it should not have been that difficult. and i can only say how tragic, shameful, and ultimately destructive it is when a gentleman with your credentials, which i want to read into the record. you then graduated with distinction in international law from the university of oxford, yet as you testified you went to every bank on 5th street, 6th street, and beyond to try to get a loan to start a business and you were turned down. so my question to those listening is if a gentleman with a degree of distinction from oxford can't get a loan from the united states banking system, how is it possible for 99% or
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100% of the kids that i represent or young people in the state of louisiana who don't go to oxford. how is it possible for them to start a business? that is why this committee presses the envelope for new and innovative ways to get capital into the hands of young americans who we spent millions of dollars literally educating, but yet our system falls so short on giving them the opportunity to start business. as long as i chair this committee, we're going to continue to push open this door. >> thank you, chair, thank you, ranking member, and members of the committee for allowing the national association for the self-employed to testify here today on behalf of our 200,000 members and the 22 million self-employed americans worldwide. we're here today to talk about the implementation of the small
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business jobs act. and the next steps we must take to improve and expand upon the vital benefits it offered to america's smallest businesses. with the current economic dialogue so focused on jobs, it's important to note that our members and the 22 million americans that are self-employed are not solely temporary freelance workers between permanent jobs. it means you have created a job for yourself. self-employed businesses successfully provide for families, contribute to their local communities, and these jobs are just as valuable to the economy as an office or a factory job. and these businesses are just as essential as their larger counterparts. despite accounting for 78% of all small businesses in the united states and collectively contributing close to $1 trillion every year, the dynamic self-employed community is too often misunderstood and underrepresented in the policy fashion for small business. our nation's lawmakers and regulatory agencies commonly craft policy geared toward the
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tiny sliver of the business population that is corporate america. the narrow policy focus on the small percentage of businesses is why the small business jobs act was so crucial to our community. this legislation included key provisions that benefitted the vast majority of microbusinesses and provided much-needed bottom line tax savings to the self-employed. for years, the nasc has been working to allow a key disparity is the treatment of health insurance costs. the self-employed do not receive a business deduction for health insurance costs causing these businesses to pay more in payroll taxes than all other businesses. with the passage of the small business jobs act, the self-employed were allowed to deduct their 2010 health insurance costs from the self-employment tax on their 2010 tax return. what did this one-year deduction mean for someone who is self-employed? based on the average health insurance costs out there in the individual market, the one-year
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deduction in this bill saved self-employed business owners approximately $968 in taxes. and depending upon their cost of coverage, many businesses save more money. member michael kagan of maine is owner of m. kagan and associates, a self-employed biotech consultant. he saved in taxes due to the one-year deduction in the small business jobs act. and he used that money to reinvest in office automation and help grow his business. timothy doyle from louisiana, an electrical contractor saved $730 savings from this one-year deduction and put that money to pay for his next two months of health insurance premiums. and in this difficult economic time, this deduction in the small business job act helped business owners lower their tax liability or provided them with a substantial refund that could be used to reinvest in their
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business. best of all, this deduction, though temporary put the self-employed, america's smallest businesses on the same playing field as other businesses for the first time. the question now should be whether we extend this benefit and how we better implement it for the future. the nac strongly supports leveling the playing field permanently. we understand, though, in this difficult fiscal climate that an immediate permanent solution may be difficult to achieve. however, we strongly feel that this deduction should be extended at least for a two-year period. should an extension pass, we urge congress to encourage the irs to rethink the approach in implementing this vital deduction. the method the irs used was very confusing and not the standard approach for a business deduction. they created a new line, line three in form 1040 schedule se, the form utilized to calculate self-employment tax to allow self-employed taxpayers to take this deduction.
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it would be preferable and a lot less confusing to taxpayers to include this deduction on form 1040 schedule c in part two, which incorporates all business expenses. self-employed taxpayers had to carefully read the directions for a schedule to take advantage of this one-year tax deduction since deductions are not typically on this form. further more, because the bill was passed so late in the year, it left little time for the irs to provide guidance to stake holders and taxpayers on this deduction. an extension of this critical deduction for the self-employed community needs to be passed as soon as possible in order to allow the irs to be able to put this on the 2011 tax form and give stake holders the ability to educate business owners on how to take advantage of this benefit. in the current climate, policy makers on both sides of the aisle have been struggling to find ways to stimulate the economy while efforts have been notable and helped some industry sectors, only the small business jobs act has helped america's smallest businesses.
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america's self-employed have long asked for the same opportunistic seed as their larger counterparts. they seek no more than the same benefits that big business receive. so we encourage lawmakers to extend the key provisions in the small business jobs act. thank you. >> thank you very much. >> thank you, chair landrieu, ranking member snowe, and members of the committee for this opportunity to report to you on north carolina's implementation of the north carolina capital access program. i'm vice president of rural development programs for the rural economic development center. for more than 20 years, our non-profit organization has implemented sound chick strategies to improve the quality of life. typically, the rural center works in 85 of north carolina's 100 counties. the north carolina capital access program is the exception. at the request of north carolina's governor, beverly perdue, they are leading the statewide effort to spur new business investment. while the state small business
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credit initiative offers states the flexibility of using their allocation to boost small business lending. north carolina has elected to invest its full allocation in the capital access program or nc cap. the rural center has a 14-year history of operating this program. in 1994, north carolina was one of the first states outside of michigan to adopt a cap program. enrolled 850 loans totally $103 million in creating or retaining more than 27,000 jobs. this was accomplished with an allocation of 3.6 million from state appropriations and other sources. today thanks to the small business jobs act. nc cap has been launched on a larger scale. they will receive $46 million that enable up to $800 million to over 10,000 businesses in our state. nc cap is a voluntary loan loss
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reserve portfolio insurance program. eligible lending institutions, banks, cdfis and federally ensured credit unions elect whether to participate. the program allows the bank to mitigate the risk with the small business lending. for loans enrolled in the program the borrower and/or lender pays a fee of 2% or 7%. it's deposited into that loan loss reserve account. as more loans are enrolled, the reserve pool grows. in the event of a default on an nc cap loan, the lender may draw down the reserve pool to cover the loss. lenders are solely responsible for underwriting the loans and defining terms. loans may be used to buy land, construct, or renovate buildings, purchase equipment, or provide working capital. why does north carolina believe in this program? first, it's cost effective. for every $1 we invest, investor will typically loan $20 to small businesses. second, it's non-bureaucratic.
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paperwork is minimal and seamless to the borrower. not only do we draw upon our own experience, but more than 30 states have successfully operated cap programs. last december, north carolina joined michigan as the first two states to apply under the state's small business credit initiative. in february and early march, the rural center held 11 briefing centers across north carolina to roll out the program. these briefing sessions drew hundreds of participants including banks, other lenders, technical assistance providers and small business owners. today, 26 lenders, including 23 banks, two cdfis and one credit union have enrolled in nc cap. these 26 lenders represent 30% of all branch bank locations in the state giving the program statewide coverage. another 15 lenders are in the process of signing up and we continue to recruit others. our staff has made face to face contact with each of north carolina's 130 banks as well as our credit unions and cdfis.
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north carolina enrolled the first loan in the country using the federal allocation. at this early stage, we have 16 loans enrolled, including loans for restaurants, logging, and air cargo businesses. we anticipate a rapid escalation in enrollments. and in the next three weeks, we will embark on a statewide publicity campaign. the leadership of several important partners is noteworthy. senator kay hagan who gave her support to this legislation, our governor who seized the opportunity afforded to our state by the state small business credit initiative, bb & t president and ceo kelly king who embraced and promoted the program to his fellow ceos, as a former chairman of our board of directors, kelly was instrumental in bringing the program to north carolina originally. we also appreciate our partners at the north carolina department of commerce and the sbtdc and in the state small business credit initiative office at u.s. treasury. they've been very responsive to
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our needs and helping to ensure the success of our efforts. our state has suffered severe losses from the recent recession. now as we began to see signs of an improving economy, this new program is finding its legs. it couldn't be happening at a better time to stimulate the business and job growth we desperately need. thank you. >> thank you so much. i'm so excited to hear about your success. and also senator levin was very instrumental having some experience in michigan, of course. so let me ask you this too, again for the record. what happened in north carolina between 2007 and 2011? did the program go away? >> the program did go away for a period of about four years.
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>> and despite its success? >> well, despite its success, our primary funder had become the golden leaf foundation. and the real reason it went away was as it came time to raise the third round of capital for the program, their priority is investing in tobacco dependent and economically distressed counties. and about 2/3 of total loans were being made in the 15 urban counties in north carolina. and just their priority as a funder did not -- it did not meet their funding priorities. therefore, we did much to the disappointment of several of the banks that participated, we shut down the program for a period of four years. we began looking early in 2010 as this opportunity looked like legislation was taking place that might include a provision like the state small business credit initiative. we started looking very early on at this as an opportunity to start to restart nc cap on a much larger scale. scale was one of the issues with the earlier program.
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we had a very small amount of capital. banks are very reluctant to -- even though it's a great tool, it works very well for them. it's difficult to get banks to invest heavily in a program if they're not sure how long it's going to be around. the authorization if the staff will remind me for our program is five years for this? what is our authorization? five years. so we hope that will give you some stability for the start-up of this. and we are really going to be looking at how this works. because we are just desperate, literally, to find models that work for people like mr. blinderman who couldn't do more in terms of what america expects its young people to do other than going to school, graduating
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at the top of their class, getting the extraordinary degrees. yet, when they go out to start a business, there's no capital for them to start. and we wonder why this recession is, you know, why we're having difficulty putting in our rearview mirror. so we're trying it all. all of the above. and i'm excited about the program in north carolina and potentially we could have a field hearing there at an appropriate time to really showcase what you all are doing. and we're anxious to hear what michigan is doing, as well. let me ask, you testified you're happy for the smallest businesses in america to be on a level playing field with the largest. and you realize the financial constraints that we're under. what do we estimate it would cost to try to put these small businesses on an equal playing field? what are the most recent estimates? and do you have any suggestions about how we might step into that over time for the record?
