this eliminates a half a trillion dollars in cuts to medicare which are unspecified. i will eagerly look forward to hearing from the authors of this legislation as to how they can possibly achieve a half a trillion dollars in cuts without impacting existing medicare programs negatively and eventually lead to rationing of health care in this country. are enormous savings in fraud abuse an twheas can be eye -- and waste that can be identified. no expert that i know of believes that that would come up to a half a traldz. -- half a traldz. hospitals are cut b by $105 billion. nursing homes are cut b by $14.6 billion. and hospices are cut b by $7.6 billion. these are not attainable cuts without eventually rationing health care in america and rationing health care for our senior citizens who have earned senior citizens who have earned >> eventually rationing health care in america and rationing health care for our senior citizens who have earned the benefits and we have guaranteed them these benefits. and for the life of me how the aarp can support this 2,000 pages of legislation is beyond my imagination. and seniors, seniors all of america, seniors all over the state of arizona including the 330,000 senior citizens in my state that are under the medicare advantage program which is going to be drastically cut by some $120 billion are outraged. the more they find out about it the more angry they become. so here we are as my colleague from the great state of iowa and a leader on health care just articulated, in a totally partisan measure before the united states senate in which no member of this side of the aisle has been consulted in any way i would point out to my colleagues is directly there has never been a major reform implemented by the congress of the united states unless it is bipartisan in nature, and i still believe that the american people want this to doesn't some page monstrosity which is full, which is full of all kinds of provisions that they are either unaware of or even in the study of this legislation many of us have also become aware of. the fundamental, the bernie madoff accounting, enron accounting that has been going on with this bill is dependent on envisioning a half-a-trillion dollars in cuts which are not attainable. if they are attainable then it would mean a direct curtailment and reduction of the benefits that we have promised the senior citizens of this country. it is not acceptable. so what this motion to commit best, it sends it back to the finance committee, comes back with another bill, only this time don't put the crux of it on the back on senior citizens of this country. don't do it. you know, last summer three months before he was elected president on a campaign stop not far from washington d.c. now president obama thou not only to reform health care, but to do it in a new way. he said i'm going to have all the negotiations around a big table televised on c-span said that people can see who is making arguments on behalf of their constituents and you are making arguments on behalf of the drug companies are the insurance companies. americans wanted to believe this would be true. republicans offered to work with the majority on our ideas, but that was rejected. so what has happened? business as usual. let me read from a report this past weekend about business as usual. the associated press has moved a story saying that health care lobbyists and other interests have made 575 visits to the white house between january and august. the report is based on records released by the bite house on wednesday. the timing of the release smells of a classic washington tactic, dumping bad news on the getaway gate before a long weekend. clearly the white house describes itself as being the most transparent administration in the history of the growth helps this nugget gets lost over the fort davis thinks giving weekend. top aides to president brought obama back early and often but lobbyists, a democratic political strategists, and other interests with a stake in the administration's national health care of all. right house business records obtained wednesday by the associated press. now, all of my fellow citizens who are watching on c-span, i urge you, call the white house. say you would like to have an appointment. 575 special interests were able to get in. why can't you? give them a call. tell them you would like to meet with them members of the administration. that is what 575 lobbyists have been able to do. give them a call. the records show a broad cross-section of the people most heavily involved in the health care debate, except average citizens, a weighted heavily with those who want to overhaul the system. talks about who is among them. the list also includes george albertson, scott sargodha, kenneth keyes, a washington lobbyist. richard stott, chief of the american hospital association's, several lobbyists for powerful health care interests including insurers, drug companies, and large employer years also visit the white house complex. so again, citizens, why don't you call the white house and ask for an appointment. the lobbyists and the special interests, big donors get it. they are not ambassadors. they are lobbying the white house on this issue. my friends, health care reform should have been about both sides sitting down together and fixing what is broken. reducing health care costs while preserving the highest quality health care in the world. somewhere, somewhere in the course of this and the process of this legislation we have lost sight of the fundamental problem with health care in america, and that's the cost, not the quality. this legislation will destroy the quality and the availability is the cuts envisioned in this legislation. the first four years, the first four years after this -- supposed the legislation was signed on the first of january by the president of the united states immediately benefits begin being cut. immediately texas go up. guess what, none of the benefits will be given to any american citizen for four years. so that is telling you can't deficit neutrality. that is how you kick deficit neutrality. if you started giving the benefits at the same time you raise the taxes by france, you have you have got about $1.3 trillion deficit in a $2.5 trillion bill. my friends, here we are with the highest deficits in history, debts as far as we can see. a stimulus package with 10.2% unemployment and many predict it is even going higher. wall street is doing fine, and these lobbyists are doing fine. this one, he is doing fine. i understand his salary is around a couple million dollars a year, not to mention all the other parts. the average citizen but 330,000 citizens of my state you have the medicare advantage program are going to see it cut and cut and cut over and over again. about $120 billion. so what happened? the white house engaged in the tradition of handing out favors to special interests. shame on aarp and shame on the ama. we know there are many common sense reforms in american. we know that it can work. by the way, in this monstrosity find you any significant real medical malpractice reform . medical malpractice, the threat of it causes physicians to practice defensive medicine. the cbo estimates it would be roughly at savings of $54 billion. that does not take into consideration the cost of defensive medicine and doctors have to practice because of fear of being sued. i would ask the distinguished chairman of the committee where is it any meaningful medical malpractice reform in this 2000 page bill? where is it? i had a town hall meeting the other day in arizona, as i do quite frequently. the rate lot of doctors said came. doctors, nurses, and cared givers. i asked them, what do you do about medical malpractice reform? every one of them said we practice defensive medicine. we prescribe additional testing procedures. we have to do it because we find ourselves in court by the trial lawyers. to not underestimate the stunning success of the american trial lawyers association who have made sure there is no provision in this bill that has to do with medical malpractice reform. by the way, if there is an example it is called the state of texas. the state of texas enacted meaningful and yet not draconian medical malpractice reform. premiums have gone down. doctors are flooding back into the state of texas. it has worked. they are making demonstration projects. the demonstration project is the state of texas. so instead of a reform which could save we are going to get hospitals, nursing homes, hospices. the list goes on and on up to half a trillion dollars. my motion will send it back to the finance committee and tell them to remove these unnecessary and needed harmful cuts in the medicare system which will not allow us to fulfill our obligation to the senior citizens of this country. buried in this partisan legislation as i mentioned, ten years of tax increases and medicare cuts the total over a trillion dollars. this stack of partisan legislation cost 2.5 trillion dollars over its ten year implementation. let me put this in different terms for you. suppose you want to buy a house. you go and buy the house. the terms of the contracts tummy make the payments for the first four years. after four years you can move in. that is why this is bernie madoff accounting. it is a sham. it is a sham. they seem to make people pay taxes and have their benefits cut for four years and then only after four years to the benefits kick in. that is the way with this kind of accounting they get to a deficit neutral. it is crazy. it is crazy. so you increase taxes and medicare cuts begin impacting americans and our economy in 32 days. let me repeat this. starting in january 2010 just one month from now the majority begins tax increases and medicare cuts starting in january. an incredibly today's implementation for four years. that is 1460 days and 208 weeks of new taxes and medicare cuts before implementation. that is playing games with the american people. if they weren't playing games by delaying the implementation of the bill for years after the tax increases and medicare cuts we would not even be discussing this pile of legislation because it would be scored as adding a over a trillion dollars to our deficit. if the other side wanted to be honest and reject madoff and enron accounting they would be talking about the first ten years. the other day a respected team of the washington press corps pointed this out just last week in his column in the washington post. majority leader been felt compelled to come down and trashman of the most respected columnist in america who i don't need to take the time to defend. david broder is, and said it is simply not true that america is ambivalent about everything when it comes to the obama health plan. the day after the congressional budget office gave its blessing the university paul of national cross-section of voters reported its latest results. sixteen-point margin the majority in this poll said they opposed the legislation moving through congress. went on to say i have been renting for months that the acid test support these efforts over the public auction or the issue of abortion coverage and the possibility of its claim to be fiscally responsible. this is obviously turning a to be the case. the cbo said that both the house passed bill and the one crafted meet abolish test by being budget neutral. every expert i have talked to says that the public has a right. these bills as they stand our budget busters. hear, for example, is what robert picks to be the sixth director of the concord coalition, a bipartisan group of budget what strikes. the senate bill is better than the house version. there is not much reform in this bill. as of now it is basically a big entitlement expansion plus tax increases. these are nonpartisan sources. republican budget experts amplified the point which specific examples and biting language. inside a long list of democratic sponsored budget gimmicks that made it possible for the cbo to estimate that reads bill would reduce federal deficits by $130 billion by 2019. perhaps the biggest of these maneuvers was reed's decision to postpone the start of subsidies to help the uninsured by policies from mid 2013 to january 2014. mom after taxes and fees levied by the bill would have begun. even with the change there is plenty in the cbo report that suggested the promised budget savings may not materialize. if you read keeping that you find that under the senate bill federal outlays for health care but increased touring the 2010-2019. , not decline. digress increase would be almost $1,000,000,000,000.848 billion to be exact, mainly to subsidize the uninsured. the net increase would be 160 billion. this depends on two big gambles. the future congress actually impose the $420 billion in cuts to medicare, medicaid, and of the federal programs. they never have. why don't we tell the truth to the american people and take the suppose it cuts out of this bill and tell them the truth about what it costs entailed in the trip that this is a dramatic expansion of entitlements, but at the same time the is presently eligible, and as senior citizens to our like to 330,000 better under the medicare advantage program in my home state of arizona will not see that program maintained. cannot reach these kinds of savings, these kinds of reductions commit these kinds of cuts without impacting existing programs. i know of no expert to says that it will that is an objective observer. and i believe that others in the medical profession will say this same thing. every time that congress has enacted so-called cuts in medicare or contemplated it they have never taken place. the doctor fix. welcoming to correct the problem. we just took it out of the bill. you know what we are going to do about the doctor fix. every year we are going to delay and delay it and today every year. that has been the history. and will this congress to enact the excise tax, the so-called cavelike plants? obama has never endorsed them and house democrats reacted to union pressure. the chance that congress and abominates the same. make the promised savings reel and don't pass a long unfunded programs to our children and grandchildren. that means taking this legislation back, taking out these cuts in medicare and programs that are vital to our citizens of this country and come back with a realistic, a realistic piece of legislation that has malpractice reform, ability to go across state lines to get the health insurance policy of your choice. the board for bones and fitness, medical malpractice reform. there are many cost-saving measures that we can enact to bring the cost of health care in america under control and preserve the quality. instead we are doing just the opposite. if you are going to make these kind of cuts, $420 billion in cuts to medicare and medicaid and of the federal health programs in you are calling to impact the provision of health care in america. now, americans have been clear that overspending has to stop. americans believe that in power in washington bureaucrats and the new federal health care entitlement has not helped reform. the other side disregard the message all across the country and the bill test does the opposite. i want to talk for a minute about a provision of this bill that is gary important. that is the transfer of power, the massive transfer of power in this bill to the secretary of health and human services. this is a huge transfer. a search of hhs will become federal giant anderson a plan by susan pharyngeal. a quick search of the senate health bill will bring up secretary 2500 times. that is because health and human services secretary kathleen sebelius with be awarded unprecedented new powers under the proposal including the authority to decide what medical care should be covered by insurers as well as the terms and conditions of coverage and who should receive them. i am going to repeat that. in this bill this secretary has the authority to decide what medical care should be covered by insurers as well as the terms and conditions of coverage and who should receive it. now, we saw a precursor of that just the other day with the recommendations concerning mammograms. the board recommended that women under 50 should not get routine mammograms. well, of course, the response was incredible and justified. when all over america who are now alive today because they had mammograms prior to the age of 50. the secretary of health and human services said that would not be carried out. well, we are creating a situation where the secretary of health and human services and a board would decide that. the legislation lists 1,697 times when the secretary of health and human services is given the authority to create, determine, or define things. for a sample, on page 122 of this 2079 page bill the secretary is given the power to establish the basic per and prole month cost to determine concluding coverage. hhs secretary would also have the power to decide where abortion is allowed under a government-run plan which has drawn opposition. the bill even in powers that department to establish a center for medicare and medicaid indication that would have the authority to make cost-saving cats without having to get the approval of congress first. it is a huge amount of power being shifted and much of it is highly discretionary. conservative think tank. one of the greatest powers hhs would gain