we all need to safety. we be safe and strong against , anda, china, north korea iran. you think we should give away all of our secrets, i feel sorry for your students read you are absolutely wrong. host: let us give him a chance to respond. guest: i said quite the opposite, there are secrets that need to be protected but we have to strike a balance and find out what information out there is in the public interest that doesn't need to get out to the public. i am glad you mentioned that, i did not want to give that impression. i, as a journalist, have been in times imposition of an information -- of information. there was a lot of information we did this close of an earlier event because we thought it would undermine sources and methods and damage the government possibility to fight terrorism. i am a big believer in spiking a balance. striking a balance. i think there is an overclassification of information. the obama administration has created a task force to try to go through each government agency and eliminate excessive secrecy. been successful in making 42% of the information less secret than it was before. they consider that an accomplishment. host: the name of the book is "inside the pursuit and takedown -- 9/11eal nine/11 mastermind." caller: why couldn't our government send in an airplane for higher in the country to go in there and get mr. snowden with spanish-speaking pilots? host: unfortunately we are out of time. thank you for leaving our viewers. i need to go to a senate gallery where it bipartisan group of senators are about to announce coalitionort behind a of 34 senators to make changes to the military chain of command on the sexual assault issues. >> i want to thank all of the senators who have fought on this issue so hard. i want to thank senator ochsner for her work on this issue and been a tireless partner on this effort. on behalf of our brave members of the services. i also want to thank senator collins were standing firmly us. us via -- firmly with i want to same -- want to thank senator fox or for her work in being an amazing advocate and unbelievable champion. i also want to thank senator blumenthal, kay hagan, and lee some housekeeping -- and lisa. today i want to thank rand paul for being here, for deciding to take a leadership role on important issues, to really take this crisis head-on. i also want to thank senator ted cruz for his very steadfast votes in the armed services committee and helping asleep this new amendment going forward. i think both of them -- i think both of them are going to add deeply to this extraordinary issue that needs radical leadership and bold action. i also want to thank senator grassley again for being the lead sponsor amongst the republicans with senator collins added that early leadership made all the difference in the world. collins. that early leadership made all the difference in the world. way we wanted and sexual assault in the military is create an independent, accountable military justice system that that is not partisan or ideological. it can create the kind of accountability and trance parents he that our men and women who serve in the military need, so that they can receive justice. our carefully crafted commonsense proposal was written in direct response to the what , whatctims told us happened to them, the fact they did not trust the chain of command, that they were becoming it did against, that they did not believe just as was possible. this is not a democratic idea, it is not a republican idea, it is a good year that meets the needs of the victims, creates transparency, accountability, and creates the needed objectivity that the deserves. deserves.e issue we will now turn it over to senator grassley. >> thank you. be a part of this effort to build support for military justice improvement act. the status quo is not working. we need to shake it up. thee do not crack down on culture that this sexual assault represents, if we do not crack down on the individuals who use sexual violence as a means of personal power and personal gain , then we will creatively great the to show problems -- then we will create institutional problems. the bipartisan legislation introduced by our path -- introduced by our colleague will give members of the armed services more confidence confidence in the military system of justice. to reform will do justice the united states military code of honor. it is based on integrity and infidelity to the rule of law. a law-assault is enforcement issue. when young adults make the commitment to serve their country in uniform and put themselves in harms way to protect and defend america's freedoms they deserve to know that their rights will be protected, including access to justice and not have that access to justice intervened i somebody -- by somebody who may short- and see that justice is not delivered. >> thank you. thank you so much, senator. >> i am proud to be a part of this bipartisan coalition for change area and -- for change. change has been coming for 21 years. i am here to say i have been in the senate for that long of a time and so has senator grassley. everyw and we see secretary of defense call for zero tolerance on sexual assault in the military and every time nothing happens. story thatell you a reflects why we have to do that. stacy robinson joined the marines at 19 for every right to reason. she wanted to put her life on the line for her country. out on a date by sergeant. he took her to a bar and drug her at the bar. he took her back to the barracks and he freaked her. rapednd herape -- and he her. he dropped her on the ground at 4 a.m. none of those facts are indisputably at -- are in dispute. i want to tell you what happened to stacy robinson and what happened to her perpetrator. sase -- stacy thompson. the perpetrator stayed in the chain of command. the chain of