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>> you know, beguagain, this one-year tax provision was a good start. it will allow us to see the effectiveness of this deduction. again, it's up to the business owner to take full advantage of the deduction. i do think we would get better utilization if the irs more effectively implemented the deduction as mentioned putting that deduction on schedule c where all other business expenses currently lie. there are 23 million self-employed americans who qualify for this particular tax benefit. and again, in terms of qualifications, they simply have to be self-employed, schedule c filer, and they have to purchase their own health coverage. so anyone who meets this qualification should take advantage of this. in terms of cost, this bill, you know, we for years have promoted legislation to address this inequity permanently, and the bill has been scored at $2 billion to $2.5 billion a year
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over ten years. again, it's in complete correlation to the number of self-employed people out there purchasing their own health care. so the smaller the number of self-employed out there purchasing health coverage, the less people qualify for the deduction, the more people qualify for the deduction which would address how much it costs. but again, at the end of the day, why is it okay for the smallest businesses out there to pay more into the tax, you know, more in revenue, more in taxes than larger businesses? why is it okay that a large business gets to deduct their health care costs that workers of large businesses gets to pay for those health care costs with pre-tax dollars, but someone who is a one-person business, self-employed, who needs the most assistance has to pay more in payroll taxes than anyone else. it's a fairness issue. and in this economy, that money is even more important because every little bit counts. >> thank you. and finally, mr. blinderman, your story is exactly what we
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had hoped for when we passed the small business bill. could you restate for the record what you think your business in terms of its contribution to the local economy, in terms of taxes that you're paying employees. you mentioned something about suppliers. would you state for the record the far reach of your successful small business? >> i think to answer that question, it's best to understand the model of my existing restaurant. currently we have 35 employees, and we generate over $3 million per year in gross revenue. of that is fully taxable as income as an llc pass through to all the owners and investors of the restaurant. in addition, all of our 35 employees are paid on the books in the restaurant industry, people are aware that often times tipped employees are paid out in cash each night, that doesn't happen. everyone receives the cash that comes in each night or credit
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cards, it's deposited into the banks, funneled through our payroll company, payroll taxes are deducted, medicare, medicaid, social security, our payroll averages between $23,000 to $28,000 per week. translating those numbers into a bigger restaurant that will employ more people. our projected revenues conservatively if we're able to meet our numbers would generate anywhere from, again, $3.2 million to $3.7 million more revenue, which would be fully taxable by federal, state, local authorities. in addition, if you take the $23,000 to $28,000 we spend in payroll each and every week, you can effectively double that and perform the calculations to determine social security, medicare, medicaid, and other entitlements which will be deducted in addition to other taxes. i think most importantly,
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though, are the trickle down effects for our suppliers and vendors. it is built upon a model of sustainability and organic cuisine. which back in the day before it was a buzz word has been open for seven years. we source all our ingredients as much as possible within 150 miles of new york city. farmers who wouldn't otherwise be able to meet the new york restaurant environment, fisherman, growers and others, it's a revenue we will consistently transfer over whether we're buying meat, poultry, fish, or vegetables in addition to our wine purveyors, and our other vendors, our glass purveyors, cloth purveyors, our laundry needs, and all of the various other entities that go into servicing a full-service fine dining restaurant. so that's the benefits that i think one can expect. and those are the benefits already achieved at mas
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farmhouse, which again, was a success story. >> thank you so much. and i want to submit for the record, i think that would be an excellent way to close. your time was very much appreciated. with a list of over 40 businesses. we could've filled this panel with hundreds of success stories of businesses just like yours and programs statewide and regional programs that are stepping up to respond to the new provisions in this act. so i'm going to submit for the record just a list of 40 businesses that we know of that have benefitted eight jobs, 18 jobs, 40 jobs, 10 jobs. and i could go through this list, hundreds of jobs created. but we're not going to rest on our laurels. we're going to see what's working until this recession is in the rearview mirror. thank you all very much. we appreciate your advocacy on behalf of yourself and the organizations that you represent. and this meeting's adjourned.
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thank you. [inaudible conversations] [inaudible conversations]
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[inaudible conversations] >> coming up shortly, president obama goes to cia headquarters in langley, virginia to thank employees there for help in pursuing and taking down osama bin laden. on c-span, and any time on the web site c-span.org. this weekend on "road to the white house" herman cain and john huntsman. tomorrow 2012 candidate herr main cain kicks off his campaign in atlanta georgia. live noon tomorrow. sunday former ambassador to china and republican hopeful john huntsman will be in new
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hampshire for a house party. he kicked off his first campaign visit to the state with a five-day 11-city visit that began in hanover, and wraps up sunday in durham. you can see it at 4:30 on or companion network. also day on c-span radio and on the web site at c-span.org. coming up next, world bank president robert zoellick talked about the developing economies from the international monetary headquarters here in washington. this is just under 40 minutes. >> our lead off segment in is an interview format. it features two we're not allowed to call them old, but veteran friends of global development, bob zoellick, president of the world bank, and
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former senate chuck hagel from georgetown university. both are known to you, but we will guild the lily by tell you that bob was vice chairman of the goldman sachs group when he came to the world bank in 2007. prior to that, he was one the longest running public service acts in washington, serving in the white house, and as the uscr in the bush '43 cabinet. grad and j.d. magna at harvard. chuck hagel after he graduated from the senate, also became an academic. both at georgetown university and at the university of nebraska. he served on the boards and advisories boards of some of the worlds largest corporations. he's a chairman of the atlantic council, and he serves on important policy boards for both the secretary of defense and the secretary of energy.
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he is a twice purple hearted veteran of vietnam and most importantly to me, a former businessman. the title of this segment is called developing challenges in a resource con train -- constrained area. since their resources are unconstrained, they can go whenever they want in the discussion. chuck is the interviewer, bob is the interviewee. when it's over, you can decide which of them was the straight man. [laughter] [applause] >> thank you, william. >> good morning. i'm the straight man, chuck hagel. we are very pleased that you are here. and i personally am most
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appreciative to have an opportunity to share some of bob zoellick's thoughts with you. president zoellick, thank you for coming and for taking time this morning. we find ourselves this morning, you in particular, your responsibilities and a very plast said, -- placid, severe world. not much going on. with that, we are try to invent some issues so we can stimulate and get your cogent and wise counsel on what faces the world and more to the point of the end of the 21st century. bob, as we all know, the president in a couple of hours, the president of the united states is going to give a speech about part of the world that is
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-- as we all appreciation, combustible, complicated, interconnected. all seven million citizens of the world are affected, will be affected. that part of the world. when i say that part of the world, i'm talking about the arc of nations that fall within north africa across the middle east, persian gulf down into central and south asia. now let's begin there. because i know you were recently in north africa. i know you recently gave a speech last month about some of these issues in this area. if you could take a few minutes to give the audience your sense of where the world bank is going in light of these complications and challenges, assistance programs, your role, the world banks role, is the world bank
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relevant, what can the world bank do? before you answer that, let me remind the audience that we will take half of our time this morning for your questions. with that, okay, thank you. >> first, chuck, if you permit me, i want to have a special thanks to you and bill and i also want to thank jim wolfenson. i talk chuck yesterday i was up visiting a member of the u.s. senate and i'll be up early next week before going to the g8 again with congress. all of you are well affair with the budget the international affairs is under significant stress here. i very much appreciate the ongoing interest that chuck has had, he had when he was on foreign relations and banking and bill frenzel has been a supporter of this, it's great to have friends of the senate and jim has continued to be active.