is the authority to begin the insurance. states currently hold this power. under the senate bill the federal government would usurp it. this could lead to the federal command putting restrictions and changes in place to destabilize the private insurance market by forcing companies to lower premiums and other charges. health and human services does not have any experience with this. i am looking at the potential for this whole thing to just blow upon people because they have no idea what they are doing. you in the federal commitment credits insurance today? nobody. health care reform legislation would rely on the u.s. preventive services task force recommendations as to what kind screening and preventive care should be covered. last week the group which operates under hhs, as i mentioned contra sharp criticism for revising that mammograms should begin at age 50. critics of the bill said this was an example of how the new bill would empower hhs to alter health care delivery. democrats argued the but rather have the government making these decisions. that is the key. they would rather have the government making these decisions. if you liked the way the post office is run you will love the way hhs runs health care in america. i understand the other side's amendment may address some of this, but under the rebuilding of the senate moves to consider beginning in the it today is the language from the bill authorizes the secretary to modify benefits under medicare pursuant to the task force recommendations, which i mentioned. how many women would have died if the coverage provision capping the new federal plan under mammograms have been implemented kinetic on the following page the secretary is authorized implemented g. on the following d to deny payment implemented g. on the followingf o r prevention services that the task force recommends. so if this uncollected panel changes the preventative recommendation for some other type of cancer the federal government planned bond cover it. i don't think the american people want their health coverage decision coming from a panel and washington. the rebuild drives up costs and premiums. just today the cl released the assessment of what will happen to health insurance premiums under the new entitlement. this cbo dealt a blow to plans that that health care bill will lower premiums. they've released an analysis showing that premiums will go up significantly in the individual market. premiums for individuals without employer sponsored coverage would increase 10-13% of $2,100 per families in 2016. the democrats' bill therefore requires individuals to purchase insurance that is more expensive and would be available under der current law. with small businesses employers picks the below is the preserve the status quo. in fact, cbo estimates that under the rebuilt the average family with employees sponsored coverage will soon pay more than $20,000 per year for a health insurance. president obama said during the campaign, i have made a solemn pledge that i will sign a universal health care bill into law by the end of my first term as president that will cover every american and cut the cost of a typical family's premium buy up to $2,500 per year. well, the cbo analysis shows that the president is breaking that pledge by both failing to achieve universal coverage and raising premiums just as it contradicts an analysis by mit economist released by the white house this weekend planning at individual premiums would cut down. in fact, even with the generous assumptions made in a number of areas premiums will either go up or remained unchanged. cbs says that premiums in the individual market would be 10% test 13% higher in 2016 under the current law. average premiums would increase by $300 when an individual policy and by 2000 on hundred dollars our family policy. the new benefits and coverage mandates actually tribes of premiums by 27-30%, and this increase is offset by other factors like new administrative efficiencies. cbs says of the more than half of enrollees in the individual market would receive a government subsidy. however, the bill before us will still require nearly 14 million americans to purchase and subsidize insurance that is more expensive than the one they have today. president obama has promised seniors will not see a reduction in benefits. in fact, he said recently people currently signed up for medicare advantage are going to have medicare and the same level of benefits. how'd you get there when you are cutting medicare advantage by $120 billion? there is no man old or new that gets you to no change in the benefits that they have under medicare advantage and get cut $120 billion. traditional medicare does offer coordinated benefits and can improve the quality of care and traditional medicare doesn't have many of that needs and benefits our seniors. president obama has also promised several times if you like what you have you can keep it. the american people to act as words as a promise that if they had a health benefit that they were happy with it could keep it. of what to make sure we are helping the president keep his promise. i want to help him keep his promise by some in this bill back, taking out the customer ended on medicare, nursing homes, hospices, medicare advantage. send it back to the finance committee and come back with the bill that the american people can believe in that will preserve the obligations we made to our senior citizens. medicare advantage price the only choice in the medicare program allowing an option for seniors who want additional benefits or a better option. medicare advantage is working. nearly 11 million seniors. to give them a choice about their health care and better benefits. as i mentioned, 330,000 beneficiaries in my state of arizona are in medicare advantage. they would see benefit reductions or their plan disappear. 89 percent of seniors may even have some form of supplemental coverage and top of medicare to provide protection against out-of-pocket cost or additional benefits. many low-income americans and minorities rely on medicare advantage as the supplemental coverage. some have a plan that cuts in that extra payments to medicare advantage plans reduces insurance company profits. under federal law that is simply not the case. the fact is 75% of those extra payments go directly to putter benefits for seniors under current law. the other 205% is back to the federal government. unfortunately those extra benefits will be taken from seniors who are enrolled in medicare advantage. the bill contains one and a $20 billion in direct cuts to private medical plans. common sense in sticking to that without affecting benefits. congressional budget office thinks so as well. cbo assumes that the bill would cut benefits by more than half from an average of $98 in additional benefits to $41 a month. so i see one of my colleagues is wakened to speak. i hope that the american people who understand what we are trying to do here, all we are trying to do is send this back to be reworked, to be fixed in a bipartisan basis, not to force 400 some billion dollars in cuts and benefits that we have promised the american people. send it back. come out with a bipartisan approach. sit down for the first time. have the c-span cameras and the way that the president promised, a promise that the blood back last october a year ago. let's sit down together and figure out how we can fix this. the best way to fix it is to preserve the quality of health care in america and bread down the cost, not to pass a 2,074 paged monstrosity that is full of the measures that would impair the ability, particularly of our senior citizens to keep the benefit that they have earned and we a promised and. madam president, yield the floor. >> the senate gavels back in at 10:00 a.m. eastern tomorrow and will continue debate on health care of the legislation. and senator mccain's motion to send the bill back to committee to address medicare reductions. watch live senate coverage on c-span2. test >> a discussion on china's role in energy and climate change. following that they look at the possible health effects of climate change. >> earlier this month the federal reserve announced new rules that would restrict banks and others that issue credit cards from charging an overdraft fees without the expressed permission of the cardholders. the rule is scheduled to take effect next summer. now a senate hearing on bank overdraft fees. you will your remarks from bank industry executives and consumer advocacy groups. this is an hour 30 minutes. >> that the bulk of our witnesses this afternoon to hour hearing on protecting consumers from abusive over draftees, prepared is an accountability in receiving overdraft coverage. there is an acronym in there someplace. we appreciate your being here. it welcomed the audience. welcome my colleague, the committee, and members of the staff. i should notify my colleagues that i have told them. what i will try to do is continue the hearing and try and stagger people simply don't interrupt the flow of this. that knee began with a brief opening statement after ridge i will ask my colleagues if they have any quick opening comments. then they will turn to our witnesses and here from them. in a series of questions regarding this bill and related matters. i begin by thanking each and every person for being here. our job on the banking committee is to make sure that regular folks get a fair deal from there unending institutions and other financial the stations. the whole notion that depositors in a bank and people buying insurance policies and shares in our public companies, people who have mortgages, all of those financial activities we have to keep in mind as we talk about the stability of our financial institutions and the safety and soundness. it is also critical to talk about the security of consumers to depend upon these institutions serving their interests well. this brings us to the subject matter. for too long credit card companies have made excessive profits by charging consumers average is peas or raising rates whenever they felt like it. our committee approved legislation to stop the abuse the practice is. legislation passed the senate earlier this year with overwhelming bipartisan support signed into law by president obama later this spring. we take tim for that. we need to discuss some of the practice i find abusive. that is misleading overdraft programs that encourage consumers to overdrawn their accounts and then slam them with too high fees. let's be clear, people have a responsibility. spined within the means that we have available to us. page have applied to charge a fair fee for a legitimate services that they provide. and the last the bank would expect them to conform or conduct activities that with the been disadvantaged. they often have overdraft coverage without informing them were giving as consumers a choice whether or not they want to have an overdraft fees are be notified. the overdraft charges usually at high fee. a consumer can pay as much as $35 for overdrawing on a $2 transaction. we are going to hear specifically about just such a case this afternoon. in some cases a consumer can rack up multiple overdraft fees in a single day without ever being notified until days later that in fact they have overdrawn their accounts. many institutions also charge additional fees for each day an account is overdrawn. the laundry takes you to realize there is a problem the more fees you can be charged. sometimes been expelled even rearrange the order in which the process your purchases charging you for a later larger purchase first said that they can charge you repeated overdrafts fees for earlier smaller purchases. the truth is that the service of overdraft protection often serves as nothing more than a way for many institutions to profit by taking advantage of their customers. last year american consumers pay $24 billion in overdraft fees. the financial times recently reported that banks stand to collect a record 385 million in overdraft fees this year, almost double what they collected a year ago. according to the center for responsible landed nearly 1 billion of those fees will come from an adult's. one of our witnesses today and a resident of connecticut. we thank him for being with us. i will let mario tell his own story about how an initial offer jaffe ended up at $140 $140 ovet coverage fees in just a matter of days. the method his bank used will sound familiar to many americans. families in my state of connecticut are already struggling to make ends meet. we all know that. last week the federal reserve to its great credit announced that they will require banks to get a consumer's consent before enrolling them in an overdraft coverage program. this was a welcome but long overdue announcement for american consumers, and we need to do far more to protect them from these abusive practices. that is why i introduced a fairness and accountability in receiving overdraft coverage act. my colleagues have joined us as co-sponsors of this bill. like that the door reserve's rule our legislation would estan opt-in the rule for overdraft coverage. customers would know have to consent before overdraft coverage is applied to their account. legislation would go further and limit the number of over kraft fees that banks can charge to one per month and no more than six per year. that would have to be a reasonable and proportional crossed. or in legislation would also put a, stop to the practice of manipulating the order of which the transactions are posted and require banks to warn customers if they are about to of a draw their account giving them a chance to cancel the very transactions they are about to engage in. finally our legislation would require banks to notify customers promptly when they have over juane and account through whatever means the customer chooses said that they can can quickly restore their balances and avoid unnecessary future fees. abusive overdraft policies are plainly unfair. the banks know it. after it came out in the press that i was reading of this legislation a few of the large institutions to appear on steps towards responsible reform. i assume out of the kindness and of their hearts. about commit. last week the federal reserve released a new rule that will require banks to get customers' consent before enrolling them in an overdraft coverage program. that is a very get started and i applaud them for doing so. our legislation goes further, and not remain committed to ensuring american consumers are going to be for the protected. let's just remember regulators did little while consumers were taken at advantage of. despite the fact these regulators have the power for years to step in and put an end to these practices. that is exactly why we need an independent consumer financial protection agency that will be focused on preventing these abuses and addressing them quickly rather than having to wait week after week month after month for the congress to pass this session. folks such as mario is about better. i remain committed as my colleagues to to ensuring american consumers are protected. of the four to our discussions this afternoon. with that let me turn to my colleagues. would you care to be heard? you bet. >> unfortunately i will be in will to stay. this is an important topic. i'm sure. i am very concerned that congress often does we will push to another extreme and create problems, perhaps as we are solving others, but create other problems. i believe that happened with some aspects of the credit card legislation. i would rather it not happen here. in particular i am concerned about closing certain services and opportunities to consumers and also shifting the cost that should be borne by consumers depending on their behavior to consumers more broadly. i am very concerned about that. it seems to me there is no way but that this legislation as it's currently drafted would do that since as the chairman just said it sets a limit to on overdraft charges, fees no matter what a particular consumers practices, no matter what number of overdrafts might happen. it seems to me if that is the case at the end of the dank and we are calling to shift costs from less responsible to the entire class of consumers including the us to act more responsible. i think that is the proper direction to move in. i would hope we can focus on real problems and real abuses and close those without that massive cost shifting and without closing the door of certain opportunity and service to consumers who may want them. so those are my thoughts and concerns going into the problems at the front and and and the court to working with the chairman and the entire committee. >> thank you. you raise a very legitimate issues. that's why we have hearings like this. i welcome them. i hope you are surprised it's not the first time and effort the. i appreciate you. >> thank you for convening this hearing in for a guaranteed share. thank you all. i am proud that senator dodd is a co-sponsor of the fair overdraft coverage act. we need this bill because too many americans pay too much for a service that is supposed to be a courtesy. when i think of the $24 billion an overdraft fees americans paid last year, 900 plus million in my state of ohio alone courtesy is not the word that comes to mind. fees generated have been growing by leaps and bounds. the center for responsible lending tells us the average