command suggested to the perpetrator he get his but out of the military in order to avoid any consequence whatsoever. forstacy was investigated drug use from that night. after 10 or more years she is coming out to talk about this story, which has scarred her forever. do we need change? yes. what happened in the armed , with somemmittee good small tweaks to the system, the main change that was supported in the committee did not happen. i am going to close just showing you a couple of charts. in no particular order. zero tolerance for sexual assault, statements by secretary hagel -- "it is not to say we do not have a zero tolerance policy, we do. , "wecretary leon panetta have absolutely no tolerance for any form of sexual assault." this really gets old. very quickly. secretary rumsfeld, "sexual assault will not be tolerated." william cohen. secretary william perry. this goes back to 1994. "we have zero tolerance." 1989.heney, it is enough with the words. it is enough with the empty promises. it is time for some real change area did -- real change. , i want you to remember that. 90% of sexual assault are not reported because they tell us that they will not reported because they do not want to see it in the chain of command. this is not something the senator pulled out of the air. look at our allies. 98, outside the chain of command. oscar elia, 2005, outside the chain of command. you knighted kingdom, 2006. tell you thatone this is some idea that is out of the mainstream. the status quo is out of the mainstream. i can be tod as stand with the coalition like this and just make a statement. to our colleagues that are looking at us and deciding, please put your faith in change. thank you. >> sensor rand paul? >> i try not to look at issues from a partisan view. i am sure i do sometimes. i look at problems as i tried to find solutions.i am concerned about justice. justice is very important to me, both for the accused and victim. i am concerned that victims of assault may be deterred from reporting their assault if they have to report it to their boss. i am also concerned about it imposing too many lawyers in the everyday life of the military and then getting in the way of the military mission. of ourt majority soldiers are honorable and upstanding individuals. we are talking about a small percentage but if they commit crimes they should be punished. inviting justice to the victims thomas to make sure there is due process for all -- to the victims, making sure there is due process for all. i think is is a great example of how people from both sides come together and are willing to work on a problem and look honestly at what the problem is. when i heard with this is -- when i heard about this my first impression was a positive one. as i looked at the bill i asked the senators to talk about it with me. i thought there were one or two things that were included in this that we should not exclude from it for you -- from it. there were a couple of things that we removed that were not sexual assault, murder, these were disobeying orders and other things. we said we will still leave that in the line of command. we are going to keep serious crimes, murder, rape, out of here. motive wasought the good for the bill but i think the bill is even stronger. i see no reason why conservatives should not support this. the only one thing i see standing in the way -- the only thing i see standing in the way is the status quo. if it appears as if there is some interesting victims reporting the crime, white don't we fix it? -- why don't we fix it? >> thank you. sexual assault is a grave violation of the trust and to keep that we owe our servicemen and servicewomen. when our sons and daughters sign up to its -- sign up to serve this nation they willingly anticipate hostile fire from enemy forces. they do not sign up to potentially be subject to sexual assault. the supreme court rightly -- ascribedte as great as short short of murder the ultimate violation of self. as, short ofrape murder, the ultimate violation of self. i am convinced our commanders in the military want to sue this problem go away. they understand that they have heard the message and they are working to make it go away. unfortunately this problem has persisted, despite good-faith repeated efforts. process byay the which this amendment has gone forward really underscores the way which the delivery -- underscores the way the deliberate rosses of the senate is supposed to work. i think there are good and reasonable arguments by the chairman of the committee and others about per serving the chain of command, keeping responsibility in the chain of command. entering the committee hearing on decided, i was persuaded by senator jill brand's exceptionally passionate advocacy. there are two points that --ator jill a brand made senator gil brandt made. it is an unwillingness and inability to report these crimes. the victims of sexual assault, for what ever reason have consistently remained reluctant and afraid to come forward and there can be no deterrence if we do not have reporting of crimes. despite all of the efforts that have been made in the past that senator gillibrand made a persuasive case, by having to go to your boss and raise the the crime, of sexual assault with your boss has proven, in fact, to be detouring victims from reporting their crimes. secondly -- deterring victims from reporting their crimes. havedly, our allies implemented policies similar to this and the results in practice -- been that reportedrapes practice was that reported rapes have been increased. we hope to improve reporting and improved deterrence. i am proud to stand with senator gillibrand. i appreciate their leadership. i am proud to see the senate working to fix this problem, to make sure that we protect every young man and woman who signs up to defend our