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i also want to thank you when you have a chance. all of you can see this in the newspapers. chuck kind of identifies it. when i go up to congress and talk about the world bank or imf and what they are doing in the world, it's kind of the sense of separation. and yet at the heart of all of the issues of today, whether it be dealing with middle east and north africa, whether it be dealing with afghanistan, pakistan, global climate, energy, we're at the heart of that issue. in fact, if you think about it, given the rising place to the emerging markets, we are much more actively engaged in that. anything that's going to happen in this world is something that we are interconnected with, whether through the public or private sector. so one the things i know the benton woods committee has done over the years, i remember we had -- i was with secretary baker at the treasury department in the late '80s last time we had a general capital increase was to be able to help get a broader representation of groups about the importance of these
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institutions. we hope we can get some of your support and help as we go forward on that. just to give you one little particular piece, if you permit me, as many of you know with the financial crisis, the bank and the fund really stepped up in significant ways financially since july of 2008 we have done about $170 billion of commitments. and a very, very large amount of disbursements as well, adjusting kind of the -- now we then had the -- our chair holders agree to the capital increase. i have to say about 2/3 of it game from other funds beyond the general capital increase, price changes, getting access to some of the prior shareholders commitments, new funds from some of the emerging markets. but we now have 85% of the votes in from a country. so we've got the capital increase. the u.s. hasn't yet acted. and so one of the points on this to communicate to the people in
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congress is while it's important, obviously, to get the additional sort of contribution from the united states and the capital, that's really not my fundamental concern now. my fundamental concern now is does the -- what happened to the u.s. if it doesn't do it's authorization of the capital increase? does it's share decrease and given all of the discussions about the role of u.s. with international financial institutions, we're now at a stage of whether the u.s. is going to come along with the others. these are issues very much on the front and center as we are dealing with today. the middle east and north africa couldn't be a better place to start. you know, i think as everybody is going to be well affair and i'm certain the president will be emphasized this today, you know, this is one of those issues that while i wouldn't draw a direct analogy to 1989, it's one of these seismic events. and i personally believe that reverberations are going to be felt, you know, not just this year, but for years to come. there's going to be ups and
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downs and twists and turns and each country is going to have different circumstances. if you look at history of successful economic development, for example, in east asia, i think one the political economy lessons with the importance of having models of success. so one of the aspects that i know that we in the imf are looking at very closely and working very much arm in arm also with the african development bank and soon i hope the ebrd in this area as well. is to try to make sure that while we customize for each circumstances that the more we can move some along more quickly in terms of their broader reform process and their ability to draw private capital to the growth strategy, that's going to be good even if some have some twists and turns in the process. now more particularly, a couple of basic themes that i've been trying to explore, i was recently in tunisia and morocco,
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i just saw tunisia finance minister just, king abdallah jordan, is that while financing is going to be important, policy is equally if not more important. this is not just a question of filling financing gaps, this is a question of how you use this moment to take advantage of in some countries what's a revolution and some countries which is a fast pace evolution to transform how policy is done. how also requires that we as institutions change. so many of you are familiar that traditionally, economist are weary of short term job creation. they are always concerned this would be throwing money at an issue. the good news is in part drawing on the work that's been done at the bank we now have good experience about ways to help create jobs in the short term to get to the medium and long term in a way that's constructive. we've done this in afghanistan, part of this depends on the structure, part of it depends on wage rate, given the fact that
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you have a youth bulge in these countries, trying to help them design short term job creation is one element. another element that we learned from the financial crisis in '90s with east asia and latin america is the creditable of stability programs. it's not just economic stability, nutrition in kids in school, you can lose a generation. the good news when i talk to the tunisia or moroccans, it's not a question of just sharing the perspectives from the u.s. or europe or japan. now we have wonderful examples from mexico and brazil. there's now about 40 countries that have done the conditional cash transform programs for under 1% of gdp, you can have good social support program. a third aspect is obviously focusing on the private sector. i think tunisians even in the
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midst of transition, they want to get through the interim and be able to draw the private financing. there's steps they need to take on the regulatory, on welcoming private investment, and i think at the g8 meeting next week, i'm going to try to urge some of the developed countries to encourage on the trade side. we are doing interesting things in solar energy as well so as to make sure there's a strong private sector. frankly, it's further along than in tunisia and morocco and some others that are in the sense of working their way through the process. this is where the model is important. another point that i emphasize in the speech and that we at the bank are going to be stressing with increased intensity is we organized in the weeks after some of the revolutions very interesting sort of arab voices. we connected using technology
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with people in the countries whether they be studentses or ngos or universities, and what kept coming out again and again were halls prized if you will for dignity and respect. and connected with the calls for freedom and liberty and change. and so one of the points that i stressed in the speech in april is how we do business and how we work with countries also needs to change in terms of connecting the politics with the economics. so the openness, the transparency, the anti-corruption efforts, the good procurement processes. and again with the early budget support that we pledged to tunisia, we have an interesting set of legislative changes that fit the calls in the street and also will lead to better programs. i think this is critically important. because in the number of these countries, tunisia and egypt in particular, you are in transition period. you have transition governments,
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and transition assemblies and elections in others. as all of you know, it's fundamental not to leave people doing privilege or special deals or other arrangements. it's moving in open for us. what we are emphasizing is an issue that, in fact, in way jim wolfenson started at the bank. sometimes economist traditionally say these are political issues. that's not economics. and this was what people said when jim started to talk about corruption or transparency or gender. we don't think that's the case. what we've seen in countries with different political systems is the step on corruption, transparency, social, engaging beneficiaries in the process, that's good economics as well as what we believe is good politics. this is again a need to transform the bank of the institution and how we operate. i think it's very much fits the types of things going on in the middle east and north africa.
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>> before we get to the audience, let's go to subsahara and africa. many of the same kinds of challenges and issues, but yet different. focus on world bank activities there. >> yeah, well, there's an interesting piece that some of you may see in the "financial times" today which is what we see. the recognition of sub-saharan africa as business and economic opportunities. as all of you know, this is diverse. it's difficult to generalize. if i would put countries into some categories, i'd try three. one is you'd have about 1/3 of the population in countries that have been growing five or six percent a year over the past decade. what those countries are most interested in are infrastructure, energy, edge nap integration, linked to global market, because a lot of them are small or landlocked
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economies. using agriculture is part of building sort of productivity and over coming sort of the poverty issues and healthy and dynamic private sector. in someways if you cast it back, that isn't too different when you have europe trying to do in 50 or 60 years ago. those are significant growth potential. you have about another 1/3 of the population in country that is are primarily energy producer. for those countries, it's really going to be a question of governance. it's a question of whether they manage the energy resources in a way that countercorruption, whether they have the energy resources in a way that support inclusive growth, dutch disease, and again the benefit of one the strengths of the bank, of course, not just our financing role, but the experience that we've gained the hard way over time to share with countries about ways to do this wisely and way that is don't work. there's about another 1/3 in a set of countries that we just
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did our most recent world development report on the post conflict or fragile states. they drag down themselves, their neighbors, stories where you have a cycle of violence and poor governance and lack of development, and one the reasons that we did the world development was to try to say let's cross the discipline. let's go beyond in my experience you often had the security guys saying one thing, development people saying one thing, political people says another thing. in a sense, lessons like the importance of short term job creation, how you build inclusive enough institutions, all of these become critical elements. if i could summarize this together, one the interesting that we are finding about the potential for sub-saharan africa is that -- as some of you know, we created within ifc, a private sector, an asset management corporation. within that asset management corporation, we created $1
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billion fund that's focused on equity investments in sub-saharan desert and caribbeans. we drew pension funds on this. building on ifc's record on 20% rate of return on investment over a number of years. what was striking when i talked to the dutch pension fund, what brought you into an interest in sub-saharan africa? they said we know markets are going to be risky. we don't know where to go. we don't have transaction costs, information costs. what we are trying to do in a way is set the pathway for these as potential investment vehicles. for the bank, it's very important because to recognize this is a fundamental compliment of raising debt and either making loans or in some cases ifc equity investments. we are now basically doing what
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we saw thought. we're going to where the money is and trying to connect us as an intermediary through the asset management function. this offers a huge potential to be able to channel capital and finance to emerging markets in different ways. over the next couple of days, we're going to talking about something we've been working on with singapore and focus in east asia and work more broadly. huge potential and it fits within i think the larger theme which you can't miss today, you know, half of the global growth is coming from emerging markets. if you are a business, you better be paying attention to the markets. and another element that connects the bank with us is increasingly whether it's on the policy side or the business side, there's south opportunities. when you talk about sub-saharan africa, there are business models you could grew. >> bob, thank you. we have so many issues to cover
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in a short amount of time. i think you framed it up pretty well on not just the general issues in the areas that we are talking about, but overall. we have 20 minutes for questions. yes? yes? >> did you want to start? >> okay. okay. thank you. robert with international investor, as you know, mr. zoellick, there's a reevaluation going on in u.s. policy to try to address some of the hypocrisy of us supporting democracy on one hand in many of the countries versus some of our policies which have supported dictatorships in others. the world bank has a similar problem, does it not, in terms of let's face it you were active in supporting some of the very
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regimes that have been displaced recently. so my question to you is, especially in terms of your arm the international finance corporation which has been working hand in hand with private equity firms, they are still helping many of these corruption regimes, even though the leadership may have left, we are still seeing corruption from the top. what will you be doing to try to address similar hypocrisies in terms of the world bank policy. >> well, it's a good question that really cuts all across the banks activities. you know, we have $176 shareholders. they cover all type differents of systems. one the judgment calls that we have to make is where we feel we can make a difference in a country in terms of whether it's dealing with malaria, whether it's dealing with improving public financial management, and those do have to become judgment calls. but our general approach is to do it in a transparent way in an
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open way. but let's also recognize. i mean some of the revolutions that were created were because you start at the middle class. when i was talking about dignity and talking about people that felt they were repressed some of this was the benefit of some of the economic growth. and let's take egypt as a good example. is that, you know, egypt is a case where you had a group of reformers start to operate from about 2005. one should recognize they had some reasonable growth, they had reasonable reserves, they did some things in others. but it's still the system. and, you know, there was going to be historians debating for a long period of time what exactly led to the revolution and the people in the square and bureau of takeover and others and aspects. there's an interview of that with some of the military today that molly did, i think in "the post." but nonetheless, i they what you have is a situation where there is a critical need not to
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retreat from reforms. not to close down. but frankly try to learn the lessons from other develop countries about how to have safety net job creation international orientation. let's take the middle eastern countries. other than oil a stand out in not be connected to the international economy. south korea has about 60 million people. egypt has about 80 million people. south korea exports more manufacturing goods in a week than egypt does in a year. now there's lots of reasons for this. one the challenges will be can we, for example, take the lessons of brazil and mexico about safety net programs that are much more effective than broad based subsidies that egypt has had, the bread subsidy which goes to 85% of the people that blow a big hole in the budget. now they can learn from other developing countries. but at the same time, try to focus on the changes that can be
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done in terms of openness. for example, we worked with the egyptians with the reformers. they couldn't get it through the system. the question is should we stop. do we wait for things to be perfect. you talk about corruption. you give me an economy where there isn't corruption. that doesn't mean we turn a blind eye for it, not only in our own system, but frankly the things i talk about with social accountability. one the best ways to fight corruption is to get the beneficiaries involved. so they can see what's happening on the ground, host at the school the textbook that is are supposed to be delivered and the teachers. then you might use electronic media and developing the capability to report back we're supposed to have two teachers. only one is showing up. i think it's a cop out to wait for this perfect environment. because transforming companies, now you emphasize i'm in the
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private sector. we are careful in terms of who we do business. we're not only careful in terms of checking the parties, but frankly, we are at the frontier of pushing principals, other standards, whether it be environmental or human rights or other issues. and that has an effect on some of -- not only companies that we invest in, but the overall business climate. you know, i guess i would put it this way. the world is the reality that it is. okay? and you can get off and wait until it's perfect, or you can try to transform it. i look upon events like this, just like i looked upon 1989 as an opportunity to try to transform it for the better. at the same time, i'm not a polyanna. i suggest you are going to have ups and downs. you better find some models that work better than others. but that's not a reason to help out of the arena. >> thank you.