over track is $35. that means that if a woman in toledo or a man in akron purchases something and is a few dollars short it can be trusted .., 20, 30 times the amount of he amount of the overdraft. these are real people, real families struggling. people like kerrey from toledo who is overdrawn by $6 but ended up paying $113 in fees. the center for responsible lending reports that 92 percent of all a overdraft fees are paid by 14 percent of account holders, and these account holders are most often folks with lower income, often young, or often non-white. in recent college grad who never paid and over jack fee in his life until a couple months ago. when he checked his balance for is atm balance. while he thought he had $80 he only had 15. he paid for three items some investment $20. when the bank reconciled the transactions he had $80 in peas turns to him. overdraft protection business its meaning if consumers are at greater risk with the protection that without it. the comments from senator victor that people need to be responsible. this is something that has just gone too far. we need to pass the coverage act and reduce the amount of these fees and give consumers more control. i just want to share a frustration that i hear too many times from too many people. people believe rightly or wrongly each of the appalling things. they believe that our economy was almost brought to its knees because of the financial-services industry. they see that government bailed out the and it's a service industry. they see that many of the executives get paid bonuses. they see people charged these kinds of fees to generally working-class consumers. that, i just hope that people from the industry understand the frustration. with how their government is treating them, how wall street is treating them, how banks are trees in them and how their lives are going in these very tough economic times. >> thank you. and we don't often jot the distinction. i always promised myself i am going to draw that distinction when we gather because it is important to use the word banks across the board. and often not the people to a far better job. we thank you for those comments. senator reid. >> thank you, mr. chairman. of what to think the witnesses. i want to echo your comments. the two largest participants in our sba programs are community banks and there are actually have avoided some of the excesses and are in opposition to help out. that should be emulated. i think your right to point that out. i am pleased the balance of the year today to be a co-sponsor of the overdraft coverage act. we are in the best of significant financial reform legislation, and i hope we can include aspects to this bill. the federal reserve is taking steps, but i think we have to do more. the legislation that senator dodd has proposed will do that. it will provide a sense of opportunity, transparency, and taurus for customers. senator brown's comments about perceptions are absolutely right. most people had a suspicion. no real increases in income yet financial executives were enjoying huge, huge pace when they started for working families. the deck is stacked against them. i think the more we learn about what happens the more and that suspicion is buttressed by some evidence about how when the large institutions get in trouble and get help. when families across the country need help with of 44 closure or avoiding excess charges it is their responsibility. so i think this legislation is timely, appropriate, and extremely important. >> thank you. >> thank you very much. my mind goes back to our credit card discussion earlier this year. i had maggie from salem morgan hill had a credit card account for about 15 years. always paid on time. could not believe it when she found out she had of late payment. she called the bank. how could i possibly be light. the credit card representative checked and said, here is the thing. we got your payment on time. we can sit on the pennant for today's. it is no date. nagy said i think the phrase that captures the sense of millions of americans, how can that be fair. that is the same standard of reasonableness and fairness that we need to bring to this conversation. i think any bank customer who finds out that their bank has reordered their transactions in order to multiplied the number of overdrafts fees there being charged with say how can that be fair. certainly this is an important conversation. i am pleased to be a co-sponsor and 904 to the testimony. >> i appreciate that, and. [inaudible question] to leave the record open for comments that may want t may want to make. now let me introduce our panel of witnesses. mario livieri traveled here from connecticut and will testify before us. we talked a lot this before. we met in connecticut several weeks ago. at the historic so compelling that he deserved a national audience. we thank you for being with us. jean ann fox is the director of financial-services. a nonprofit association. ms. fox advocates for issues including financial services, electronic commerce and consumer protection. president and ceo of the pentagon probe credit union which has cost of 1 million members and its core comprises men and women of the army, air force, coast guard, and department of common security. john kerry is the chief of ministers of officer. responsible for external matters including business practices committee and to regulatory and government relations. we thank you very much. and michael calhoun is the president of the center for responsible lending. the center is a research and for focusing on consumer lending and protection. again, we are very pleased to have all of you with us today. your full opening statements and comments and any supporting information will be included in the packard. i'll begin with you. very grateful to you. you have to pull that microphone close to you. >> i got it. >> you got it. okay. you're all set. >> good afternoon, chairman, senator dodd, an esteemed members. my name is mario livieri. i am a senior citizen in the san branford connecticut. i am honored to be invited to today to share my story with you. i hope that it will help you to right by consumers like me who have been treated unfairly and misled by their bank about a rich feast. until a few months ago i was a customer and a prominent bank in my town i am no longer a customer because i don't thinke fairly. i wrote a check for $200. when the check was cashed it a richer my checking account by $2.17. by bank trust me $35 fee for my $2.17 mistake. i had no idea i had overdrawn my account. if i had a would have immediately deposited money to cover the over draft. instead it took the bank over a week to notify me of the overdraft. by the time they finally got a round to telling me my account was overdrawn i had made a few other transactions totaling $100, and the bank charged me $140 in fees. now, i on the small-business, a building and lumber company. i am quite sure they would not have done this to be 50 years ago. now it happens, but i also know if you don't get anywhere in the world in business by treating your customers unfairly. i called the bank. after a whole bunch of arguing they agreed to refund one $35 charge, but insisted that i pay all the other fees. i told them i did not think it was fair. they told me it was legal. as a matter of fact the people that told me it was legal was the thrift institution in washington, d.c. i have been in business too long for that to be an acceptable answer. if that sort of practice is running up ridiculous charges for an overdraft protection program i did not even sign up for is legal it shouldn't be and it certainly isn't fair. i am glad my senator, chris dodd, is doing something about it, and i am grateful to the entire committee for the opportunity to discuss my story with you. there are a lot of folks like me in your state who are in the exact same situation. they make a little mistake and get slammed for it by their bank. i hope that we can stop abusive overdraft coverage practice so that no one else, no matter what bank they use has to go through what i've been through. thanks for inviting me here today. thank you for fighting the good fight on behalf of us consumers. thank you. >> we thank you very much. appreciate that. >> thank you, chairman dodd and members of the committee. i'm jean ann fox, director of financial services. i am testifying today on behalf of the national consumer groups listed on our testimony. we enthusiastically support to and bill 1799, the fear of a draft project. .. instead of denying aid devitt purchase of the point of sale or a cash withdrawal at the atm on insufficient funds, banks permit this transection to london bank's money and the largest banks charge each typical $35 fee for the extension of the credit. these loans are not authorized by consumers. no consumer ops then typically on overdrafts provided as a courtesy by the bank. consumers don't apply for these loans. they don't get truth in lending cost disclosures. they do not get a contract that the bank promises to cover overdrafts of to assume-- limit. they do not get a warning and their creditworthiness is not evaluated when this credit is extended. these loans are for small sums of money. the fdic study were last last week found a typical overdraft was just $20 the banks are charging $35 to loan $20 for a few days. and the typical overdraft not exceed $78 in the fdic study. the small loans come at an astronomical cost one. with bank fees up to $39, the highest we found the most recent survey of banks pylon extra fees to the don't repay in a day or two. the majority of the largest banks charge sustained overdraft fees. you can be charged $35 for your first 5-dollar overdraft. if you don't pay that back in five days it now costs $75. these overdraft loans are taken out of the next deposit in consumers' bank accounts making the banks the first creditor gets paid out of their next paycheck warrior social security check deposit in your account in these loans are extremely expensive. for the fdic's typical 20 dollard devitt overdraft, if the fee is just $27 you get the whole two weeks to pay it back that is 3520% apr. which leads us to describe draft lending as pay day loans as done by banks. these loans, a balloon payments. you don't get an affordable repayment schedule. these get paid first which can cause the other checks consumers have written to bounce and trigger more overdraft fees. bang sis trec send traps to over drawbaugh by ordering the largest withdrawals first so that that wipes out your balance and then they can charge you overdraft fees on all of the other smaller transactions. this is not what consumers want to have happen. a polling that cfa did this summer found 71% of american consumers say they want banks to get permission to cover overdrafts for a fee. 85% of americans want banks to be required to disclose on the atm screen if they withdraw will trigger an overdraft. 70% say that bank should pay transactions in the order they receive them and a polling done for consumers union they found consumers expect of the don't have enough money to cover a transaction and you use your debt pickard the bank will reject it. that is not typically the case. the consumers who are trapped in overdraft or the ones who can least afford the most expensive form of credit at banks offer. about a fourth of bank customers pay the $24 billion overdraft fees that were collected last year and they are most likely young, low income and minorities. i would be glad to answer questions later about the specific provisions of the bill but let me wrap up by saying fee based overdraft lending traps consumer in astronomically expensive debt in deprived families of money that they need to meet their basic needs. these are not the convenience. overdraft loans are dangerous, eikhoff lawns that must be reined in. people who agree to use them, we urge this committee to reverse the drain on vulnerable consumers' bank accounts by supporting senate bill 1799. >> thank you very much. i am grateful to you for your testimony and your support. you are gracious to be here today and i'm anxious to hear your perspective. >> thank you. on behalf of the board of directors and management of the credit union have liked to thank you for this opportunity to testify. weiss serve the military can department of homeland security and we are of the conservative institution that is particularly the evers. our income represents less than 10% of our total income in any given year. while our first priority is to remain safe and sound hours strategic objective is to provide products and services that offer high rates on savings low rates on loans and loan fees. we have been recognized in the military community as the leader with their overdraft protection programs and we have always viewed overdraft protection as a particularly valuable service for a military member. in their line of work maintaining good credit is important to their military readiness and ultimately their career that's our program dates back more than 20 years receiving most of the overdraft programs that have come into question today. from the very beginning we have believe members should be the qualify for our low-cost line of credit or we should not allow overdrafting of their accounts. bid we would note that with more than two decades of experience we find our members are appreciative of that approach. we offer a line of credit attached to a member's checking account with a minimum of $500 overdraft protection. the services offered to give the credit or the member who opens the checking account, 45% of frakt chicken-lickin members have such a line of credit. as a result our programs have always been opted in. we believe strongly that every consumer must have opt in rights. that the credit union we charge 14.65% annual percentage rate calculated on a simple interest basis with no other fees and charges for overdrafts. we believe by using the light of credit products which is formally recognized as a loan and the subject to all of the federal lending disclosure requirements the cost to the consumers both fully disclosed and properly proportional to the amount they overdraft their account by. at pen vet we's transactions mall listen largesse to avoid charging unnecessary overdraft and of the vision fund fees. we provide separate mail notification for each overdraft events of our members are kept fully aware of the status of their account. we believe rapid notification is important to those members so they can pay off their overdraft as quickly as possible. in short we have crafted a product that is truly consumer friendly. we make double the fact that we have not received a single complaint from our membership regarding the order in which we process items and more than 20 years. nevertheless their members to do not choose to opt then and there are those who cannot qualify for a line of credit. these members are not allowed to overdraft their account with a limited exception of an offline pet a transaction where we are required by contract to process such payments. in those instances we do charge you $30 fee. this does not happen with great frequency in derecognize the proposed bill would eliminate that feet. we support that. we also recognize the recent after the federal reserve bank will prohibit such a fee. however we do believe merchants the network should be required to process all transactions and real time which would eliminate this exceptional circumstance. as an organization were causally focused on processing improvement in we felt there was more we could do for military members in the area of overdrafts. this summer we made the decision to eliminate as many fees are military members incur as we possibly could. the product we created is called warriors that the image. eight waives the checking account fees associated with instances of insufficient funds crept to two occurrences in any rolling freemont period. importantly this goes-- program is distinct from our overdraft line of credit and goes beyond the minimum requirements of the proposed legislation. under this program a military member with overdraft protection can use all the money available in their checking accounts plus their line of credit and still have two additional instances of returned items. with no fee or charge is beyond the interest on their loan. a our research indicated this program would result in just over 98% of our military members with checking accounts never experiencing a fee. the warriors the fenech program represents only the beginning for us. we intend to extend this program to our entire membership and are at work on annex eversion weech we hope to roll out in the summer of 2010. thank you for this opportunity to testify. we are indebted to you for the work you are doing on behalf of the american consumer. >> mr. kerry welcome to the committee and i want to point out, and i say this to you because oftentimes we have these discussions and hearings and people like citibank and others are the subject of our concerns to put it mildly and i would like to reflect here that at city overdraft fees from atm point of sale, pen transactions and devitt transactions when they are not sufficient funds and accounts with, real-time posting of devitt and atm transactions are part of city's programs selee complement citigroup for those sections because we too often sit here and the rate you for what you are not doing