nation and our liberties and to make sure that they have a save, secure environment were they can trust their fellow soldiers and the secure -- and be secure from any threat of sexual assault. >> you definitely see the political spectrum of greece -- political spectrum of support. i am proud to stand here not just with the colleagues here but there are others who are very much concerned and wanted to take some specific action related to drama in the military. this has been going on for far too long. there is no magic bullet. one of these answers is to remove the chain of command from making the decision to investigate and go forward. on the other hand, there are plenty of other things that we need to do because we are dealing with the culture and a military that has allowed this to occur for decades and decades are you the commander has a responsibility to change that culture. there are educational opportunities, there are all of these other things that can happen. the navy is doing some of this, starting in a small way where they address the incidents and use of alcohol, which is very much a part of these kinds of crimes. there are so many ways that we can address this. this is one very specific way that we believe will result in more of these crimes being reported. we think that is one of the first things that we have to i thank all of my colleagues and kristin's leadership. >> i am very grateful for the leadership of everyone here and for the several other cosponsors we have 30 sponsors. we all know the military is home to the best and brightest in the world. is such a small number of criminals in our military that are undermining good order and discipline. those are the individuals we have to find. these cases must be prosecuted and they must be held accountable for you when we look at -- held accountable. when we look at this issue we have to look through the eyes of the victim. that is what matters most. for 62% who reported the crimes of the 3300 that were reported last year, 62% said they were retaliated against because they reported the crime. of the 23,000 that did not report, they did not think anything would be done. said it reports it because it fears retaliation. that is why this kind of reform is so important, to be able to have that objective military prosecutor become the decision- maker. there's less hope of of accountability and a greater belief that justice can be done. ist is what this change trying to accomplish. i am going to read the story of one survivor to leave you with. you have to imagine these crimes happening to your son or daughter. of the victims are male in these cases. one mother said, she did not want to diebold her daughter's name, "i supported my daughter going into the army. next year she may be a casualty victim by some foreign enemy. be aer imagined she would victim on u.s. soil from the very army she partnered with to protect the united states and our right. she was sexually assaulted in the end of 2012, which is a case that instills pending. batch -- that is still pending. she has become dependent on drugs and now she is being pushed out of the army. he has a re-victimized her emotionally by exposing her to unsafe conditions, verbal abuse, and total disregard for her as a soldier and a woman. that is what we are here to do. i want to thank all of my supporters behind me but also all of those that are not here. we have to answer the call of these victims. >> senator? senator leventhal said that the proposal to move these decisions up the first chain of command will take care of the problem of retaliation. >> i disagree with that assessment. i believe he is putting forward his best effort on what he thinks will make a difference. the reason i think that change does not do enough is because of this, right now the commanders are putting forward cases that are reported and their attorneys are suggesting to be prosecuted. even if the prosecutors is insured. you are starting with 26,000 at only 300 are going to trial. the commander and his lawyer always disagreed one percent of the time. that is one percent of 300 cases . it is a handful. our problem is not the disagreement between a commander and a lawyer. our problem is what general amos says. they do not trust the chain of command. if they do not trust the chain of command. -- trust the chain of command they will report these cases. if they witnessed people being shocked out of the military because they reported these crimes, they will not trust the system that the chain of command has put into place. our only hope is by making the system more objective that it is not object if -- it is not dependent on that judgment, that decision by the commander, they will have hope and confidence. training is essential because these prosecutors are trained for sexual assault and military. that sexual assault and rape in the military. they know how the perpetrators are, they know how the pressure is put on the victim. they know the law and whether they can win these cases. i want that trained military prosecutor. the lenders will have the determination that we saw in the last hearing. every commander is going to understand that the rate is a serious and violent crime of domination, not even related to dating or romance. you need somebody who is trained and knowledgeable to make the assessment about whether these cases should go to trial. the greatest success of objectivity -- >> they have done some good things which we support you in -- which we have supported keeping in the bill. sometimes people think what we do is take the whole thing outside of the military. ere are some people who want that but we do not go that route at all. we keep them in the military but with people who know exactly what they are doing. prosecutors and our objective. it is an important point to make. >> i would like