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>> yes. >> good morning. frank vogel. just very briefly to follow up on exactly what you've discussed with the issue of dignity that you mention. isn't it time for the bank to lend in a really substantial way, direct to civil society. many of my colleagues in civil society say that the idea of going to corrupt governments which get assisted by the bank and for all of the good reasons that you mention and asking them just doesn't work. we were not allowed to create a transparency international chapter in egypt. although we tried. right up to two years ago. isn't it time to find a way to either get around the articles of the agreement of the bank or to chase the articles so that the bank becomes a direct supporter of civil society instead of just finding all of these other ways of trying to do
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it which frankly civil society does not believe work. thank you. >> well, as i suspect, you know, one the major ideas that i launched in the april speech was the notion that the bank which would consider taking the next step and how to support civil society directly. just to give people background, and i want to give jim credit because he's launched a lot of this himself. about 50% of the projects now engage the ben fish beneficiarie community into the project. a lot of what we are doing, it goes back to the aspects, whether it's dealing with environmental aspects, or kind of how to most effectively have a community development programs, for example, it's probably the things that's worked best in afghanistan, having local councils decide on their priorities. there's a whole series of these
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that we've been involving in other time are already part of what we do. i raise the question that just as the bank as a group as evolved so we created ifs in the 60s, what about the private and nonprofit. this will be one the issues that i recognize, one for shareholders, one for our board to deal with. but i was trying to tee up this issue to see how we could structure. of course, there's going to be sensitive issues which we shouldn't ignore. when you have countries under the international system are the legitimate governments, they are always sensitive about. some of them are elected governments as well that are sensitive about that. the multilateral institution is supporting organized groups. you know, what is the balance in terms of the political role of the institution? i think we can work through those issues. we are already doing with some
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of the ben fish beneficiary groups. some of them properly raised. you know there's a debate. where does the funding source? does it come from anything that's public? does it taint them? a lot of our delivery programs work with civil society groups. there's a whole, i think, realm of responsibilities -- possibilities here. i think this is the next stage that we should figure out a way to do it. the british have a development fund that does this. the japanese has had a special trust fund moved in the area. these are initial steps. again, this is -- i'm just explaining to you the context in which we work. we have 187 countries that represent all political system. without favoring one's political system, in the involvement of beneficiaries and societies, regardless of the political system, how can we support that?
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>> yes? hang on just a second. we'll get you. i have two short questions. do you have any special program to promote economic freedom when international investors are going. then stability and economic freedom. i am worning if you have any program addressing this issue. second question, it wasn't about three trillion. why are you still issues them from time to time for different enhancement programs. thank you. >> yeah, okay. well, on the first one, yes, you might know we have something called the first of doing business report which evaluates the legal system of countries about taxes, the ability to set up a business, licensing, which countries have used quite effectively to try to drive
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their own reform process. in addition, ifc, the private sector has an advisory work. we have projects in almost all of these countries about how we can improvement the investment climate, how we can try to strengthen the legal system, that's where then our ifc team works with the world bank team. when you are talking about natural resource development, the experience of how country have done this in a way that's more inclusive. if you have a particular area of interest, i would suggest we put you in touch with -- we have officers in, you know, over 110 countries. meet with the country. i urge all of you they are there to provide support. again, we want to throw in the private sector to this. this is a core element of what we are about. i would go a step further. seeing part of this is in addition, we're trying to develop markets and institutions and capacities. you know, we've been trying to work to develop domestic bond markets which have helped countries be able to deal with the downturn, whether it's
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microfinance, whether it's carbon trading. your second question was -- okay. very good question. but -- and it's an issue that i talked about with hank paulsen when i started the bank and i feel quite strongly about. there is a view in some, the bank should deal with the poorest countries. the 79ida counties. we are trying to figure out how they change with the circumstances. i think it would be a huge strategic mistake to take the country that is are middle middle-income countries or moving in the process and say you are no longer part of the bank system. because if i think about climate change, trade, south, south investment, learning from other countries in terms of how they have done different programs, i
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want these countries to be active participates engaged in the bank. so that's why with share holding, staffing, and others, it's very important. now particularly with china. we have a certain amount of lending that we do to china. but frankly they are not looking at it for the money. they tend to have rather small projects that they use as pilots to develop knowledge and experience which they then expand. about 80% of those are environmental. i think it's a good thing, that china improves the environmental context. and frankly, we are then drawing china in to be a partner with the rest of things we do. some of you you know we have ida, grants or no interest loans. in the midst of terrible financial crisis, we had a record ida of about $50 billion we were able to put together. now i went to the chinese and not only did they make a regular contribution, but i said you used to be a ida beneficiary, some of those credits are on the
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books. could you think of prepaying those early? they did. they did about $2.5 billion of repayments. so did some of the other middle-income countries. there's a lot of ways to take the brazil, russians, india, indonesia, and engage them for a broader development purpose and build a stronger international institution. i don't know your outlook, but my view is these countries are going to continue to play an important role. i want them engage the as stakeholders in the institutions. >> yes? >> council, food and energy are the fundamentals across most of the globe. and making a society develop, and both of them are going -- becoming constrained by available water. because of climate changes that are beginning now and beginning
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to accelerate. that's probably going to be exacerbated substantially over the next generation. are you going anything to focus on that to create incentives to go for not using more water, but figures out how to constrain and diminish the need and demand for water? >> yeah, let me start for a moment on food and energy and then i'll come to water. i'm glad you raised this. >> let me remind you, mr. president, about four minutes. >> okay. one minute on each topic. okay food and energy are increasingly linked. look at the food and energy price, it's been much more interconnected. part of this is biofuels, part of it is the use for fertilizer and production of transportation of agriculture goods. but part of it, i think, is also frankly people using commodities as an asset class and money moving in and out of that fashion. as you may know, one the big themes we had at the spring
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meeting is putting food first. frankly, i think, i don't have time to get into this. i think for a lot of reasons while the increase in commodity prices for agriculture provide an opportunity for increased production of agriculture and over time a supply response in ways we can look all across the value change to use this as an antipoverty program, in the near term, stocks are low, if you have weather events, you have increased chances of volatility, but linked to the energy market. so we are trying to do things on the supply side, public and private sector. but also one the things that i've suggested to the g20 is ways we could actually make markets work better to manage, information of stocks, special humanitarian reserves, not having expert bans, particularly for humanitarian suppliers. that's a big area of the work. water, you are exactly right.
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key interconnection. we're doing a lot of work in this area on both the public and private. we did very interesting work with mckinze that analyzed countries. we did an initial set of four or five on their water use and water patterns, how it was for agriculture, public sector use, some of the issues for managing. and, you know, the third is, you know, michael bloomberg has the great line that i've co-oped. he said in god we trust. everybody else bring data. it's often useful to start with data in some of these situations. but here's the short -- the real core issues that we're trying to work with government. in a lot of countries, people have gotten used to have water for free. and most of you probably wouldn't be here until you had some intense of interest in markets and economics. it gets really hard for people to do management if you don't have some pricing system. now you can have pricing systems
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that have, you know, a certain amount of grant water for low income people and other types of uses. one the core issues in dealing with water policy, both for conservation but also for use and production of water is going to be have some reasonable pricing system. by the way, we are making progress. just to close on this. one the most increasing things -- the best things that i've seen about the bank over the course of the years is we know have a lot of evidence from other developing countries which we can bring around the world. and i'm sure jim had this experience too. as an institution, we tend to have the knowledge and learning development in regions. what we are trying to do now with open information systems and structural changes at the bank is share much more of the knowledge in the regions. >> bob, we are grateful for your leadership and focus. we want to thank the imf for
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hosting. with that, we shall let you escape and save mankind. thank you. thank you. [applause] [applause] >> this weekend on booktv.
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>> a conversation about updating the nation's infrastructure from today's "washington journal." >> maureen mcavey joins us. ms. mcavey, how much should the government spend? >> guest: we should be spending twice what we are. it is strategic. the american on civil engineers did a study showing over the next five years, we need to spend about $2.2 trillion. we'll spend about half of that. if we don't, we will lose economic competitiveness. >> host: what's going on that
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we have to spend that kind of money? >> guest: part of it is we have not done major investments, roads, bridges, mass transit, we haven't been spending what we've needed to spend over the last 30 years and it simply deteriorating. > host: because? >> guest: people use it and we take it for granted and we're not spending what we need to spend because people don't want to spend more. we assume when we open the tap, here comes clean water. we assume when we get in our car and come out of the driveway we have a good road to ride on. one way or another through taxes, tolls, increased user fees, we need to be spending more. >> you say people don't want to spend more. do you mean those in the federal government, particularly those in congress don't want to spend more? >> guest: well, congress believes it's strategic priority. they just don't want to do what's necessary, whether to raise gas taxes or encourage the
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tolling, for example, of some of the federal highway programs, and certainly local individuals don't want to pay more. citizens don't like toll roads. they don't like raising taxes for one purpose or another. interestingly, we have seen over the last five years that particularly in the western states, the valid initiatives for infrastructure have passed on about a 70% ratio. so 70% of the valid initiatives have passed. it's sort of an interesting number. >> host: as far as spending is concerned, what are the problems being faced on roads and infrastructure that we have to spend this kind of money? can you give some specifics? >> guest: well, there are problems literally coast to coast. in the new york region, the tappensey bridge. on the other coast in san francisco, the rolling stock, the stations, the repairs of the
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bart system needs $7.5 billion of investment. and i could go to smaller communities as well. the value a critical issue. when we think about infrastructure, we think about the backbone of the economy. compared to india, china, even the united kingdom, we are not spending what we need to. >> guest: the report that you put out. why focus on the specific city? >> guest: because china aross the board, much is in beijing, shanghai, they will spend $1 trillion. they have a different form of government, of course, they have spending it in state-of-the-art infrastructure and they are able to spend grand new roads, bridges, etc., we have to repair our existing bridges, roads, et
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cetera, in addition to build new. we are one the fastest growing countries in the world. we have 30 million people that come into the country, both immigration and through birth, every ten years. almost all of those people live in cities. and they want to get some place with mobility, access, and they want goods in the stores, they want goods for all of the moving around that's necessary. >> 202-624-1111, 1115 for republicans, 7620 for independents. call us about infrastructure questions. also e-mail journal at c-span.org and if you want to spend us a tweet c-spanwj. what does urban land do? >> guest: it's in research. we do not do lobbying. it's across all of the sectors.