and we want to compliment you for something when you are doing something right. >> thank you for the opportunity. >> there are still things we want you to do. >> thank you very much for the opportunity to talk about the bill and offer recommendations for improving the choice with overdrafts. we have heard today that the policies and some of the bank's employee implying there overdraft protection particularly with atm and debit transactions can be confusing frustrating and often expensive for consumers. especially for those people who don't manage their daily finances that closely. there many stories we have all heard were a consumer incurred an unexpected the for a transaction that could easily have been avoided had there have been a better information at point-of-sale. it is the 5-dollar cup of coffee that ends up costing 40 bucks after the overdraft fee is slapped on. at the outset it is important for me to be clear and senator you have made it clear, we help customers avoid overdraft fees. we have never authorized, never authorized atm or debit transactions if we know the money is not there and therefore we cannot charge an overdraft fee when a customer at him such a transaction. moreover through incentive programs with their personal bankers we encourage our customers at the account opening and route their relationship with us to link a savings account or a line of credit to cover potential overdrafts and avoid either of overdraft fee or a bounced check fees. this practice is one of the best way to reduce the risk and the cost of overdrafts. separately, we do allow overdress for checks and ach transactions. we do this because the situation is different. with checks and ach transactions customers have the sole control over the transactions. we cannot know what amounts they are riding on the check or exactly when the check was written. on the cases we mitigate risk for customers and ourselves by allowing customers a cushion to cover a small overdraft. further, in order to avoid large overdrafts situations citigroup wanat authorize a payment. today fewer than 20% of citibank customers are charged even one overdraft fee a year. those only if you are charged more than once annually. we think the reason for this is because we declined atm and debit transactions when the funds are not available. well we have concerns, we fully support the goal of protecting consumers from unnecessary overdraft fees. we support the additional efforts to improve consumer awareness regarding overdraft protection and alternative payment options. moreover we agree banks should provide more transparent and easy to understand disclosure so that consumers can better manage their own money. we believe in the importance of giving consumers the ability to make choices based on their individual circumstances as they manage their finances from one day to the next. that is why we believe there are opportunities for reform to provide consumers with even greater choice and control related to overdraft fees. of course most consumers do not overdraft and never will. still consumers may not fully understand the effect of opting into four out of overdraft coverage over time the future they might find themselves in the circumstance where they wish they could proceed with the specific transaction even if they know they would be charged a fee. i am not referring to the 5-dollar cup of coffee that ends up costing $40. rather this about someone being stranded without cash in a foreign country and being able to access the $100 from an atm even if it cost them $135. having previously opted out would eliminate the flexibility so it is our position that consumers should be given the choice of opting in at the point of sale. the choice and control should lie squarely in the hands of the informed consumer. so consumers should be alerted at the ctm or devitt terminal that the transaction will overdraft their account and they should be able to choose at that moment when they are not they want to incur the feet. and have it go forward with the transaction. and the absence of a choice perhaps the transaction should be denied. understandably updating the technology to provide such transparency and it will take time it will be incumbent upon the merchants, the networks and the banks to help create this functionality at the pointage transaction. with this point the transaction approach of the issues in the bill about how many fees can be allowed whether those fees are reasonable exactly when the customer should be notified and the other concerning policy and business implications of those points all become moot. informed consumers can decide whether a fee is too high or being charged to welton based on their personal needs. in short, consumers need to decide. we agree with the overriding goals of the bill however we have some important points to concern in the current bill that should be addressed. some i have noted here another in more detail in my submission and i thank you. >> thank you very much. very creative thoughts. appreciate them. how were you doing today? good to have the was well before the committee. >> good to be here chairman dodd and members of the committee. thank you for your leadership in protecting consumers especially in acting the current act and thank you for inviting us to testify today. nearly five years ago vedra regulators studied overdraft fees and found serious problems. daishi joint guidance advising thanks to consider prohibiting overdraft fees on debit cards into limit the fees. had this guidance betton force we would not be here today discussing the explosion in the amount of frequency of these fees. instead of the regulators just not in force the guidance and in the intervening years american families have lost an additional $70 billion. current overdraft practices r.a. pipeline out of the pockets of american families. fed regulators to stop this abuse. their hands are on the veldt to cut off the siphoning of consumers money but they refuse to cut it off. i am going to focus my comments today on overdraft fees on debit cards as this is the largest and fastest-growing source of overdraft fees. overdraft fees and that the cards are. >> civin should be prohibited. it is a penalty fee totally unrelated to the cost and the bank can stop the act by doing as citi does, just deconingh the transaction and there is no ansf fee for the customer or the consumer when that is done. this is doolittle like victum, an intersection with a grain traffic light and then the town of's is a high fine on travelers who entered the intersection. today banks manipulate bank accounts to generate these and impose high penalties. there are alternative says mentioned today but these abuse if these are driving them off the market. several bang said discontinued alternative products like lines of credit because of the revenue from high overdraft fees. overdraft fees are turning debit cards into high-cost credit cards without the protection of the card. these these cause immense damage to families, more than 27 million families pay over five overdraft fees each year. it is taking families out of the financial mainstreamed as we run into counselors i feel that they cannot tell families to get a bank account because these overdraft fees drive them into financial hole they cannot get out of. these appeasable overdraft fees also harm the banking industry in our overall economy. bay dissidents responsible programs who don't charge fees fees, and it turns our banks into a competition of who can enroll the most customers in overdraft programs in deplete their accounts rather than which bank can offer sustainable credit if-- one testimonial from a banker for overdraft programs went on to say "if i had to more products like this, i could quit making loans altogether." we praise the reforms that are set out in senate bill 1799. it imposes critical limits on the amounts, numbers of these and contrast their recent fed control. there was consent on credit cards before the card act that that did not solve the problem. substantive protections were needed. again overdraft abuse demonstrates the need for consumer financial protection agency. if overdraft abuses had been a primary focus of an agency they would not have developed in the way they have. there is a need for an agency that can act quickly in response to new problems in the consumer financial protection agency focused on consumer protection is best suited to do this. it is said to whom much is given much is required. the american taxpayers have given hundreds of billions of dollars to the big banks and taxpayers will pay for this for many years. it is not too much to expect that the recipients of this aid will use it to restore the american economy that they helped bring down and at the very least, that these things will not return siphoned hard-earned dollars, hurting not only those families but also that many businesses in dire need of the boost those dollars would provide if available to purchase useful goods and services. we call on the financial regulators and especially the occ which oversees the biggest overdraft programs to enforce the overdraft guidance sitting on their shelf and to issue regulations with substantive protections for american families. we also urged congress to enact substantive overdraft reform, closing the gap and the card acton putting an end to these abusive practices. thank you. >> thank you very much mr. calhoun and i want to thank you for your participation in your thoughts and ideas. they have been very constructive and helpful. i want to begin with you mr. livieri with the question. view hyundai talked about this but wondered if you receive notice, you talk about this week that went by between the time you actually wrote that check for $200 only had $179.80 in your council you had $2.17 in an overdraw on that account. would you have continued to use your debit card to make additional purchases had been notified right away? >> definitely not. >> i think you told me at one point that actually on the notice you received it the postmark on the notice-- >> the notice was given to me on the 18th and the postmark was the 24th. then they send me another one on the 16th and the postmark was the 22nd so i didn't know. as soon as they told me i was overdrawn ten minutes later or half an hour later i brought down the money. >> was six days after they took notice of that that they notify you so had he been notified more promptly would have dealt with it. i hesitate to ask you this then you told me so i know the answer, you had enough money in your own accounts to mooring cover and you were not sure of that amount in the bank. you just pour not aware of what was going on. >> i did not have within their bank. i had it in another bank which was closed by. >> you are a multiple banker here. >> i did not have the that there bank but it was down the street a couple of blocks of estin as they told me the thing was overdrawn i went and got the money and brought down cash to them so it wasn't a serious problem. before this on many occasions because i was with this thing for ten years, when i did something and a lot of times it was their mistake but if it wasn't as soon as you put your cardin and put in your pin number it would say insufficient funds, go see your banker. it didn't this time, nothing. like everything was fine. we are only talking $10.60, $30.20. that is all the things were for. this serious amount was the $35 to get $10.60. >> the technology existed in your bank where a machine notified you. >> sure, sure. >> that is interesting. let me ask the panel if i could, mr. kerry in his testimony talks about the frustration that consumers express on atm and debit transactions were the overdraft coverage fees good at been avoided if the customer had only known at the atm point-of-sale that the transaction results and a fee and are billed by the way we asked for a study to look at this particular point so we have already accommodated your interest to some degree and recognize although we heard from mr. livieri the technology existed at his bank in an earlier time were they were able to notify and instantaneously about whether not the amount, there was then adequate amount of funds to cover that particular transaction. but you make a good point and as i say we are evaluating it to a steady but even if the technology were readily available at reasonable cost overdraft coverage fees should still be reasonable in proportion. if you have to dollars and 17 cents and you have a 35-dollar fee, seems to me if someone was overdrawn by $500 or $250, having in overdraft see that with some of the proportional to the month of the overdraft would be more reasonable to me at least but the idea that even a few cents, up of coffee, multiple transactions. young people particularly to use the card more frequently and have smaller transactions for each transaction is up $35 or gets double that amount. it doesn't seem at least in the interim or the point of transaction that what we are trying to to hears should be adopted rather than waiting for all that to occur. >> senator i guess the question is directed at me. >> you made the point. >> i made the point, that is there. at citi at this point if you were to go and buy that for dollar cup of coffee and you did not have $4 in your account we would not authorize the transaction. basically the transaction would not go through and the customer would have this decision to pull out another means of basically paying for it. and what we are essentially saying is that is what ought to happen until the technology is there any point of sale, to simply deny the transaction in its entirety and have the customer go someplace else or use some other mechanism to pay for it. that way, when you do that, when the customer, when as technology gets built, and it is not that far away because it can be done in it already is and is in the atm's we have heard, you can make the decision whether not you want to incur the feet. d.w.i want this or do i not want this? no i do not want that the and i'm going to go someplace else to do that. that is where the real choices. my concern is that we give the choice and astatic department and i had no idea that i would be incurring this feed some of that is the problem. u.s. about the reasonable fees and it is a slippery slope. my concern about it is certainly in the devitt and the atm space, establishing limits and establishing those what is reasonable or not, i think that is worth discussing but i think women start talking about people writing checks and bouncing checks and the banks offering the service for overdraft, rather than having the check bounced that is a good thing. >> my point i guess i want to make here in the absence of these other matters being adopted i want to determine whether or not you felt it was reasonable in our bill. >> in essence what i would say, what i would suggest is the transactions in simply be denied. >> let me ask other members of the panel. >> senator dodd when banks talk about overdraft fees being set high as a deterrent that is a bit disingenuous. that they wanted to deter overdrafting they would deny the transactions on devah cards at the atm. >> u.s. anticipated my next question. the gao found the average nonage frisbies including overdraft fees increase by 10% since the 2000's the house the imposition of these these at the determinate feared a fresen data has shown increasing revenue coming from these banks? >> we have been serving the largest banks overdraft fees for the last several years. everytime we go back and look the fees have gone up. more banks are charging tiered fees so the second, third in fourth overdraft is even more expensive and now they are starting to add sustained overdraft fees so you can get charge $35 immediately if you don't pay the bank back in a few days and it is another 35. some banks charge and a dollar today sustained overdraft fee. i heard from again fell in indiana this summer, just out of high school working in minimum wage job. he made a 10-dollar math error on his bank account. he had for debit transactions that overdrew his account by $6.58. his bang charge $35 for each of them. he rush jenin deposited $100. that was sucked out to pay the overdraft fees so he was still overdrawn and charged him $8 a day. by the time this young kid's family got in touch with me he was $500 in the hole. that is not a deterrent. that is not a service. that is a death trap. >> anyone else want to comment on as before i turn to senator reed. senator brown. does anybody else have a comment on this particular point? >> that is what the practice was not many years ago and that was a big selling point. in fact the debit card, they had a limit. they were different from credit cards and again with these overdraft programs of them particularly with debit cards is the upturned debit cards into extraordinarily high cost credit cards with none of is the substantive protections. the card that limits the number of fees in this pattern similar to what cube had been 17-- and requires this these be reasonably proportional and the consented to. if you are going to require that for a credit card it seems like you need at least those protections in a noncredit situation. >> thank you. senator brown. >> thank you mr. chairman. thank you senator rhee. a question for mr. calhoun and a question for mr. pollitt. the american bankers association says consumers