to invite senator blumenthal. let -- let me thank senator jill brand -- senator hillebrand --senator gillibrand. measures will greatly enhance the credibility and trust in the system, which is critical to reporting. none is more important than the forshe is championing separating the convening authority from the command chain. i am very encouraged by the support that we are amassing. i see it in the response among my colleagues from both sides of the aisle. i think we are making inroads all across the senate, including on the armed services committee .here i served and she does i think that success is within sight. whatever the threshold of votes that are required. i think that the majority is within our grasp. >> thank you for your leadership. >> you can give us a sense of how [indiscernible] >> what is lost some weight times appear is that there is no bipartisanship. itaw the news reports about and my first impressions were to be favorably inclined to it and that i need to read a little bit more about it. there were a few things i want to modify to it better and she was receptive to that. it was not to like it big to get the bill even better. changes they have made should bring more conservatives on board with this. -- do not not think see things in partisan purpose. it sounds a clear all trying to get a more just situation. all trying to get to a more just situation. >> as i described, i was persuaded by the arguments presented at the armed services hearing. my vote supporting this amendment, afterwards i visited with a reporter who was genuinely astonished. he thought every vote was decided before hand and arguments can persuade. all of us, republicans and democrats, and also the commanders in the military, want to solve this problem. the question is what is the right solution that will fix it, that will prevent sexual assault, but also maintain good order and discipline and the integrity of the chain of command. the suggestions ran to me to meet the bill stronger. madee suggestions rand made the bill stronger. we need to make sure we can stand by and protect every service man and woman. >> senator paul mentioned some changes made to the bill. unique military crimes were the exception. have there been changes made to extend the markup? wo senator rand noticed to .dditional crimes i think his changes were smart. specifically, direct order. if you are given a direct order by a commander, you are not going to call a lawyer to investigate whether you respond. that is not the appropriate response. he was very smart to recognize that and say that should be included in the specific crimes that i believe and we all believe could be built this way. there is no parallel in the civilian system. going awol is the clear example. the military commander will be in charge. he knows what is going on, what is the appropriate response, to either keep you in the military or respond appropriately. he found two additional crimes could i agree with be better determined by a military manager. the report shows -- >> the support show some serious problems. your bill looks at the prosecution. it seems to have bigger problems than [indiscernible] this challenge is pervasive. it is a cultural issue that needs to be looked at at every step of the way. but we were able to do, -- what we were able to do, he had a that wouldills strengthen the process and help victims. one bill that senator patty murray and kelly i ought worry beads bonkers on were victim advocates. we included that in the markup and unanimously supported it. there are a number of reports i urge you to look at. we can summarize them for you. there are a dozen really strong reforms that will help victims and help this process better, also accountability in terms of what kind of punishment. report, wedoes not still have a record of the crime being committed. i think that is -- >> i think that is an important question and speaks to the need of a trained prosecutor. i was a federal prosecutor, i served as state attorney general. ultimately the prosecutor can insist on standards and excellence in investigations. he is ultimately in charge. he is the one who has to present the case to a jury and make the case. integral to the entire justice system. i may just go back to the question of how can people who normally disagree count together on this issue? never been a bipartisan issue under any administration at any time. justice, and particularly criminal justice, it should not ,e about republican or democrat and certainly not about ideological differences on other issues. i do not think there is anything surprising about thoughtful people coming together, who may disagree on other issues. >> doma. -- thank you. >> the senate is in session. harry reid says they may have a way to move forward from president obama's nominees. senator reid plans to change the rules on filibusters in an agreement -- rules on filibusters. politico writing the senate democrats are close to having the 60 votes needed to advance the long stalled nomination for the consumer financial protection bureau. giving senators more time to reach a deal to avert the nuclear option. the story goes on to say that the senate still faces a potentially historic vote later on tuesday, on changing the filibuster rules and other executive branch nominations for you high-level talks are ongoing . we will bring you the latest on that and you can watch the senate live on c-span [applause] -- on c-span2. award snowden submitted request for temporary asylum in russia, claiming he faces persecution from the u.s. government and faces torture or death. the secret site has been helping him confirmed the application request and services required by the law to consider the application within three months. energyive to the senate and natural resources committee, talking about the increasing