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finance people, real estate developers, academics, architects, it's about making cities better all across the world. predominantly in the u.s. we have about 30,000 members. >> guest: as far as off of twitter, florida expresses that american infrastructure is falling apart. falling apart, would that be a term you'd used? >> host: i don't know if i'd use the drama. but it is deteriorating. i might use erosion. we need to be spending competitiveness if we are going to remain competitive. >> host: there's a chart that shows the united states in shades of red, green and blue. what's significant about the colors, how does it relate? >> guest: the chart relates to how much the federal and government are spending. despite how high the gas prices are, we have not raised the
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federal portion of the gas tax in 18 years. so that the federal government, who builds the highways and the major cross border infrastructure elements has not had more money to spin in the last several years. we can't continue to do that. and one the things that's interesting to note is that infrastructure will increasingly relate to the strength of metropolitan areas. there are economic gdp rests within the country. so that if we weren't spending competitively in the metro area, we'll have winners and losers. >> host: so for the reds -- give us a break down the colors again. it says greater than 48.1, green is 40 to 48, and blue is less than 40%. >> guest: it's really how much the gas tax, how many cents per
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gallon is being paid by various parts of the country. and the state and local portion of the gas tax in some cases has been going up. it's the federal portion of the gas tax that has not been rising. ! is raising the gas tax a fix for the kind of situations? >> guest: it certainly can be. there are a number of communities, los angeles is one, denver is another, in order to fund local infrastructure initiatives. >> host: first call. george, republican line. >> caller: hey, how are you doing today? i was just wondering about if we are going to give $2 trillion to the administration for infrastructure, and we've already given them almost $1 trillion for what they considered shovel-ready projects, are they the group of people that we should trust? >> guest: that's a good question. the stimulus dollars that have been spent in the last couple of years, largely did go to shovel
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ready projects to repairing existing infrastructure. so roads, bridges, things that were ready to go and could provide jobs and badly needed repairs. so much of that money may not have been excited, but it certainly did a lot of work that was needed to be done. that money will now tail off and largely be done -- we don't be spending the stimulus dollars by 2013 or so. and the question is what happened then? >> host: atlanta, georgia, you are next, derek, democrats line. >> caller: yes, what i would like to say is the people argue about the size of government. this is a vague answer of whatever that the republicans always giving the size. how many people do they want? when the natural disasters such as happening on the mississippi river is taking place, they always look for help from the government.
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you know, the businesses and things. it cursed them more than it does the average person like me, the average taxpayers. these people should be responsible for putting up money, because they profit more off of the infrastructure if it's renewed and things than anybody else. >> thank you. infrastructure is very much a national issue. and certainly we've seen five years ago with katrina and the flooding through the central states, we see the need for thinking through a national system of infrastructure in dams, levees, as well as bridges, roads, mass transit, et cetera. if we don't do it, it is to our peril. >> host: louisville, kentucky, republican line, everett. >> caller: yes, ma'am. i think your topic is very interesting. i would support more money for your infrastructure if there
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could be a significant labor reform. we have a situation where you go down the road and you see four or five union contractors or laborers working on the project and one of them working. another further one sitting by a railroad crossing just standing there as if there needed to be someone there. if you are going to spend more money, you got to spend it -- you talk about the chinese. the chinese don't have the kind of labor over run and no bid contract that is we have. don't you think there needs to be a significant either a even your reform in the country and labor reform before we start spending this kind of money? >> well, the issues of efficiency and effectiveness are really worldwide issues. >> guest: china has had significant problems with the high-speed rail. they have fired, there has been
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corruption, cost over runs, some of our problems are also worldwide problems. but it is useful to note that in the u.s. where the local citizens believe that infrastructure dollars will be carefully spent and prudently spent in an effective way, 70% of those valid initiatives have passed. there are some good examples around the country. >> host: bushnell, florida. you are on. >> caller: this problem with infrastructure has been going on for like you said 30 years. it's like having the little dutch boy with his finger in the dam. we have to stop spending so much money on making war and making weapons of destruction. i think we have enough. >> host: st. petersburg, florida. duke, independent line. >> caller: yeah, what bernie madoff was to job creation is what the state of new york is to infrastructure and fiscal
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responsibility. the last plate that was built in new york, 1954. the state of new york is negligent in regards to infrastructure. that's why i-55 is a infrastructure toilet bowl, bronx-new haven. >> host: >> -- >> guest: well, the challenge of repairing is a crucial issue. anybody who's in is metropolitan area and spends times struck this traffic waiting for transit service understands how critical it is. one the mantras the urban land institute has used is we need to invest in infrastructure, not just spend. by invest, we mean spend strategically, spend using a national plan, and a metropolitan local plan. >> host: there's another chart which shows cars per capita. as far as the united states, it leads the pack, following italy,
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denmark, and france, you mention that the way that other countries fund their infrastructure projects differ from the way we do it. what's the difference? >> guest: many of the other countries spend on sort of a top-down basis. much of our country, because of democracy, because of how local decisions are made spend from a bottom up strategy. of course in the metropolitan area, we have many universities of government, chicago, for example, in the metropolitan area has 1400 separate taxes districts. everybody is buying a little bit for where the money is coming in? it's hard to get comprehensive plans done. whereas china, india, et cetera, are able, germany is a great example, the uk, are able to spend on a more topdown national strategic basis than we sometimes spend. it makes a difference. >> what about the assessment of i-95? >> guest: well, we have not
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done in terms of thinking through significant new roads. some of the plans that have been on the books all over the country, some of them have been on the books for 20 and 30 years in washington we're seeing the intercounty connector built after 30 years of planning. in new york city, we're seeing the second avenue subway finally getting going. there's a desire to build an extension of the barts system in san francisco, coming south into silicon valley. these are investments that need to be made and that are, in fact, strategic. >> host: stella makes the point. talk about projects. it winded up costing millions more and continues to cost. >> guest: that's true. often the projects are very hard to estimate going forward. many of them, as many of the other defense projects, even projects in the private sector are very difficult to budget accuracy and to control accuracy we can always improve that process. it doesn't mean we should stop
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doing the basic investments. we need to get better at controlling it. >> host: republican line. >> caller: good morning. good bless you and c-span and hope we are around on sunday morning, after we miss the rapture. marine is going -- maureen is going to give a lot of heart attacks across the country until the chart shows all of the tax run by democratic state whether they are spending all of the money on union workers and exorbitant, you know, they are taxing all of the retired people to pay $80,000 for their retirement, when most all retired people make less than $20,000. it's the totally inefficient people that come out putting the baby, or grandma over the bridge scare tactics when they have had 50 years of firmtive action programs to set aside money for all of these people that have had it for 50 years and done nothing but built up the bureaucracy where they are
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running businesses out of california, running new york, sending them to places and attacks places like south carolina where boeing is building a plant. : thoughts -- one of the challenges is to think through the kinds of transportation systems that we need as people age. about a third of the population in this country cannot drive. even if they are too old or can no longer because of vague reflects standpoint, there are too young and are not yet able to drive or get a driver's license, or they are impaired in one fashion or the other or disabled. how we provide access and mobility to those people is critical. as the baby boomers age, that is going to be a critical issue >> host: feces, arizona on the democrat's line. >> caller: hi.
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good morning. >> host: good morning. >> caller: i just want to say that america's infrastructure should contribute itself towards america's major state of the art development and establishments here today. the question is for marie. do you believe that america's infrastructure should be more contributed to our education which does provide us a lot of growth today or just our state of the art that you talked about with the light rails in the metro area as you were speaking? >> guest: education is a critical part of infrastructure. we think of infrastructure, if you will, in two ways. there is the hard infrastructure, roads, bridges, airports, ect., and there's soft infrastructure which includes the health care systems, education, and in many ways telecommunications, and we need both hard and soft
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infrastructure to remain competitive as a world power. >> host: i don't know if you agree or not. but one says the costs of infrastructure cost less down the road and adds no pun intended. >> guest: it's easier to fix something currently than let it deteriorate further and further and further. we know this from our own cars and homes and if you wait for something, it triggers something else going wrong and then it's a major repair and it could have been fixed earlier had you had the money and intentions. >> host: how long does it take to get a plan and fix an infrastructure problem? >> guest: many projects are long-range projects. it takes 3-5 years to plan major improvements, think about airport expansions, major bridges, subway lines ect., and once it's planned and approved, then it could be 3-5, even 10 years in construction. it took us 30 years to build the
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federal highway system. i might add, not only does it take long to improve and plan the infrastructure improvements, but they stand for 55-100 years. we use within the older cities, philadelphia, new york, washington, we use some of the same infrastructure created 75 and 100 years ago. these improvements stand. they need to be repaired and improved, but they are the skeleton or backbone of the economy. >> host: as far as the $2 trillion cost, does that involve planning and building or just the building and materials? >> guest: planning and building are the estimates. it's really a total cost to get the improvements up and running. >> host: texas, add edison up next, independent line, go ahead. >> guest: yes. >> caller: i regarded infrastructure as something that we have inherited from our predecessors.