appreciate having overdraft protection mandate is these jurors that their customers, their members customers want. white is your survey finding it so different mr. calvin from what the american bankers association tells us? >> many surveys, it depends on what u.s.. our-- and people want to know what it will cost them and when they are told $35, it is a whole different kettle of fish. the other main thing is that for people who want it covered there is an alternative, both in line of credit which the typical charge of the use overdraft protection from its credit, is less than 1 dollar foreign overdraft versus $35, or they used to regularly offer linking as some still do, linking your debit card commodore savings and then some charge imposed like it 1 dollar feed every time you access it. banks are discontinuing those programs because the regulators have allowed these abusive products to drive out the good ones. so it is not an either/or. with somebody truly wants coverage for overdraft they can have it and on a fair basis it is profitable to banks. >> five for ten years ago it would be much more likely for a bank to set up a situation that the account, the overdraft if you will, would simply be money taken out of my savings account. there would be a link in the bank would do that automatically and i would get the statement that they did that and that is much less common today than five years ago? >> many banks no longer offer then those that do often discourages them point people towards the hy-vee overdraft program instead. >> mr. pollack, at the pentagon credit union where you work, to your customers complain that the decline these debt transactions? do you hear discussions from customers about this after they see how your system works? >> actually we do not. we share that view and we think that our members do less well. when they don't have money in the account, they prefer to know they don't have money in the count in not be charged a fee to get $20 for a 5-dollar cup of coffee. and so we have had no complaints. >> you don't have the technology mr. carey talked about that someone is notified that they would be overdrawn but still have the option to be overdrawn and paid a fee in case of an emergency? you don't have that technology i assume yet? >> that is correct and we rejected the do not have available funds. >> would you know if most credit unions around the country have the policy that you have or do other credit unions more likely to amendment binnun credit union or mimic some banks that do this? >> it is probably 50/50. roughly. >> can you, is it the larger credit unions that are more likely to do it? >> i think the larger ones are less likely to charge a fee. in the house meeting the second largest credit union showed up with in north carolina state employee. they do not charge fees on it so i think the larger credit unions are more apt to have programs similar to ours or similar to citi's. >> thank you mr. chairman. >> thank you very much. senator reed. >> thank you mr. chairman. thank you for your wonderful testimony. let me ask mr. carey, you have initiated the steps with respect to your policies as a result of any type of regulatory suggestion or is this just something that you think is good business? >> this has been their practice really sense we invented the atm, and we have never done anything. >> careful because someone invented the internet. >> i don't think there is as much dispute around this one as the other one but it has had essentially been our practice that the funds are not there then the transaction doesn't go forward. >> the majority of banks, large, medium and all sizes charge these these and i guess my point is, and is due regulators ever looked at you and say, that is great for today in any way try to suggest what a good fee structure would be with respect to the consumers or do they just remain aloof? >> your first point, i have yet to be in a meeting with the regulator or they have said everything i have done is really could mpaf mian the head because that is not their job but to their complaints over side is woesik ne sultaness oversight in they challenge us on all sorts of issues about how we are approaching specific things. i have not have specific conversations around our practices with respect to devitt and atm, but nor would i expect to have them because i think it is not a driver of consumer complaints. they are not surprised at the coffee they bought in fact cost them 40 bucks and with respect to a c.h. in checks, our customers like the fact that we can cover off a transaction that is important to them rather than belting beared chacon having them face the return bounced check fees from a vendor and all the problems that come from that. >> thank you. there is some evidence i think mr. callahan that consumers would rather then be denied in some cases and particularly debit cards then to have automatic fees. is that you are finding? >> klebold that 80% of consumers prefer to be denied rather than impose the 35-dollar fee on the debit and they want choice on all of these, then going back to your question about the regulators i think one of the striking things is i mentioned the joint federal guidance that was issued five years ago, february 5th, but going back further than that, the occ going back as far as 2001 issued, was approached by a bank that wants to offer one of these overdraft programs, kind of a new thing on debit cards. it was similar to the program being described here today. and august 2001 the occ responded in very harsh criticism noting all the lack of consumer protections when the program was never instituted at that time. why the change of heart by the regulators? consumers suddenly have more money they want to pay in fees. it is not only because they failed to address this problem. they have actively condoned the development of these overdraft programs as your questioning was suggesting. >> could i add to that? also the comptroller of the currency has had a set of guidelines for the order in which banks process payments and none of those criteria that in the consumer protection. it talks about deterring this use of the account unless the banks lets you over drought, you have not misused anything. none of the occ's guidelines about the ordering of payments says that consumers shouldn't be charged extra fees just because it has been manipulated so that regulators have really failed to curb this practice. as the fees one of overdrafts became more pervasive, more transactions became covered in more money went out of people's pockets. >> that is, from your perspective, consistent across the board, not just those deceivability hess? >> it is the federal reserve that writes the rules and implements the federal banking and credit loss and we have been urging them for years to require banks to comply with truth in lending when they extend credit to letting you borrow from the bank with an overdraft. in docket after daka of the federal reserve has failed to do that. they have written truth in savings act rules. they have now added rules to regulation e but they have failed to provide a basic set of comparable protections to overdraft lending that every other creditor have to comply with. >> mr. pull it kiplagat in your testimony that is what you do voluntarily, because of your practices, if someone has overdraft protection you are consistent with all of the landing was. is that correct? >> yes sir, that is correct. >> you have not seen that as an impediment to business? >> to the contrary, we are doing quite well. >> mr. carey justin my my to clarify your policy about debit cards is you don't charge fees fees. with respect to jacks, you do charge those and unlike mr. pollack's organization you don't do it through an overdraft. you do it automatically? the we have programs similar to what pen fed has which an account opening in throughout the relationship there's an opportunity to link the savings account or lincoln line of credit and the customers can move those funds back and forth and make sure they have the appropriate covered so we do have all of those things, so at those points of sale one can literally move over and cover those particular transactions and people are due not-- not tonight. what i am essentially focusing on was it someone simply did not often to those programs, in the current environment we simply would not authorize the transaction that there were not funds there. >> yes, sir. mr. olivier. thank you. >> allah the in his than policy and it has been quite a while but i remember having a credit card or debit card or whatever and you put in the machine and you say you want to hundred dollars or whatever it is and it says the fee will be $18. do you want to continue? if you say no the transaction is null and void. that is okay. flaun as you know what it's going to cost two. t1 that you do it in if you don't want it you just but don't forget about it. doing it without you knowing what they are going to charge is a course of a different garage. >> i could and did say it better. that is in the wind, course of a garage. >> a garage of a different color. [laughter] mr. chairman, thank you. >> thank you very much senator. good questions. let me pick up on the point senator reed was making and it may be duplicative. for many years the federal reserve because it is the federal reserve who has the primary responsibility or has said the primary responsibility of consumer protection and they have been aware of the abuse of overdraft fees for a long time. in fact an interagency guidance of 2005 called overdraft coverage programs "abusive and misleading the." that was their words to describe going back in 2005 and over the past several years the federal reserve has issued modest rule after a modest role in them please to say they have done that. i don't want anybody here to leave the room thinking i'm not grateful but i would love to be convinced it would have happened in the absence of introducing legislation in this regard and absence of the consideration of the financial regulatory reform proposals and as i say i have a lot of respect for ben bernanke and i don't say that likely. i think he has done a very good job and day to welcome these changes here it seems to me. but, are these sufficient rule change is going to be adequate enough and doesn't it, i mean let me take advantage of the panel here, and again i say this not because it should be punitive or adversarial but really sordid to complete the entire picture. if we are looking at creating stability and safety and soundness, which we all would like, at the same time it is important people like mr. riviera, a hard-working guy who ran his own business for 50 years goes in and does the simple transaction ends ends up paying $140 for $2.17 overdraft. if this were a bizarre exception, he would not come here. misstate tappen. in forstchen when this happens with great regularity and the idea that this reorganization of the regulatory process, instead of me going to the process, all of you understand the senate pretty well. the likelihood i could take a bill like this and get it on the committee, get it on the floor of the united states senate, go for a weaker to if i'm lucky, to completed in the other body appointing 35 people. to have the president of the united states sign it into law. energia to get the changes that the federal-meckle abuse civin misleading seems to me it cries out for a different process here. that would allow an agency the responsibility of confirmation by the senate, appointment by the president to watch for what happens to the mr. livieri's of the world. i should not have to go to this process on every matter like this. this ought to be delegated to a response body to provide the kinds of protections. and the great depression we came up with the federal deposit insurance corporation. we did not require a piece of legislation every time a bank failed to make sure that depositors would have the money protected. with the securities exchange commission we guaranteed we would not be deceit and fraud and of this and that still goes on. nonetheless it with an agency that protected the brother of the senate bill in congress every time some action occurred out there. should meet today in the 21st century given all the wonderful technologies that exist today that can inform consumers of what is going on and i apologize for the length of this question but this is a further example. instead of waiting of round and hoping and praying despite years of acknowledgement of this problem existing in waiting for a bill to be passed by congress would have raised responsible regulatory body making these kinds of decisions. does nick rielle for an independent consumer-- if your lawn more breaks the day you can call somebody and say the warranty is not there, who can help me out to get my money back from a faulty product that i got sold, a consumer products? who do you call? when all of a sudden you have been taken to the cleaners for 140 bucks for $2.17 transection? who do you call? collier senator. >> if the calls a regulatory agency they will tell him this did not violate any rules. they can charge any amount and they can charge to any number of these. they can charge you over and over for the same overdraft. there are no limits on what the banks can do in this area, then you are correct the consumer financial protection agency would be very important to keep this kind of abusive practice from getting out of hand. >> mr. pollack i don't mean to draw you into this that you are in the business of financial services. do you have a reaction to this? i don't even know what your thoughts would be. >> at pfc we believe this cfpa is a good idea. we think the ability of an agency to focus solely on consumer protection will make that agency more effective. the fact of the matter is the day of the regulators have a very difficult job and have to cover a lot of ground was trying to do a bad job. i don't think that all. i simply think when you are tried to cover a lot of ground can do as well as when you are focused on one sole area so we believe strongly that the cfpa is a beneficial events for the american consumer. >> mr. carey are there any comments you would like to make? i will even let you speak is a private individual. >> the best thing i can say is that clearly there is an opportunity to improve consumer protection and whether it is through the cfpa or whether it is true enhancing the authorities, senator you probably know it better than i do but clearly the stories you are describing here deserve attention and if that isn't being done by the regulatory agencies, then the questions hess to be asked as to why not. >> mr. cal hun we nowhere you stand on this because ufr is spoken on it. would you like to make additional comment? why don't you jump in here because i don't know how much longer we will have before both starch. >> i wanted to ask a question and i apologize that i had to leave and come back so if this has been answered you can end of-- indicate to me to check the record if you will. i used the. >> said the pickard for just about everything i am purchasing. and i try to keep an of balanced and not worry about this issue of overdraft, but how difficult would it be to have a system in which i could be given a real time choice of whether or not, if i have in fact, if i have in fact depleted my funds with the transaction and i am buying a newspaper in the airport, how difficult would it be to-- kevin overdrafts and to pay a fee for that or simply not do the transaction? >> why don't you start? >> right now the technology, the technology is there. but it is not capable of being done now. is not likely have to invent a new idea. we have to invent the transporter room in order for this to happen. the technology is there, the processes are not and that requires the cooperation of mergence, requires the cooperation of banks and requires the cooperation of networks to get that done so it is not there today but for example it is your own atm and it should be for your own-- on the surlier home atm about having the capability if you do this you are quick to be overdrawn and would you like to go ahead with the fee? it is not that far away, but there has to be the incentive to be able to go out and build the import of that is, and that is the point i have been trying to make, until that is there than perhaps the transaction should not be approved, just simply flat out not approve. if there is a market for that, if there is a need for that let's build that in give consumers a choice at the moment in time that they need it the most. >> doesn't seem that long ago that that was the response, your transaction won't go through. is that-- just a few years ago, was that? >> according to testimony today, at citi we don't do it so of the don't have the dough in the account, there simply aren't funds available for you to draw and the transaction is not authorized nice suspect that was a much more typical practice earlier on in his migrated over time but i am sure mr. calhoun-- >> i would echo his comments that it is not going to immediately be available to have a point of sale realtime morning and it is critical that reform not be dependent on that because particularly of the set the standard is universal two-way communication there is going to be a gas station out in some small county that it may be ten years before it would have to wait communication