domestic domestic oil production and its impact on gasoline prices area -- on gasoline prices. these to, we purchase manufacture refined process -- refined products such as gasoline and many others. refining is a global business and refined products are functional and easily transported. because the marketplace is global, demented refiners compete against international refiners,, as well as each other. andite the drop in demand the addition of global capacity u.s. -- been added, that allows them to produce excess gasoline and diesel fuel that can then be exported. this is a benefit to the united states economy, the american worker, and the consumer. with supply and demand adjusting until markets clear -- our cost position asks as a flaw -- acts as a flaw. prices are very visible in the commodity exchanges around the world, where anyone can buy and sell benchmark crude oil and natural gas or refined products. a position ofn being price takers rather than --ce makers did refineries than price makers. refineries do not set retail prices. companies set their own price. the price of crude oil represents by far the largest component of gasoline prices. retail gasoline prices are currently composed of 16%. eight percent distribution and marketing. 361 per gallon -- -- 3.61 per gallon, even without any refining benefit we would have crude oil over three dollars per gallon. we are in a world of $100 crude oil. we do not expect a significant priceshat is keeping from rising higher is the canadian production and some uncertainty about economic growth around the world. the united states remains a .rude oil importer crude prices clearly reflect movements in the global marketplace and prices we pay must behind enough to attract those barrels to our market. american refineries are essential to our economy. the industry employees over 800,000 people and many more in other jobs. think about all of the people that our industry and forces and touches. there are other factors factoring in retail prices and despite the high cost of labor and right conditions in the united states, increased natural gas production has resulted in a much lower price and is allowing our industry to be competitive. especially in the atlantic basin. a very careful and balanced approach to export policy is important for refineries. is importantve it to have crude oil come to the united states where the jobs are. that is why we support the keystone pipeline. today, the most important thing that is affecting us is the renewable fuel standard. bolero is the third-largest corn ethanol producer but the fuel refuel -- the fuel standard is out of control. i am told they are over one dollar -- over $1.30 per gallon. this cost is just skyrocketing. it was ok when the first law was passed in 2005. one the new law or the revised , the program was not revised. we understand this will cause $750 million this year. with the numbers we are talking about now, it will be much higher. support and believe that ethanol will be part of the fuel mix in this country. there is no cellulose to speak of. any other advanced ethanol has to be imported. this is not in the interest of our country. thank you very much for allowing me to speak and we are very proud to be part of this panel. >> thank you very much. mr. gilligan, good morning. >> senators. i thank you for the invitation to be here today. i served as president of the petroleum marketers association of america. petroleumnt 8000 marketing companies nationwide. the majority of which are small businesses as defined by sba. his companies have one thing in common, they all bring to market liquid fuels, such as gasoline, diesel, heating oil, biodiesel, and kerosene. our companies are engaged in that transport stores on both the wholesale and retail level. not only are these companies primary suppliers of fuel, they also own and operate over 30,000 retail facilities. iny are also specialist serving farmers, machinists, and airports with what they need. the companies do not benefit from high gasoline or he so operate inause they such a transparently competitive environment, prices must be absorbed by retailers. competitivecape retailers offer the lowest price for gasoline. prices are unusually high, customers often reduce their store purchases and some retailers struggled with credit line limits. both companies are rack buyers. in the industry, wholesale autos is loaded on terminal backs, approximately 1200 terminals in the united states. companies permitted with low pot must have good credit standing and a plethora of state, local, and federal licenses to permit. i spoke to most of my testimony on wholesale rack rices and how they impact petroleum marketers. when examining data over the past 15 years it is clear that oil price benchmarks are the primary drivers of diesel prices. because of their importance, pma remains a hardened supporter to improve transparency in future markets. it is sobering to note that for every dollar increase in crude al prices, that translates to $2 billion daily increase for gas and diesel prices on u.s. motorists. the data supports completion of the completion -- the completion of the keystone pipeline. it will diminish opec's are tell our to dictate crude prices in the and the conflict middle east will be thankful to crude oil supplies readily available from canada. the second driver is environmental laws and regulations. with over 30 fuel recipes, bottlenecks can increase prices at the pump on a regional basis. most of you are aware the escalating debate ongoing at congress about the renewable fuel standard. because gasoline demand has been week, refiners have fuel options to revise the mandate in 2014. i am not sure how it will affect prices. it has been much written and said about 815. it cannot help solve the problem in the short term. are sevene there