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you mentioned immigration, and one might regard infrastructure as a gift to the immigrant when they come in. i'm curious, i've wondered in the past, do you have a dollar figure per capita what the value of our infrastructure is in the country? >> guest: good question. i don't know on a per capita basis. we're at about 306 billion to 310 billion people and adding 3 million people a year for the foreseeable future. we're one of the fastest growing countries in the world and faster growing than japan, most of europe and russia, so we have to accommodate the new citizens both born here as well as those immigrants who come in. virtually all of those people will live in metropolitan areas. as i mentioned before, we are getting sort of crushed by the amount of congestion in those areas. >> host: is there a case to be made to let private industry take over? >> guest: they are making a
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real play in a number of these projects. we see an increase in p3 or public-private partnerships where the private sector in some cases design a project. in some cases, they design it, build it, operating, and maintaining it over time. chicago did that with the chicago skyway. the indiana toll road is now run privately. we're seeing that done with soft infrastructure as well with the charter schools, so we're starting to see public-private partnerships in very creative ways. other parts of the world have used public-private partnerships much more creatively than we have. >> host: as far as roads and bridges and how do they make money in the long term after the initial investment? >> guest: two ways to make money. in some cases, there's toll roads then created, the hot lanes, being built in the washington, d.c. metro area will be toll roads, and in other
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cases, there is a pledge of future tax revenues. it can be parking revenues. it can be sales tax revenues, but there is an agreement that there will be some revenue that comes in to the private sector. >> host: maureen mcavey here joining us. put out a report looking at infrastructure spending. go to their website to find out more, uli.org, and is the report available online? >> guest: it is available online. >> host: as you look at that, west palm beach, florida, steve, republican line. >> caller: good morning, can you hear me? >> host: yes, go ahead. >> caller: hi. i just want to say something to this woman who is probably a very honorable woman and to the rest of america. this is a bunch of hooey. i have four points if you have the time. first, politicians love infrastructure projects because they are extremely labor
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intensive, they create a lot, a lot of employment temporarily, and then you end up with a bunch of people that are basically then all of the sudden unemployed and projects that don't fulfill their, you know, their promise as it were. this happens every time, for example, a city hosts the olympics. you end up with stadiums that are unusable and luge runs and wherever it is, salt lake city. this is bankrupting greece right now. two examples -- >> host: you already gave two. . >> guest: some promises don't live up to their expectations and we don't hear about projects brought in under budget and on time with above projections or writership. salt lake city saw that with the light rail system and los
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angeles saw that with the laight rail in a few areas. particularly with transportation, the american householder pays the second highest payment they make per month is for transportation, so the first payment is for housing, and the second payment is for transportation. we see that if we didn't have the bus services, transit services, that the householder, if you will, would have no choice but to drive every place all the time, and, you know, that's an increasing problem when you're looking at gas in the neighborhood of $4 a gallon, so we need an array of transportation choices. >> host: according to your report, as far as our satisfaction with roads and highways, united states came in fifth with a list of other countries, australia, u.k., canada, norway below us, japan, france, and sweden above and beyond us. what difference of satisfaction
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levels and what they experience below and those above us? >> guest: well, many americans, partially because we're a big country, believe our infrastructure, and by that, many of them mean roads, are doing okay. they can get around wherever it is they want to go within 20-30 minutes. there's other parts of the country, and again to the levies and problems with the flooding where it's apparent to them that those problems may well increase over time as we face issues of climate changes and such, so in the countries where things are better, in many cases, european countries, japanese, ect., we're seeing an array of transportation choices and people use that transit regularly. that's true in this country where we have transit, we call it transit rich cities, where there's really good service. i might add that in the cities where we have such good service,
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30% of the population commutes by transit every day, so if all those people didn't have it, they would be on the road making it even more congested for the rest of us. in the places where there hasn't, there's nos at much satisfaction or investment in the last 30 years. >> host: off of twitter, how can we trust the spending for infrastructure to be spent on infrastructure? evidence that it's being used politically, he adds. >> guest: well, it's also something that bears watching, and there's a watchdog agency to watch over the spending, but i go back to the point that the citizens approved ballot initiatives in a 70% majority in all of the cities in the last five years, and it's a significant number because we have been in a recession since 2007. there is a great deal of just distrust of government, and yet, 70% of the citizens thought that
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that agency for that purpose would spend money prudently, and that it would be badly needed, and that they would get, if you will, return on investment, so, you know, being a watchdog is critically important and it's critically important to our democracy, so we need to figure out how to spend the money prudently, efficiently, effectively. >> host: from illinois, democrat's line, steve, good morning, go ahead. >> caller: good morning, maureen. >> guest: good morning. >> caller: i wanted to ask what's the effect of this infrastructure, like bridges, deficiency ratings, how will that impact the highways and airports and things like that down the road and in the future, and do you think the highway system will with the new federal highway bill, whenever it comes in the congress, will that have an effect on how it goes on the
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infrastructure project and things like that? >> guest: thank you. to the extent that we are not spending what we need to spend, we end up closing contribute cam infrastructure links. there's bridges around the country that are closed because they are no longer safe to travel across, and because this is only a networked system, we see, in fact, the closing of one element in the system reverberates and causes problems in other elements of the system, and we see this literally in spot areas all over the country, so we need to be spending strategically, and we need to be doing a better job of coordinating our planning so that we spend where it is most critically needed and where the population growth will occur. >> host: from maresville, washings, republican line. john, go ahead. >> caller: hi, good morning. i guess i really support the idea of better transit. i've been in the navy traveling
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all around the world in a lot of different cities in the u.s.. i lived around chicago, and i liked the rail system there. i think san diego is an outstanding example. washington, i don't know, they are way behind the curve ball up here, but what i'm wondering is this. was it a case of poor planning way back when that nobody thought, hey, we build a road and pay for it down in the future because as the population increases, we also increase our roads and our bridges and our infrastructure, but you would think that as the population increases, you know, and the cost of living increases, that the -- and the cost of repairs increase, you would still think we would have the same money coming in. i'm just -- or at least the level of money so we could repair things. i'm wondering what's happening
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to that money? was that just not thought about in the past? >> guest: you raise a couple of good points. one of them is the relationship in how we build, and at the urban land institute, we think a lot about land use, and we're seeing an opportunity all over the country. the suburbs where there is some degree of transit starting to build up, starting to build in clusters, so that there is housing nearby offices, nearby retail, and people either have a shorter trip if they're going to drive, or they have an opportunity to bike or walk or simply get around in using transit because they've done a better job and a more intelligent job of building in an intelligent way, and the second question of where does all the money go? the more the country has grown and the more our metropolitan areas spread out, the greatest the -- greater the cost in repairing existing infrastructure. we simply, as i mentioned, have
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not kept pace of nationally raising the gas tax, which is where a great deal of the money comes from that has been redistributed across the country. >> host: on the hill newspaper here in dc reported earlier this week, and i want to read a bit. "the imposition of a new tax on cars and trucks based on how many miles they drive generates revenue for the federal highway trust fund. joseph ky lirks told the finance committee that a tax on travel meets goal because it spends more than it collects. as a proposal, what do you think of it? >> guest: we've looked at it, and we think it has real miter. one thing is vmt, vehicle miles traveled tax, which it does encourage people to use alternative methods of transportation and encourages them to plan their trips in a smart way so they don't go ato
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point b, back to point a to point c, ect.. they can think of how they make the trips and travel less. the other part of the equation is on a tax gas basis because we are seeing, which is a wonderful thing, cars becoming more fuel efficient, it is often deemed that we shouldn't be solely relying on the gas tax. it won't bring in enough money unless we raise it very dramatically to meet our needs. a combination of taxes makes some sense. the proposals talked about would make allowances for people whose jobs, whether they are visiting nurse or a salesperson or what they might be, if they have to use their car for their business to go to these various locations, there are offsets that could be worked into a vehicle mile tax. >> host: public transportation? >> guest: public transportation.
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>> host: are more people using that now because of gas prices? >> guest: absolutely, all across the country. again, that's true where there are good alternatives. if it takes you two and a half hours to get from where you are to where you want to go on transit, they still drive. they are cutting back on other expenditures within their lives. whether there's god alternative -- good al terniveship, the ridership is up. >> host: thanks for waiting, louis, democrat's line. >> caller: good morning. >> host: go ahead. >> caller: yes, i just want to make a point. thanks to c-span. i just want to say to maureen that either way, i travel 95 quite a bit. either way you pay for the road structure because when you travel up and down 95 with holes in the road and you run those trucks across there, i tell you, when you tap the front end on a
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big truck, it costs you. either way you look at it, you are going to pay. you're going to pay the mechanic or you pay something to redo the road, and i hate running on 95 because of that. first of all, we pay road use tax, so you don't want to be running a big truck, and no one looks at the big truckers, how many truckers and what it costs across this country. we pay a big dollar, road use tax, and i think someone should get with the truckers and look at these highways because the truckers don't mind paying, but they want good roads. it costs them lots of money to run over these rough roads. >> host: thank you. >> guest: you raise a really good point that the wear and tear on trucks and on cars because of bad roads, because of congestion is substantial. some have estimated that it costs between $500-$1,000 per
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car, and for more truckers who use the roads all day every day because of the conditions of the roads. if we have smooth roads that run efficiently, and you can get to where you want to go reasonably and efficiently, it saves money and saves wear and tear on the car. >> host: los angeles, good morning, republican line, bob. >> caller: yeah, hey, here in los angeles the freeway and the car region, the city roads in los angeles, the city streets, are just deplorable. they are the worst mess. the city can't keep up the maintenance. they repair something, and it falls apart within minutes after, and -- >> host: potholes and things like that? >> caller: yeah, that's just the city surface streets. the freeways, there's no way, they are obsolete. it takes three and a half hours to go a few miles in most cases
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barring the slightest incident. orange county is building 8 lanes on their freeways every year, and it just adds more congestion. they add another lane, it's just another parking lot. water mains burst every week, and nobody seems to -- washington is not going to pay out any where with all or funds for repairing our infrastructure. >> guest: well, los angeles just passed a half cent sales tax increase to fund billions of dollars of improvements, predominantly to the mass transit system, and they are experimenting with bus transportation so that the los angeles region remains competitive and is able to get people from place to place in a more efficient way because you're certainly correct that the roads in los angeles both in
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the city and on the freeways are at capacity, and they are, in fact, past capacity, so there has to be some alternatives. >> host: jim hiens makes the statement that new york city has the best transit system in the country. is it profitable, neutral, or negative as far as dollars are concerned? >> guest: it is neutral in most cases and profitable on some lines. as you go through the metropoll tan regions and, of course, the city of new york is an extremely large and well-served system, but in many cases, the rolling stock, which is the cars, the train cars, need upgrading and improving. we're seeing stations that need improving, eel elevators that need improvement, so it depends on the line that you look at. we are, again, not spending all that we have to spend in order to keep up with the usage that
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is occurring and the growth of populations that will be happening over the years. >> host: our guest is the executive vice president of the urban land institute, been there since 2001, member of the board of trustees from 1995, has two masters degree, one from the university of minnesota and the other from the kennedy school of government. how did you get involved in these matters? >> guest: i've always considered myself a social work of cities. i love cities, and how you actually finance, organize, and maintain a city has been a passion of mine all my life, so -- >> host: as far as most cities when they come to thinking about these things, is it a whole holistic approach or a peace meal with examples involved? >> there's examples of where people can come together and think about the good of the all. in denver, 40 mayors in the city and the suburban areas got
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together and worked for almost three years to get a regional transit system funded and built. the twin cities of minneapolis-st. paul passed a revenue so revenue is gathered and redistricted so the entire metro area, so you see conflicts where there are places where it's me, mine, mine, and places where there is better cooperation. over the long run, better cooperation cities succeed. >> host: as far as cities are concerned, what ranks on the lists with examples and other cities to look at? >> guest: well, there's no perfect city, but i would say virtually all the cities in the country are doing things in this arena. san diego is experimenting with bus rapid transit, i mentioned denver, los angeles got a sales tax. >> host: washington, d.c.? >> guest: absolutely.