and i think as this bill properly does, it ought to set the goal and the incentive to move in that direction but that the absence of that warning, the practice should be and the law should be that no fee should be charged on those debit transactions. at the bank for convenience or for a particular customer wants to cover it, this bill 7099 does not prohibit it. it prohibits these abusive fees which also i think the point that has not been covered these actually be get more the fault. the majority of these these are from accounts for people have fallen into a whole, where they cannot make up the money. most of these fees, programs overdraft fees have a 500-dollar limit. once you get that limit you are getting checks turned down for overdrafts turned down. you have just been triggered into all of these defaults because as we heard about the defaults by ubot kind and a lot of people's paychecks cannot catch up that whole and covered their deficiencies the next month they are facing more of these overdrafts. >> i would think regardless of the technology for two-way communication in the future, right now we have the old style that would work, which is a bank could say well, jeff merkley you have a choice. you can either sign up for they line of credit and have your overdraft covered by a line of credit or you can choose for us to turn down your transaction if you have hit your limit or you can choose to do some third option, but there are a range of options that addressed this and we do have the technology for it right now. >> yes, that is correct. we do. >> it is a great line of questioning. i forget which colleague raised it, it may then use senator and maybe some of you know the answer to this but i heard it was 17 to 20% are paying about 90% of the fees. am mic close to accurate on that? it is a relatively small number of people and their people, primarily people who are in difficulty, have lost their jobs and are in difficult straits, going through medical crisis of one kind of another and are in a tough spot. is that correct? >> senator the fdic did a very extensive study that was issued late last year and they reported that 9% of customers had ten or more overdrafts in a year, sold 25% of banking account customers over drop in a given year so it is a very small fraction of customers who are keeping the banks afloat. >> that constituency that is paid the 24 billion last year and the estimated 38.5 billion this year. >> i think the 38.5 billion includes both bounced check and overdraft fees but that is the cost to consumers of not having sufficient money in a bank account in the banks going ahead and luning money and charging a fee. >> i will give it to you exactly from the fdic. the fdic reported that 93% of all overdraft fees are paid by 14% of account holders. >> yes, that is about right. >> 14% of account holders paid 93% of that number. people who are struggling the most are pindell lion's share of these billions of dollars. that is ridiculous. >> mr. chairman bair to subgroups. again, they are two separate parts. there over 27 million families who will pay five or more overdraft this year based on the last data so that it's a pretty good head and then there is this group that just gets hammered because that same study found that the average household in the high use group paid $1,600 a year and overdraft fees, $1,600 so-- but the abuse is not just the very high use. it does spread across a much larger swath of account holders, 27 million to be exact. >> senator, if i may. a couple of points worth making. i asked because i anticipated this question, i want to see whether there was a disproportionate impact to the people who received an overdraft the orrin anne's f.e. across are checking account business and again, since we don't do them, we don't do the devitt and we don't do dat insel this is limited to a group that would otherwise be belting checks and it does not load the, it spreads out across the entire spectrum and that, so again i want to make sure we are focusing on the problem, and the problem to me is the brown the velocity of the electronic devitt and atm transactions were people are caught on aware. >> we appreciate what citi has done. have i said that enough times? >> you have then they proceeded very much. you can never say it enough. >> that is an interesting statistic as well. tell me that again, how that works. >> in essence because it is primarily made up of people who are writing checks or over drawing drew az its transactions and the question i ask is that this proportionally impacting lmi? it is not. it is spread out across the spectrum and i think the reason why is we don't charge that fee. people are not caught, they are not using debit cards the way-- >> we suspect another fact is an awful lot of low-income people don't have checking accounts. their 10 million people in this country that never access the traditional financial institution other than through credit cards and debit card so there is that element. >> a few years ago congress enacted dft 99 to require that federal benefit recipients get direct deposit of their income, social security, veterans' benefits do we have pushed a lot of fun they consumers into mainstream banking without making it safe for them to have bank accounts. all the social security-- are supposed to be exempt from attachment. banks take that money to pay overdraft fees for overdraft they permitted to take place so that is a drain on older consumers and low income consumers. the fdic study looked at a cross-section of larger and smaller banks that they supervise. they don't have the big money center, the big national banks and their field of supervision, but if you look at banking across the board, its low to moderate income consumers who have a bank account, they don't have enough money to make ends meet in the banks are not helping them avoid fees. >> we have got problems. one of the things i wanted to point that, i think the idea of letting someone know they cannot into an overdraft coverage, but we need to make sure that these these are not going to be excess of which is that point we made earlier and also that their alternative such as why the credit link to accounts which again that citi those are important as well in consumer awareness about what is available to them rather than just the one to have a fee charged or not have the fee charged but what else is available to me. senator merkley? .. the sort of fabric of the company in this space. you know, there -- people are very unhappy about fees in general. and i think you have to basically try to draw better transparency. i'm responsible for business practices within the consumer businesses and a lot of it is centered around all sorts of revenue opportunities and we spend a great deal of time in those discussions trying to weigh all of the risks and rewards that come from that. such as the damaged reputation risk what's the potential revenue opportunity. where are we in the competitive space and there's vigorous debate and discussion and it's very good and i think useful process that we to try to come up with really what the right answer is. but it's through those kinds of things that we come up with the decisions that we do come up with about what makes the most sense. and i think what we'd like to believe is that you know, at the end we've got to be entirely transparent to our customers. we've got to make sure they understand exactly what is going on. they have informed choices and that they can make those choices over reasonable period. in reasonable time so that they're not trapped. and that that's basically a bedrock in how we look at these things. >> thank you. >> senator if i may add, i think citi testimony addresses an important point that was raised earlier today. there was concern that perhaps this reform effort would disadvantage other consumers and particularly one argument that's been croun out is -- thrown out is somehow if you regulate overdraft fees it would mean the end of free checking which lots of consumers like. and i think two points are. first of all, citi finds a way to both turn down and not charge overfees from debit cards but still offer free checking and tree checking predated these aggressive abusive overdraft programs. they are not interdependent and that if you take away the abiasive overdraft you're -- abusive overdraft you're no longer going to have free checking. >> you provoke me to say as someone who negotiated and tried for many, many years to get some reform with the credit card tri and this year thanks to senator americaly and other members -- murkily and other members of the committee able to get one vote margin of the credit card bill passed the senate overwhelmingly but one thing we ne gauche it yaed in the process is a delay before imme ming the provisions of that bill in. order to provide at the request request of the industry time for them to be able to adjust for the changes. what they've done in that interim period not just adjust to the changes but charge outrageous fees and interest has just been skyrocketing in this window. to get as much out of this window as you could get. completely defying in effect the very quest they made basically to allow for an adjustment period which i thought was a reasonable request. i'm angry now in a sense they took advantage of that request and we've of course got legislation to put a freeze on it. if we can get it done. i don't know if we can or not. they've been arguing this is what happens. because you changed the rules now we're going end up doing all of these things and we're only doing them because you passed the credit card bill and frankly that's be a loneny -- be a lonnie that argument and the argument now we're going to do away with free checking and other things. citi is living example what you can do. you can do exactly what they've done with the debit and credit cards and also provide free checking and have a very reasonable response in these areas. hip those involved in the lending institutions are not going try these tricks. again, further evidencing why you need a consumer financial product safety. you don't have to have a bill in every time. here i have to introduce a bill again to put a freeze on these rates instead of having an agency who can put an end to it. immediately without having to go through all of. this i thank all of you you i've been very gracious. we thank you. we know you've come down and we know it is not easy for anyone to stand up and talk about something. all of us agree. we all bear responsible at the out seth to con -- outset to conduct our affairs and be knowledgeable where we are in these matters to talk about a situation that involved 2.17 for a guy what's been in business for many, many years obviously is an uncomfortable moment but we appreciate you doing it because youch become the face of an awful lot of people. these aren't just numbers and statistics so we're very grateful to you. appreciate. we thank you as well. the committee will leave the record open for additional questions the members may have but again pleased you all are here. committee stands adjourned. [inaudible conversations] today president obama told world leaders about his afghan strategy. tomorrow we'll have coverage of president obama addressing the nation on his plans for the war in afghanistan. we'll have those remarks on one of the three c-span networks along with cspan.org and c-span radio at 8:00 p.m. eastern. >> swedish prime minister frederick rhine field said today the global climate change problem cannot be resolved without chinese leadership and responsibility. next a look at china's role in energy and climate change and how this status affects u.s.-china relations. this is two hours 40 minutes. >> good morning and the mike is working. monday after thanksgiving so we're a little slow in getting started this morning. thank you for your patience. i'm ted a senior fellow and deputy director for foreign policy here at the brookings institution. welcome. on behalf of the foreign policy program here to brookings. this morning's event is part of a series of joint research and periodic updates on developments in china. sponsored by the australian national university, the chinese academy of social sciences and the john l. -- china center here at brookings it is particularly timely in light of the high-level presidential level diplomacy taking place these days involving all three countries the abc countries we call them. president obama's recently returned from his first state visit to china. prime minister of australia is in washington today. to discuss preparations for the copenhagen meeting on climate change and both president obama and i believe premiere went jiabao are to travel next week to personally express their commitment to reducing carbon emissions. very fitting today we take up two of the most important issues facing china. first the issue of clean energy and climate change. as you know the u.s. and china are the most important countries in the world in terms of carbon emissions. and during president obama's visit to china the leader signed no less than 7 agreements on u.s.-china cooperation in clean energy and made some notable statements about u.s. and chinese approaches to copenhagen. both countries this past week have made important pledges regarding cuts in carbon emissions. though how significant these are are really up to our panelists to help us interpret. the panel will help provide contacts on what has transpired recently in the u.s.-china relation shup and what we should expect looking ahead to copenhagen but also more generally. the second issue is how china is coping with the global economic crisis. how is china fairing what changes are occurring in its own economy and how will these affect and be affected by the country's international economic behavior. that will be the second panel this morning and i'm very pleased that we have panelists here from veil and china to -- australia and china to groin -- join our group and i thank you for traveling so far to participate in today's event. yourself again to amu and chinese academy of social sciences for their support of this series of meets and i'm delighted again that brookings can host this event and i'm going ask the first panel and charlie director of our energy security initiative to come up and get going. thank you. >> thank you ted. ladies and gentlemen, we're delighted to have you here today as ted was suggesting, these are indeed momentous days as we look towards the opening at copenhagen and a little more than a week away. and we hope that china and the united states will play dynamic roles obviously at that forum. because without us both stepping up to the table i think it is highly unlikely we'll see more than a process for further negotiations put forth. that may be what we have to live with, but we'll hope there's still time to have more. we have a very distinguished panel this morning and let me just briefly introduce them and then we'll get under way. our first panelist will be ross a distinguished professor at the australian national university professor is a vice chancellor's fellow and fellow in economics at the university of melbourne as well as a distinguished professor at the australian national university. he is currently chairman of a number of international companies and research organizations including the international food policy institute in washington and paw pew what new guinea sustainable development program in singapore. director of okie tedi limited in new guinea and member of the board of several national research institutes including the lawrie institute for international policy in sydney. asia link in melbourne the center for strategic and international studies in jakarta and china center for economic research at beijing university. he is the author of numerous books which i won't go into but he's also had a long and distinguished record as a policy advisor a diplomat and a businessman. he was the senior economic advisor to australian prime minister hock from 1983-1985 and subsequently served as the australian ambassador to china from 1985 to 1988. in september 2008 professor gar nel presented the climate change review to the australian prime minister which this review which has been highly noted commissioned by the australian government and examines the impact of climate change on the australian economy and provides potential medium to long-term poll stis emile rate these challenges. our second panel list will be elliot diringer. pew center on global chri hat change. oversees the sent's and jis -- isn't analysis of international challenges posed by climate change and strategies fors meeting them. also directs the senl's outreach to key governments and actors involved in international climate change negotiation. mr. diringer came to the pew center from the white house where he was deputy asis tament to the president and where he helped to develop major policy initiatives. before joining the white house mr. diringer was a veteran environmental journalist as a reporter and editor at "the san francisco chronicle" for nearly 14 years. he covered the 1992 earth summit in rio and authored several award winning environmental series mr. diringer holds a degree from college and in 1995-96 he served as neiman fellow at harvard university. our third panelist barbara finamore is with -- is the founder and director of the