hundred thousand gasoline dispensers in the united states and only 5000 has been approved for de-15. are also underground tanks and lines that have not been foroved for the -- approved e-15. was $30mate i saw billion. our companies have significant investments in ethanol blending and woodlot to offer de-15 -- would love to offer e-15. a few months ago a major bank on wall street print digg did that it will go to three dollars next year. that will increase gasoline prices over what they would normally be. we are urging the epa administrator to adjust the ethanol mandate as needed to ease potential economic harm. in 2007 2000 several -- several refineries were closed down for maintenance. the prices were so severe that senator dorgan offered an amendment to the 2007 energy bill to have a coordinator to improve communications and it is now six years later and congress has not appropriated funds for that position. ironically, just two month's ago the region was hit with a similar situation. but wrists and orth dakota and south dakota paid order he -- paid $.40 per gallon more. we hope you will support funding. lastly, i have to mention credit card fees. fees on gas station is not a person -- is not a cents per gallon charge. were using their credit card they were likely paying $.11 per gallon to visa. the federal gasoline tax is 18.4 cents. fisa gets $.11 per gallon for what? to make matters worse, issa charges interchange fees on taxes, so they get a cut on that area -- on that. thank you very much. >> let us go now to mr. -- >> thank you. as the nation's largest motoring drivers whoar from are increasingly frustrated and often look to aaa for explanation. for more than one dozen years aaa has provided an accurate and comprehensive resource that tracks national, state, and local gas prices. it educates the public on steps it could take to get more miles out of a gallon of gasoline. with unbiasedle perspective. unlike others who frequently comment on pricing, aaa has no involvement in the regulation, refinement, shipping, blending, or sale of gasoline. we seek to educate consumers on factors that result on price swings and urge policymakers to find solutions that will result in a more stable and more predictable price. aaa has called on the federal government policymakers and other industry stakeholders to work to make sure that gasoline prices and supplies are stable and less subject to large fluctuations. it is difficult for americans to predict, understand, and ultimately adjust to price changes that are regional, sudden, and dramatic, as has often been the case in recent years. there are a host of factors that could impact the prices at the pump. ,he range from a local variety global variety, factors ranging from the expected seasonal demand changes, shifts in the summer and winter blending requirements, and to the unexpected. hurricanes and other geopolitical tensions. the result of these myriad of factors is a new normal. the days of the national pump price below three dollars is likely a thing of the past and state and regional price spikes -- retail prices moved sharply in the span of days is all too common. the national average has not been below three dollars per gallon since 2010. since that date motorists in 16 different states have registered a one-week spike of at least $.25 and looking at for the 13, of national price of gallon gasoline was the highest it has ever began in the year. they have peaked in lower and -- peaked higher and lower than previous years. three2 the peak was dollars $.94. this year the peak came at three dollars 78 cents on february 28 and following that the national average declined to the recent low of $3.47 on july 7. wholesale gasoline prices have follow crude oil prices higher in recent weeks. the prices at the pump and majority of state are again on the rise. barring an unforeseen market development, it is likely to aim higher through the end of the summer driving season and into mid-september. the rise and fall of the national average during the first set -- the first months of 2013 was obscured by regional volatility, was to notably on the west coast and midcontinent. in both of these cases even if mitt -- even if the national private -- national average price of gasoline was following that was falling, a tightened -- onal supply while pump prices to drop sharply as production came back online, motorists are understandably frustrated. swingsramatic price underscore the volatility that has become all to familiar in recent years. there is no silver bullet solution to the high prices are more -- or market volatility. a national federal -- a federal energy policy combines the use of traditional and alternative fuels, the elimination of lengthy load blocks -- lengthy load -- lengthy roadblocks. remains committed to providing our members of the traveling public with accurate prices and fuel conservation tips. much of the tips have been given to the production side of the equation. there is a demand aspect as well. informing consumers must be a necessary element in any use yourand how you car is just as important as what vehicle you choose to use. thank you, mr. chairman, for the opportunity. i look forward to any questions you might have. >> thank you. distinct members of the committee, i am a managing director at citigroup, working in the equity research apartment. my responsibility includes research analysis of integrated oil, refining biplane industries in north america. i want to be here to discuss this important topic. the refining industry has restructured over the last 20 years. 