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washington has done a great job of what we call developing a round transit. within the washington area where the metro system has been so successful, there is now increasing development, offices, residential, ect., around these transit stations, and they are one of the leaders in the countries developing around transsis. >> host: one more call, go ahead, independent line. >> caller: good morning. first, i really admire your focus on the work you do. i think it's extremely critical, and it's so important because it affects people's quality of life. it's a very important issue that people have to deal with day after day. my question is this -- how much you focus on the efficiency of projects? there are projects that are in place, but what is frustrating to most people, for instance, here in new york is, a road is scheduled for repaving, and it
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seems to go on and on and on with no progress. for instance, i've gone over the same pothole in new york city for 30 years that has not been fixed, but you see construction workers there. you see trucks there, lanes are cut down from three lanes to one lane, and yet, no progress is made. >> guest: i certainly share your pain in many respects. one of the challenges in dense areas like new york is to try and keep movements occurring while major repairs are happening at the same time, so we see lanes cut down. we see much repair work done at night and in the early morning hours in order to keep things moving while the repairs happen. could we do better? i'm sure we could in many, many parts of the country. i lived in los angeles during the olympics in 197 # when the -- 1984 when the airport was
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expanded, and it was a terrible challenge. i lived in boston during the big dig. i understand that pain. how we do this in the best and most efficient land, the urban land institute looks at what we call best practices, and part of what we try to do is share the best practice so that other people can learn from both the best of what people are doing and the mistakes others have made. >> host: one more tweet for you from a viewer. on the scale of the flintstones to the jetsons, how do you rate the american infrastructure and where should we be now? >> guest: i'm not sure i can remember the flintstones and thettesons. we need to be on the top of our game. i answer it that way. india is spending a frl dollars on building state of the art. china is spending a trillion dollars in the next five years. we are not spending what we need to spend and strategically investing that money because it is the economic backbone of the country. >> host: maureen mcavey with the urban land institute,
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executive vice president, a new report online at uli.org. thank you very much. > guest: thank you so much, pedro. pleasure to be here.
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[inaudible conversations] >> now a discussion previewing president obama's upcoming trip to europe. he'll travel to ireland, britain, and france. the trip includes a state visit by invitation queen elizabeth ii, lateral meetings with heads of state and participation in a g8 summit in france the the ambassadors and british embassy head of mission discuss the current relations with the u.s.. from the heritage foundation in washington, d.c., this is an
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hour. >> it's my privilege to welcome you and to welcome those who join us on each occasion on our heritage.org website. we ask those in-house, to make the last check that cell phones have been turned off. those recording the event will be appreciative, and we will post the program within 24 hours on our website for everyone's future reference. hosting this is michael frank, vice president for government studies here at heritage, oversees outreach to capitol hill and the executive branch, served as directer of congressional relations as well as serving for directer of communications for former house dreebter dick army and served in national drug control policy and a legislative counsel and before returning here to heritage while working in this capacity. he's a graduate of yale and please join me in welcoming my
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colleague, mike frank. mike? [applause] >> well, i'll introduce our esteemed panel from the podium, but we'll speak sitting down making it formal. first of all, welcome to harming and this event. a preview of president obama's trip to ireland, great britain, and poland. we're honored to have three esteemed dip employee mats here to give us a preview on what to expect and discuss the challenges in each of the relationships we have with those three friendly and very important nations with whom we've been dealing with for a very long time. i'll do a brief introduction of all thee of our speakers, and i'll say if you took collectively our panel today, it's hart to find a part of the world where they have not served
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an area of the diplomatic relationships in the interest of their nations and have not been on the front lines dressing over their careers. they are very, very extensive backgrounds. first, speaking in the order in which the president conducts his visit. first, starting with the irish ambassador, michael collins, the ambassador since 2007 to the u.s., native of dublin, but a career diplomat for over 35 years. he has served, a couple examples, rome, new york, washington, he's been ambassador to saudi arabia, covered bahrain, kuwait, and united arab emirates, ambassador not czech republic and ukraine. can you figure out a part of the world he's not had this greet experience? he's also done extensive work at the u.n., been involved in the north-south relationship and a
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lot of the economic challenges and issues ireland has faced. also, ireland remains one of the most free economic nations in the world according to the heritage foundation, "wall street journal" index of economic freedom, and despite all the this, ireland is number seven in the world. second speaker is philip barton. he's been in that position, very recently, only since april of this year. he's also a career diplomat joining the foreign and commonwealth office in 1986. he's been in venezuela, india, and cyprus, and played an important role with afghanistan and pack tan. the u.k. is a high score in the index as well. 16 in the world now, and we
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expect them to move up the rankings while lowering a government burden in the future; is that correct? [laughter] the third is ambassador of poland who was born in war saw and began working in foreign affairs in 1994. he's a newcomer relatively speaking. his sense of security matters, nato matters, u.n. affairs and weapons of mass destruction and no proliferation issues, and poeland is? -- population land is the most improving areas. now we turn it over to ambassador collins and we'll go down the panel. please join me in welcoming ambassador collins. [applause] >> well, good morning, everybody. i'm delighted to be here. thank you for extending the invitation to me with my
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colleagues here to talk about the visit of the president, in my case, president and mrs. obama to ireland. this inviation was extended to president obama first in 2009, and that invitation was renewed following the formation of the new government in dublin of march of this year, so the new prime minister within five days of being in office found himself in the osm office and happy to have a discussion with the president of the united states and most particularly happy to renew and extend the invitation to the president to visit ireland and to our great satisfaction, that the president accepted, and committed to coming to ireland which he will do and will arrive on monday next and be in ireland on monday for his visit to the u.k. on tuesday. this is a big thing for our country. the last president was in 2000
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when president clinton visited ireland. president bush was in ire land twice in 2003 and 2004, but that was on other business and the limerick was in the context of an e.u. summit that we were chairing at that time. this is a big moment and we are dlighted it's happening and delighted the program developed and i can share a little bit of that with you. the president will, first leave ing dub lin then going to phoenix park to meet our government nearby before the engagement with staff of the american embassy of dub lin. he'll then fly from dublin to a little town in the southwest ireland, population, 300, where he rediscovers his irish roots,
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and i'll come back to that again in the minute. from there, he'll travel back to dublin where he'll speak of a major public event in the middle of dublin in front of a public crowd later that afternoon. basic, you know, elements of the program, and obviously it's a big moment and cause of huge celebration, a visit by a president, particularly a president with some irish history. as i may say so also, it's a big week because the visit of the president follows an ongoing visit of queen elizabeth to ireland. for those of you who understand history, you will understand and i don't need to reiterate the importance of that visit. the last such visit of the british ruling monarch was in 1911. it's 100 years and it's taking place now because the politics
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and circumstances of the evolution of the peace process in particular has ensured that she receives the welcome she's enjoyed in these days and as we speak. in any event, she's leaving friday, and the president arrives monday. this is a big moment where we have an opportunity to engage with our two most important bilateral partners and relationships, the u.k. on one hand and the united states on the other hand. we are looking forward to welcoming the president. i would say the relationship between ireland and the united states is profound. it's self-evident in so many ways. so many people of the country have a connection with ireland, and we, ourselves, figure 35-40 million people, but there are statistics say up to 100 million people share a connection with ireland. either way, it's bigger than the ireland i represent of 4.5 million people. [laughter] you can understand why it's very
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important for us, and why we're proud of our diaspora and those who made such a contribution to this country and whose role is placed in american society has given us enormous credentials as a country, and it's a very special place and special contribution they made along with other, you know, diaspora communities here in the united states over the generations. of course, you know, as ireland has a hard edge, and i mean the business edge. you know, ireland and the united states has a very substantial relationship on the economic front, and in recent times u.s. investment played a huge part in ireland's economic expansion. they worked in high line operations to help these u.s. companies gain access to a european market of some half a
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billion people, so it's very important base and a very willing base for american companies to be in ireland and have access through ireland and the european marketplace and beyond. i would say we're the english speaking country in the euro zone and one of the best places to do business according to the world bank. these points are obvious to some point, but it's hard not to mention them again. by all the negative narrative coming from ireland, but exports were up from 9%. when countries talk about their capacity and ability and their wish to grow their economies out of their challenges that we have, mostly they talk about doing it through exports. we are, in fact, doing that as the economy grew by some 9% last year, and that's quite significant. it's not all one way. it comes as a surprise to million people that we are the 13th largest direct investor.