climate change program at the natural resources defense council. ms. finamore leads nrdc's 25 member staff in beijing to promote inknow i have -- innovative policy development capacity building and market transformation in china with a focus on climate change. critical components of initial efficiencies. green buildings. advanced energy technologies and environment law and a number of other activities. ms. finamore has had nearly 30 years of experience in environmental law and energy policy with a focus on china for nearly two decades. she has worked in nrdc's nuclear nonproliferation program at the departments of justice and interior and for the united nations development program and the center for environmental law. she has served as president and chair of the professional association for china's environment pace and is the cofounder and president of the china united states energy efficiency alliance. a nonprofit organization. she holds a jd with honors from the harvard law school. so without further adieu let's get ross garnaut up to the podium. >> it's good to be with you again. the abc meeting on china australian national brookings social sciences. we put out a book each year embodying results of latest research on the chinese economy and the brookings version of that will be out soon. not out for the occasion this year. we're meeting at an unusually interesting time in china's place in the world and china- u.s. relations. they're always interesting but number of things are coming together right now. most importantly the two issues we're discussing today the aftermath of the great crash of 2008 which has left a legacy of continued growth momentum and confidence in china. and concerns about the growth outlook in the united states economy. a very difficult budget situation as far into the future as we can see. so one of the things that the great crash has done is accelerated a shift that we've all been ware of for a long time. a shift in the increasing weight in world affairs of big asian developing countries. first of all china but also india and indonesia and the relative decline in world affairs the old industrial countries of the north atlantic. the acceleration of the shift could not have been more dramatic and the panel will be addressing that in the next session. the great crash and the great recession had important effects on the climate change discussion. globally it temporarily slowed down the growth of green house gas emissions but not by much and certainly not by enough to cig enough cagely -- significantly change the rapid movement of the world towards high risks of dangerous climate change. the slowing gives us just a couple of years of breathing space if we take as our measure the levels of global emissions but from sometime in the future 20, 30, if we're plotting e mission -- emissions growth over time the effect will only have been to shift back a couple of years the tan m -- attainment of various levels of emissions and the business as usual and even in the depths of the recession emissions where it was still so large that concentrations in the atmosphere were still growing. quite rapidly. second effect of the crash on climate change was that it increased public investment in all spears -- spheres and part of the stimulus programs most countries including china and the united states included investment in emissions reducing technologies. that was quite significant and in the case of china the period of huge fiscal monetary expansion has been associated with quite large investment in emissions reducing activitys and that's increased confidence in china that it can seriously changed the relationship between economic growth and emissions and help to give the confidence that led to the statement by the chinese government late last week. and the third change. the third effect of the crash on the climate change outlook is that it made the political economy of taking action more difficult. in all countries but especially in the countries the western countries most affected by the recession. and i think we'll be living with the overlay of that difficulty for some time. just looking at three countries in particular because it matters so much on what the world's seen. quite an interesting example of management of climate change issues in the aftermath of the crash with much in common with the united states. the united states itself and china i'd highlight a few points. in australia we're going through a rather dramatic period. like the u.s. we have a house of representatives and the senate and government's position is stronger in the house of representatives. than the senate. like the u.s. we had a government until quite recently that first contested the science of climate change and was seeking to slow down international movement on doing something about it. that all changed in australia a year before the united states in november 2007 with the election of the labor government which had campaigned strongly on the need to change climate change policy. probably the second main election issue in 2007 the biggest being industrial relations policies. and that proceeded by a year similarly large turn around and approach to climate change in the united states. the australian and the positions influence them, each other under the bush and howard administrations and probably are continuing to implement each other. prime minister 1 in washington today to discuss the approach to copenhagen with the president. today american time or eastern time and on tuesday australian time we're probably going to see a change in the leadership of the opposition in the australian parliament over the climate change issues. so we've not only had our first climate change election we're about to have our first climate change of high level political leadership. and all of this is rather dramatic in the politics of trail blazers. and -- of australia and the history of it is the difficulties of the opposition parties the conservative parties in coming to grips with the changes that have occurred under the government. rud came to power committed to introducing an emissions trading scheme and having australia play an active role in international discussions on mitigation. just wasn't all that easy politically in australia as it is in the united states and for much the same reason. we're both economies with an abundance of fossil fuels and we've developed patents of consumption and investment premiseed on the availability of probably cheap fossil fuels. australia, united states and canada stand out as the three developed countries with far higher emissions for -- per capita than any other developed countries twice as high as europe, japan, new zealand. so there are plenty of interests that are threatened by a change in policy. the government doesn't control the numbers in the senate and the green party which is quite strong in the senate. wants very strong action on climate change. thought the government wasn't doing enough and the conservative party wasn't giving enough assistance to higher emitting industries and so mr. rudd's legislation was held up in the senate. he finally made some concessions in the form of giving out more free permits to oversubsidize the heavy omitting industries and reached agreement on those lines with the leader of the opposition. and the opposition parties are probably in the process of getting rid of him for accommodating the government's legislation. in the eyes you're -- united states you're much closer to that than i am and i look forward to learning more about that today. the announcements last week were i think historic. the president committing himself to a version of the bills which have passed through the house but not the senate that must increase the chance of something like that becoming law also a few more words about that later. in china we also had announcements last week, not accidentally in the immediate wake of the american announcement. china was always going to show its hand more clearly than the united states had. it has committed itself to 40-45% reduction in the emissions intensity of production between 2005 and 2000 -- and 2020. and there's been a fair bit of commentary here about how that's not really a -- much of a change because china had been reducing emissions intensity at something like that rate anyway. and also it's not an absolute reduction in emissions. i think it is a very big change. in the half dozen years of this century. chinese emissions were growing about as fast as gdp. the energy intensity of output wasn't falling the huge falls of the 90s which were the product of introducing pricing for energy and moving away from some of the processes of central planning had brought down initial use -- energy use, gdp. that process had come to an end by 2000 and energy use had continued to grow more or less in line with gdp early this century. te missions intensity of energy use remained very high because of the dependence on coal and it was actually a change in policy. that led over the last two years to substantial reductions in the emissions intensity of gdp. don't think the fact that china had already succeeded in getting itself onto a new path is -- did americans the cig enough -- diminishes the significance of it committing itself to continue on that path to 2020. for what it is worth in my climate change review it's published by cambridge university press last year and on the web review dot au. i did some careful calculations of what each country would have to contribute if the world was to achieve the 450 part per million concentrations goal that the europeans have sometime accepted as a aren'table objective -- a reasonable objective policy. australia and the u.s. are heading towards. and what china is doing is sub stan,ly -- substantially more than their part in the arithmetic that i presented in that review. the united states on the other hand with the 17% reduction from 2005 by 2020. it's not doing as much as develop countries will need to do. my own view is that the rest of the world has to accept that as a reality. most important thing is that the rest of the developed world our country included doesn't start to see the united states position as a norm because we won't get strong global mitigation if it becomes the norm we have to see it as an exception that the u.s. for its own political reasons at this moment in history. can't do much more than that. and we have to see it as an exception and not something we all have to weaken our own positions to move into line with. and i think that strong global mitigation is feasible within that context as long as we see clearly the position of the u.s. and the u.s. as in china confidence in starting to make a movement towards reduced emissions in china's case first those ratio to gdp and later on absolutely confidence the progress will make it politically possible to do more. the mitigation of climate change has a cost. i estimated in my review after the most elaborate set of long-term modeling of the strait yan -- australian global economies i think and has been done anywhere ha the cost -- that the cost to the middle of the century to australia participating play part in strong mitigation regime directed at 450 million would take some -- something approaching but something less than two percentage points of gdp growth per annum of the total. it would delay by a few years australia wrech -- reaching the average per capita level. the income level that would otherwise attain in 2050. that all became part of the australian debate and people were prepared to accept those costs but we're probably makeing the costs a good deal higher than that and higher than they need to be by the way we're going about supporting high emissions industries as a result of the political process that's gone on. this is happening in all countries. all of them are subshy dees -- subsidizing because each country fears that its trade exposed industries will become less competitive because others aren't doing as much on climate change as it is. and the net effect of this everywhere is to increase greatly the costs of mitigation in all countries. we need to use reality of an emerging global agreement for all of us to get rid of this highly distorting stuff. it's important in budget matters the u.s., australia, every country in the west faces a dreadful budget outlook. the u.s. much worse than australia's. being able to auction permits rather than giving them out free to high emissions industries would have a material effect on budget prospects. so it's how we handle this issue is not only important for managing the big effort that's required on climate change but going to have a significant effect on our ka passionty to bring bud -- capacity to bring budgets back into shape in the aftermath of the great crash. the u.s. and china announcements last week, i talk as being very helpful in the approach to copenhagen. we would like both to have been stronger but both do represent big shifts in position from a couple of years ago. the whole world needs china and the u.s. to be taking strong positions if we're going to get a strong global agreement and i don't think that we should use disappointment that the u.s. or for that matter china is doing enough as an excuse for the rest of us becoming less ambitious because there's too much at stake. thank you. [applause] >>. >> good morning. my thanks to brookings and anu for the opportunity to share some thoughts with you this morning. as the theme for my remarks i want to pick up up on a word professor used in his remarks a few times and that word is confidence because i've come to believe the ultimate objective of climate diplomacy whether talking about bilateral summitry or multilateral negotiations is to build and maintain confidence between and among nations. that's because i believe countries will ultimately deliver their strongest possible efforts only if they are confident that others their counterparts. their competitors are also delivering their strongest possible efforts. we all need confidence that others have the ability to act and are intending to act and once they've committed to a set of actions we need confidence that they are fulfilling those commitments and this is something of a virtualous circle we need greater confidence to get us to agreements and hopefully good agreements deliver greater confidence in turn and i think it's reasonable to argue that one of the greatest obstacles to achieving global progress on the issue of climate change has been a lack of confidence in particular in between these two countries the united states and china. as we all know in washington there has been long-standing concern here in this town certainly going back to the days of the negotiations that china could not be counted on to do its part and many have argued on that basis that the u.s. should hold off on enacting mandatory greenhouse gascon trolls here. for its part the united states has probably provided plenty of reason for a lack of confidence in our efforts. first u.s. having walked away from the kyoto protocol. second still not to date having enacted any mandatory controls on greenhouse gas emissions and within the bilateral context there's a long history of the u.s. helping to launch but then abandoning joint initiatives. and i think this has periodically eroded whatever trust had begun to be built between the united states and china on these issues. at this point though i think we can point to a number of very promising signs. that in fact we are seeing confidence being built and i would start with the recent summit in beijing. climate change in the context of this summit was a point of agreement rather than disagreement. was one of the points of agreement highlighted by the leaders many of the concrete outcomes of the summit were energy and chri nat -- climate related the joint statement from the two leaders contain some very important language on the issue. both countries resolved to take strong mitigation actions and the two sides said that they resolved to stand behind these commitments. important words i think coming from the leaders of the world's two largest greenhouse gas emiters. together they launched a series of joint initiatives on clean energy, electric vehicles efficiency, coal, other areas of clean energy and i think we can look to those to be producing some concrete results over time that in fact will better enable both countries tackle these issues but parnl i -- importantly i think they do provide opportunities to continue to build and strengthen confidence. in areas such as technology sharing probably more practically approached than the context of specific initiatives rather than in a broad complicated negotiation. and i would point in particular to a memorandum of understanding achieved between the u.s. epa and ndrc with the goal of strengthening capacity for greenhouse gas emission inventories. that of all the initiatives launch at the summit i think that is the one that probably speaks most directly to the issues in the global negotiations. i think the bottom line on the summit that while it may not have achieved any fundamental breakthroughs from the perspective of confidence building it was certainly a success. but the summit of course has already been overshadowed by what came next the two countries putting numbers on the table. something the u.s. has not done since the kyoto negotiations and something china