70% of refining capacity is owned by the independent refiners, compared to 40% 15 years ago. industry has evolved to be one of the largest industrial manufacturing sectors in the united states, one simply tied to energy production two or three decades ago. it is described by a high degree of competition by both domestic and international companies. gasoline prices in the united states remain tied to the global markets, adjusting for the cost of transportation. there are a number of key trends that have been continuing to develop in the u.s. fuels and primary energy sectors in north america. after peaking in the middle of the last decade, gasoline demand appears to be in secular decline. he could see deck -- we could see gasoline demand produced by a thousand barrels per day. high sustained oil prices and high gasoline prices, compared to earlier in the last decade, is resulting in price elasticity. diesel, jet fuel, and heating oil shouldst -- should seek -- with heating oil demand being placed by cheap natural gas supply and natural gas beginning to compete with the support short haul trucks and long-haul trucking, we estimate 50% of all long-haul truck sales by 2025, assuming a price difference remains in place -- the scenario could result in a displacement of one one 8 million barrels per day in the united states. bothe supply front, natural gas production is growing in the lower 48. and canadian production could grow by 5 million perils per day through this decade. the growth in lower 48 production, which began in 2008, has resulted in significant price discounts on both canadian and united states food of between 20% and 40%. as more logistics capacity has been added, we see them moderating the differentials in -- the differentials. despite the delay in keystone xl pipeline, the industry is working around the issue. crude oil movements by railroad has increased exponentially in the last few years. pipeline bottlenecks in the gettingand south are new and expanded infrastructure. as more crude arrives in the gulf by pipeline and other coastal markets by rail, regulations such as the jones act increase the cost to live ports,ude to u.s. potentially increasing the price of gasoline, most notably on the eastern seaboard. the result of the increase by rail could he sold his safety incidents. rail has four times the accident rate as pipelines. demand continues to grow however gasoline demand continues to contract, pushing the mandate towards the blend wall. knows,committee currently there are winners and losers in the rim market. we estimate the liability to the industry could grow, pushing them prices up and affecting gasoline prices. dimly traded with relatively few participants, compared to other commodity markets. unless supply increases come a -- increases, we will see prices continue to rise into next year. the growth in hydrocarbon production is positive for the u.s. economy. the independent refining industry on the low end of the cost curve, resulting in a massive increase in exports. the crude oil and products market appears to be functioning normally and providing the right incentive, which we estimate will push the u.s. toward energy independence by the end of the decade. costs at friction to the market. the industry appears to be able to work around these issues. thank you for the opportunity to testify, i look forward to answering any questions you have. >> thank you very much. i want to thank all of our witnesses. we have had 10 senators come in and out on a hectic morning. we are going to go back and forth. i believe it is going to be possible to keep things going. let me start with a question of why the lower cost of new oil supplies is not being passed on to the consumer. you, usingtart with a chart from the energy and -- energy information administration. the cost of the oil that goes into it -- four the so, that is 62%. -- for diesel, that is 62%. the second chart shows that industry leaders -- shows what industry leaders called the crack spread. that is the difference in price between what the refiner pays for oil and the price to get for selling the gas and the diesel fuel it makes. this was done for the committee. this for consent to insert into the congressional research service analysis in the record without objection. that will be done. the refineries in the midwest and rockies, which have access to the lowest oil from north dakota and canada, have the $39 per barrel compared to $14 per barrel on the east coast or $25 on the west coast. those are the annual averages and -- annual averages. for some refiners the spread has been considerably higher in the $40 and $50 range, roughly one dollar per gallon. we are talking about a record meel refining margins, let repeat that, record level refining margins. all profit,re not certainly a lot seems to be. the flipside of this part of the story is the lower crude oil costs from these new sources of production are not being passed through to the consumer. to began, why are consumers not seeing the benefits of these lower crude oil prices when two thirds of the cost of a gallon of gas is the cost of the oil that is used to make it? , the purpose of that graphic at the gasoline pump is to try to provide some to anyative knowledge how thevia's data as to price of gasoline has to improve the cost of imports like crude oil and ethanol as well as refining and distribute and margins and state and local federal taxes. so we try to provide some breakdown for that. to go back to the basics of your question, virtually every group that i know that has ever studied product markets believes that prices are being set in the global markets. so the price of gasoline, in a sense, is a global price. it is not a local or regional price in the u.s. so what that means is that if there are lower crude prices in the midwest region of the u.s., that is going to be reflected in refining margins, as your chart illustrates. in pricedifference ability ofis some those refiners to begin to upgrade their facilities to do things like make better use of the crude oil that is being produced. one thing i do want to say is i think consumers are benefited from the growth and domestic oil production. 