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with accumulative up vestments it's $34 billion u.s. dollars. when people talk about investments into ireland is one way, it's important to acknowledge the second way as welcoming into the united states as well. there's over 200 irish companies across all states and provides jobs in the united states. that's an extraordinary contribution for a small country and proud of it and want to build on it. we face challenges and daunting challenges, and we have to take questions on any of that. obviously we are going through a period of quite certain difficulties starting in 2009 in particular when the economy dropped by about 8% alone in 2009 and it's a little less so, and this year, we're looking at stability, returning to
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stability, and returning to growth as well. ireland will experience modest growth, something less than 1% in 2011, and we're looking forward to better performance in 2012 and 2013, so we have taken very determined steps to address the very particular difficulties in our economy, and we're quite confident with the help of our partners, the imf, and the european union, european central bank, we will find our way out of the difficulties, and the president will give us an enormous boost to the country. there's no other way to put it. there's celebration and acknowledgement that we will do, but also at this particular time in ireland, you know, the boost will be very, very important. i want to say briefly in conclusion in compares of the president's background, he's going to the small town in the southwest of ireland, and we've had many presidents with irish
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ancestors. his great, great grandfather on the mother's side, sailed for america at the age of 19 on the vessel called the ss, and he was a shoe maker of the great, great grandson returning to ireland on monday. it's a story of success and improbable legend and the story of the irish people of resilience, courage, adaptability during this time that we are facing the difficults we are facing, and it's very gratifying the president would invest time in coming to see us obviously enjoying the opportunity to celebrate his background, but also giving us the opportunity the message we want to promote which is ireland is in business and on the way back to economic stability. thank you very much.
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[applause] >> thank you very much. good morning, ladies and gentlemen. i'd like to start by thanking the heritage foundation for organizing today's event and giving us the opportunity to talk about the forthcoming state visit, and thank you, michael, for acting as our host. unfortunately, and ambassador couldn't be here because he flew back to london last night to help with the final preparations of the visit by the president and he said his greetings and apologies and i was asked to pass those on. this is going to be the first president's state visit to the united kingdom. he was last there in april of 2009, but, of course, he's had regular interactions with prime minister cameron since the general election in may last year. prime minister was here in
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washington last summer. they meet at international meetings, met at the g20 summit last autumn, and they talk regularly on the tornado watch as well on the -- telephone as well on the big issues of the day. the united kingdom is the ally and the state visit has symbolic and substantive importance. before i say a little bit about the state visit itself and what we might expect, i want to say a little bit about the foundation on which partnership between the united kingdom and the united states is built. it ranges across all fields of both government and private and personal interactions. to use a military term, it's a full spectrum relationship. i want to pick at that very broad and deep relationship three areas to highlight. firstly, prosperity. it's a time of economic challenge across the globe, and u.k. and united states worked very closely together on the
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global economic issues, how we are all dealing with those challenges on issues like trade, but also bilaterally, we have a very important trade and investment relationship. by way of example, the u.k. and the usr, the biggest, single biggest foreign up vesters -- investors in each other's country halving half a trillion dollars in each other's economies, i think at a time where, you know, i've been struck in my five weeks here at the talk of the rise of china here. it's worth noting that u.k. investment in the united states is 570 times larger than chinese investment in the united states and 1 million people go to work every day for british companies and more people work in u.k. for american companies. that's a show of the commercial and economic relationship between our two countries, and what it does to help our people
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be more prosperous with employment and to work together to ensure a prosperous future. the second area i wanted to highlight was security. we are the closest possible military allies. i think that's very clearly illustrated by afghanistan where there are some 10,000 british troops engaged alongside the u.s. troops, that is for the u.k. by some distance the second largest military contribution to the campaign there, and we have a shared approach to the security challenges that the world faces today be it from terrorism, al-qaeda, iran, nonproliferation, or other situations. the third and final area to highlight was a softer side of science, innovation, research, and education. again, we are very close partners and the u.k. is the top choice for american students who
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want to study abroad for university degrees. i think both countries act as a global hub for talent. look at the 2010 nobel science, nine of those went to the u.s. of u.k. partnerships, and half of the recipients came from the u.k. into the united states and we acted and worked together to make the most of that tie. on the state visit, and i think they are often seen as being a lot about pomp and circumstance and for those of you who got up in why pajamas and watches our recent role living, you know what you're getting on that side, but as i said earlier, there is also going to be a significant amount of substance to the visit. the president arrives in london
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for his visit to ireland on a tuesday and will be formally welcomed by her majesty the queen and the first lady will be there as well. it's a day for interaction between the president and prime minister is on wednesday, and that's when they have detailed talks. the backdrop, of course, is the sort of turbulent and rapidly moving seen in north africa and the middle east but also the death of bin laden which is a great achievement in our shared fight against terrorism. i think the president and prime minister will discuss those developments and talk about the situation in afghanistan and pakistan and also discuss how best we can work together to respond to the arab's screen and support countries like egypt as
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they go through transition which is also, of course, going to be a theme of the g8 summit in france taking place immediately after the president's visit to london, and i'm sure also discuss how we can improve the relationship in the source of fields i talkedded about, science, innovation, defense partnership, cyber where the u.k. will want to play its part in joining the international strategy for cyberspace that was launched in washington on monday where there's also a high degree of congress between u.k. and u.s. approaches and also how to work together on things like the development field globally. there's a lot to talk aboutment i think there will be a lot of substance to the visit beyond the pomp and ceremony as i said. i wanted to close by making one time point, picking up on what ambassador coal lips said about the --
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collins said about the queen's visit to ireland. it is generally an historic event and symbolizes the normality of our relationship between the two countries, and i think speaking potentially appropriate to place president mcavey, all she's done to bring prosperity there. at the time of tony blare, the great fight, was reached. i know from that firsthand experience the role the united states played in helping to bring about that agreement with the eforts of the u.k. government, the irish government to reach an agreement. it brings a real neatness and semitry to the fact immediately after the queen, the president is visiting ireland as a symbol of united states support in the peace process and it was achieved in that part of the
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world too. thank. -- thank you. [applause] >> good morning, ladies and gentlemen. i'd like to echo the words of my colleagues in thanking the heritage foundation for the opportunity to highlight our perspective of the president's visit to europe. we will be the last stop of the president's trip to europe. he comes back to washington the next day in the evening. president obama's visit is a long expected and long awaited one, not only by us, but other countries of the central european region, and it is also received by 10 million polish americans living in the united states and a large group of
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taking relations into central europe. the president's visit takes place in a very special moment in poland. in two months taking over the presidency in the european union and at the time of president's visit, we will host major summit of all central eastern european heads of state where the president will be part of the summit, and where we intensify our efforts through tunisia, and i will say a few words about it in a moment. president's visit will take place six months after my president visited washington in december last year. relatively short period of time and social security the second -- second meeting and discussing the agenda, but the president
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program is divide into two parts. on the third day, president obama participates in the concluding dinner, the working dipper of the heads of state -- dinner of the heads of state committee. their agenda will be of the meeting divided into two elements. the presidents will jointly take stock of the central european economy transformation and transition to democracy, and they also think or analyze the situation in terms our applicability and transition modeled essentially through european countries and the emerging democracies and credit the situation especially in north africa and the other portion of the conversation will be exactly devoted to global issues and the applicability and
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regarding situations. we'll have a substantial bilateral agenda which will be fielded to the meeting of the prime minister and then in the preps of president obama, and as far as the topics of the discussions, they will be divided into three areas. those three areas will be strategic talks with the united states. those three areas comprise security, economic, and democracy relations. it's now occupied by energy corporation. in terms of security, the presidents will take stock of all cooperations in nato and
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joint participations and 2,000 polish troops continue their mission in the gaza province. there are a number of situations with presidents in the same part of the country and the challenges ahead are in line with the expected calendar which was opened by a major portion of the discussion. the presidents will also take stock of what they already discussed in december, in december last year, where they indicated program of the projects for bilat ram military operations including increased military forces with the prospect of the regional applications so so i think by the time of the visits of the president, we will be able to announce those on the takes and
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the project of fallen -- the second topic to be discussed with the president and prime minister is democracy and it has fallen among the european conscious. this has played strong leadership regarding bureaus and also increased our activities regarding tunisia. a few weeks ago, a democratickization team combined in various fields of constitutional economy, public life led by our legendary leader and former president of poland when he visited, visited tunisia with the political representative of the civil society, and last week, my
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foreign minister, the first minister of the foreign minister in the european union where he holds substantial discussions with the representatives of the authorities in benghazi and working also strong and significant on the humanitarian assistance, so those issues based on our joint interest and joint agenda will be as i mentioned a major portion of the meetings between the leadership, and last, but definitely not least, the economy. over the last couple of years, we see steady growth of our trade with the united states. it is very significant growth and signals indicated growth is
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very significant for the last three months of this year. they show the prospect of the economy exchange between our two countries, but there are projects, mostly connected run by the american companies that they will occupy the interest that they occupy and the time of the leadership. there's companies in poland and reported by various sources the success of poe land has a lot of reserves underneath its soil, and it is a huge prospect when it is important to be put in production and not only set aside the multiconsumption in poland, but also provide export and changing the complex balance or imbalance of the -- of the
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energy sources in the origin, and it's not only an economy and emergency related issue, but highly political, highly political point that is being discussed by the european unions, and the region, and obviously bilaterals and others with interest in this issue. as i mentioned. -- as i mentioned, there's the european union conference and on the first of july of this year, there is a significant regional angle to this visit, and there is one special issue that is very much on the agenda. poland is the only country who is a member of the visa waiver program. i'd like to say a remind to all of you of president obama in december 2010 declared by the end of his presidency, he would li
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