has never done. in the case of the u.s. president obama has proposed a provisional target in the range of 17% below 2005 by 2020. in the case of china what we've heard is voluntary goal to reduce carbon intensity 40-45% in the same timeframe. each is saying that the other's officer not enough -- offer is not enough. many others have expressed disappointment in both but i think the fact the two largest emiters now have numbers on the table is a sign of greater confidence on both sides and is a major step forward and i think it should give us all greater confidence because a global agreement frankly is only possible with these two participating numbers on the table is a critical step in that direction. but ultimately i think the real test is what we can achieve multilaterally. ultimately what we need are binding commitments from all the major economies and i think the question for copenhagen is how far it can move us toward that objective. i would foresee the outcome in copenhagen in two body mentions. broad dimensions the first being a set of political commitments. these are individual commitments from the major countries on the types of met gags actions i -- mitigation actions they intend to undertake and these are also financial commitments from the developed countries to provide some prompt start supports some upfront support to developing countries both on climate mitigation and on climate adaptions. i want to be careful to characterize these as political commitments. the second major dimension of what i hope to see in copenhagen would be a start on the architecture of a future treaty because we are, what we are seeing now is basically a two step process. we are seeing a political agreement in copenhagen that hopefully sets the stage for a legal agreement to achieve, to be achieved next year and if we're going to get to that second step that legal agreement, it is important that parties in copenhagen make some real progress on beginning to lay down the architecture. how our commitment is going to be defined in this treaty. what is the longer term fien national architecture -- financial architecture to provide sustained reliable support to developing countries and importantly how are country's commitmentsing going to be verified that is the elm most critical to instilling and maintaining confidence among parties and in the agreement itself. the question is how confident can a country be that others will do and are doing what it is they've promised. now, the bollly action plan which was adapted by governments in 2000 seven and framed the current negotiations contained an important phrase. measurable reportable and verifiable. this was a new construct introduced into the climate negotiations and parties agreed at that point their mitigation actions are to be verifiable. that i think holds the potential to provide the kind of confidence we need. but as we get closer to copenhagen we see that many parties are to one degree or another retreating from the concept of verification. china last week reiterated its view that verification should apply only to actions that are supported by the international community. not to actions that a country like china takes on its own. and of course in the case of china most of the actions that we would expect to see would be taken on its own. not supported by the international community. the united states for its part doesn't use the word verification in its proposal on mvv. mrv being the lingo we've developed for measurable reportable and verifiable. the u.s. has tabled an mrv proposal that manages to avoid using the word verification. the proposal has a number of very important features. it would require annual greenhouse gas inventories from all the major and bidding countries. it would require that they submit regular reports on their implementation of the action that they've agreed to. it would require both the inventories and implementation reports be subject to expert review at the international level. all of these are important steps towards greater transparency. but the u.s. proposal only goes so far as requiring a peer review process. at the end of this review process in an open plen ri of all parties the party concerned makes a presentation on what it is doing. how it is implementing its actions and other parties have the kmunl to comment and ask -- to comment and ask questions on. that again, a step towards transparency but one could easily see this evolving into a very polite ritual in which countries agree not to be too harsh with one another and i think at best what you get is an inconclusive debate with the party claiming it is in full compliance and other parties disagreeing this effectively leaves the question of compliance entirely to comostic -- domestic compliance regimes and my sense is many in congress would be quite confidence -- confident of domestic compliance regimes here in the united states but perhaps not as confident of domestic compliance regimes in other countries including china. what you wind up is perceived asymmetry that i don't think goes far enough to provide the kind of confidence need. from our perspective an agreement would need to establish some means to independently determine if a country is complying with its commitments this could be done with implementation committee appointed by the parties to look at the reports from the expert review panels and any submission from parties and rend ear judgment if s a country complying with its commitments. we would not suggest this be a punitive approach. one involving personalities necessarily. i think that's something that many countries including china and quite possibly the united states would not accept. rather we suggest what is determined a -- termed a facilitative approach a compliance america nis up that is geared toward helping to identify and overcome obstacles to implementation so the countries not in compliance can be brought back into compliance. there's a well established school of thought in international law that naming and shaming may well be the most powerful incentive for come plinls. -- compliance. that the potential the potential threat of international sen chur and the reputational costs that that would entail is the most powerful force availability to the interational community to encourage parties to fulfill their commitments. put for effective shaming you need effective naming which is why we think that you do need some mechanism in an agreement to actually reach that clear determination of compliance or noncompliance. so in sum let me just say we are seeing some very, very encouraging signs of progress even if the numbers put forward by the u.s. and china fall short of what many had hoped or expected they are in fact major steps forward and they open the way toward building an effective multilateral climate regime. i think we should be watching in copenhagen to see just how far we get toward building a solid architecture so that copenhagen isn't simply a plunging conference but that it in fact moves us closer to a full agreement that gives parties real confidence by providing clarity on commitments and on compliance. thank you. [applause] >>. >> good morning. thank you to the brookings institute for inviting me to speak today. we're coming off an exciting few weeks of u.s.-china negotiations and discussions on climate change. and i want to spend my time here today covering a little more detail of what's happened in the last couple of weeks. the significance of the partnerships and commitments that have been announced. and what we can look for from the u.s. and china in the copenhagen negotiations and afterwards. one of the key achievements of president obama's asia trip was that it advanced the discussions on climate and collaboration and clean energy with china and it laid the foundation for future concrete and meaningful cooperation that hopefully will build trust between the countries and accelerate the development of clean energy deployment. the key principal here is engagement and partnership. no country can address the challenge of climate change alone and it's especially necessary for the major emitting countries particularly the u.s. and china. the world's two largest e milters to find ways to cooperate. on the policy and technology developments that are required to shift to a lar car -- a low carbon economy. reducing emissions from fossil fuels will require the development and deployment of clean energy technologies on a very large scale and the u.s. and china both have strengths complementary strengths in innovation, design and manufacturing that will be vital to building the new energy economy. you heard that in china presidents obama and who announced a package of clean energy initiatives in the key areas that have vital to developing the techno look -- technological solutions for reducings emission zwhas're mutually beneficial for both countries and can speed the transmission to a clean energy economy. i'd just like to highlight in a little more detail some of these initiatives and comment on their substance the first is the energy efficiency action plan which we believe is key to achieving the levels of carbon intensity reduction and absolute carbon emissions the two countries have recently pledged and they have pledged to work together only on -- on some of the areas of greatest phone, reduction through energy efficiency. developing building efficiency codes and building energy rating and labeling systems. benchmarking industry industrial energy efficiency. harmonizeing the test procedures and the performance metrics for energy efficiency, energy efficient consumer products. exchanging best practices and demonstrating. these design and energy practices. there will also be an annual u.s.-china energy efficiency forum and mayor's sustainable city program where local officials can visit each other's cities to share experiences and best practices. believe in many, many analyses have shown that energy efficiency which means getting more work done from the same amount of energy is key. a vital part of mitigating emissions and it's the cheapest, cleanest, fastest way to reduce any country's emissions while saving money. from the u.s. side over the past several decades, california has become a leader in energy efficiency and has, its experience has shown every dollar invested in energy efficiency leads to $3 in energy savings. but still there's enormous untapped potential for energy efficiency in both countries. these energy efficiency measures alone in china are capable of reducing china's carbon emissions by 728 million tons by 2020. more than any of the other abaitment sources combined yet investment in energy efficiency in china is only 5% of the investment that it's making in supply side energy resources. so the high energy consuming sectors account for over 70% of china's industrial energy use but they only contribute 20% to the val added. -- value added so therefore these agreements this energy efficient action plan we feel is going to be a vital step in moving forward increasing investments in energy efficiencies and reductions in both countries. second the two countries agreed to renewable energy partnership. they're going to develop and implement policies to adopt, advance renewable energy deemployment in both countries through renewable energy road mapping. regional deployment solutions. advanced r&d. and public private engagement. the u.s. and china were the two countries in the world who invested the most in renewable energy last year and the world's leaders in the design, the manufacture and the installation in various technologies and renewable energy this cooperation is going to scale up that investment that r&d to the level necessary to take advantage of their competitive advantages in a way that benefits both countries. there will also be an advanced grid working group to bring together u.s. and china policy makers and regulators leaders in civil society to develop strategies for grid modernization. this is key to enrenewable energy to enter the grid in both countries. there's a u.s.-china electric vehicle initiative. this is a prar -- particular interest to the leaders in both the departments of energy and the ministry of science and technology. this is going to accelerate electric vehicle development through joint product and testing standards. development of a road map to identify the r&d needs. barriers to widespread use of electric vehicles which still exist in both countries. this is important because china and the u.s. of the world largest consumers and manufacturers of vehicles. electric vehicles are a key way for both countries reduce their alliance on oil. china's projected to increase the number of cars by 10 times from its current level by 2025. while the u.s. transports sector is responsible for a third of all co2 emigs. -- emissions so this could to the be more important. and finally the u.s. and china agreed to cooperate on 21st century coal initiative which includes several measures designed to further the rapid commercialization of car can chur and sequestration and to develop cooperation on the gas initiative. and finally it was mentioned earlier we believe it is key that both the u.s. and china. the epa and the n d rc. china's most powerful government agency agreed to cooperate on development of greenhouse gas inventories this is the first time that epa has partnered with the ndrc which is responsible for all climate change activities and it is going to help develop cooperation on the key issue of monitoring reporting and verification. so while china has not agreed to allow international verification of its emissions this kind of cooperation gets us a step closer to that goal. china has already developed an inventory of its greenhouse gas emissions back in 2004 four. it's developing its second one right now and it's made it clear that it is going to include its carbon intensity target as part of its climate policy. part of its medium to long-term social and economic development plans and they're going to probably allocate this carbon intensity target down to the pro vennial and local level. so again active engagement between the u.s. and china here on the details of its greenhouse gas inventory design. it is going key to enhanceing the confidence between both countries. so what are the expectations that we see for both china and the u.s. as they go to copenhagen? you've heard the announcements everyone's heard the targets that both countries have recently adopted but i think it is important to note that china's new carbon intensity announcement is significant not only because of the actual number of the target but because of the national monitoring framework that will acompany it at domestic level. china has already announced that it will establish a national a greenhouse gas database management system and we expect this to follow in essence the framework that it's already developed over the last five year plan for monitoring, reporting and verifying its progress in meeting its energy intensity target. this includes things like in september 2008 the establishment of a national bureau of energy statistic. a department of energy statistics. within the national bureau of statistics. which is creating a nationwide system for monitoring and verifying its energy statistics and determining compliance with the very important target and that is not just at the national level but the local governments have also improved their institutional arrangements for monitoring and verifying their energy intensity compliance and their staffing to do so. and on the carbon intensity target china has already required every province to develop its own climate change action plan and to set up a climate change leading group led by the governor of each province or the mayor of provennial level cities such as beijing shanghai. this is going to be key in determining compliance with these targets and enabling them to take place you need leadership at both the national level and the local government level. china just yesterday announced, issued a progress report on how well it has been meeting its commitments and its climate change action plan to date. and its 100 pages, it is comprehensive and it's clear to me from reading this progress report that chai -- china's climate change efforts have been going on for some sometime and have been quite comprehensive in everything from forest station to energy efficiency and renewables. so neither country is going to be entirely satisfied with the commitments made by the other but both should realize and i think our earlier speakers agreed that they represent a significant commitment given the particular situation in each country. china would like to see the u.s. and other developed countries commit to a reduction of 40% from -- by 2020 from 1990 levels. the u.s. commitment of 17% in the range of 17% from 2005 levels is equivalent to only a 4% reduction from 1990 levels. but it does represent or plans in the waxman markie bill to accelerate as the years go by on u.s. side like to see ci that set a slightly higher target for reducing carbon intensity so china's emissions can bebin to slow and peak as preferably as possible by 2025. but we need to remember a rapidy growing economy and so as it constructs the infrastructure and buildings to house its increasingly ur -- urban population by its very nature going to increase its carbon emissions