2 million barrels a day or so that we have seen and just the last few years has added to global supplies, increases in oil production from sources around the world, including the united states. to hold oil prices down. you talked about rice is having reached $147 a barrel back in 2008 -- you talked about prices reaching $147 a barrel. increased u.s. oil production, so international oil prices are lower and consumers are probably benefiting. if they were $21 lower, that would be $.50 a gallon of gasoline lower prices that consumers are benefiting. >> my time is about up, mr. sieminski. having been on this committee we have always, been told that the price of gas is related to the price of oil. my sense is, based on this kind of evidence that we are seeing, that may no longer be necessarily the case. >> well, it is related to the international price of oil. and we are going to be asking about that in the context -- my time is up, but keystone, as well. i am just troubled with the basic proposition that really questions what we have been told around here. and that is, when you have new oil supplies, the consumer at the gas pump is supposed to benefit, and we're not seeing that in too many instances. . we will explore that. ?enator murkowski >> in my opening statement, i alluded to the belief that increased american oil production or domestic production here, which is up 30% over the past five years, has reduced or at least re-strained .rices at the pump we can speculate as to what it might be, but it has been my contention that we have at least been able to hold it down. clearlyinski, you have indicated that you would agree with that statement. i would ask the rest of you if you agree with where i am coming from on it -- do any of you think supply is irrelevant to the market prices that we are seeing? any disagreement there? a, i will take that as descendent -- dissent. let me ask about the issue of what we are seeing, which is prices. i think a lot of us are concerned about what we are seeing here, i have written several letters to the epa asking for some kind of plan of action, or at least a background on what has prompted this rise. , you mentioned that millionay see a $750 increase this year alone due to the spike in rem. rfs is brokenhe and out of control, mr. klesse. mr. khan, you had mentioned that $.35 a gallon at could cut refiners margins by 5% to 15% this year. explain to the committee, if you will, where we are going with refinersot only to the but ultimately then to the if we are not able to get this under control? >> the obligated party under the refiners and importers. gasoline demand has been following. now it is flat but down a lot from the 2007 law. because we're the obligated party, we can only blend up to e10. that is accepted in the .arketplace it is a well-accepted product. however, when the law was passed, the amount of ethanol is going up. it is increasing every year. and thewe are at e10 amount of gasoline in the marketplace, you are not able to blend to the mandated volume. now we are and obligated party as importers. are not thelenders obligated party. it is a situation where we are a large merchant spot market seller of gasoline. because we do that, we then have , because we have a renewable volume obligation. lenders generate that. the level of the playing field to be move for blenders the obligated party for a level field. but it still would not solve this difference between the mandated volume and the blend. going to e15 does not make any sense for the consumer. car warranties do not approve it. you would be asking other questions to sell a product that is not approved. ?> mr. khan >> thank you. there are two deputies as of legislation causing the situation to happen. the first mandate initially envisioned higher gasoline demand for the foreseeable future, so we were able to increase the amount of renewable fuels into the gasoline pool. the café standards envisioned the decline of that demand, so you have two opposing pieces of legislation that are causing what we call a short position to take place in that market. as we get into next year and as we passed the blend wall, we see an increasing short position and liability that refiners end up with. that can be passed along to the retail buyer of gasoline as refiners pass on the cost in producing gasoline into the market. have you updated your numbers to reflect the impacts that we could see if the rin remains at the current price, above one dollar? >> we stated that it could impact the earnings of the refiners that we cover by 5% to 15%. up, those moving costs could move much higher. >> thank you. senator murkowski. i believe we have times to get into questions from our next senator, senator baldwin. we will try to keep this going. >> thank you, mr. chairman, i want to start by thanking you, mr. chairman, and ranking member murkowski, for such a warm welcome to the committee. i am delighted that my appointment to this committee has coincided with two hearings, last week and this week, that are so incredibly relevant to my home state of wisconsin. ,n the topic of today's hearing it is particularly timely for people that i represent and wisconsin. residents in milwaukee saw gas over $.60 perof gallon during the month of june. and i want to go into a little bit more depth on a topic that a number of you referenced in your of refinerymony outages. the energy information administration has attributed the recent price hikes in the midwest to refinery outages. the federal trade commission concluded that the planned shutdown of a refinery as two cents to seven cents per gallon to the price of gasoline, and in the event that it is an unplanned outage of a refinery, it can be twice that amount. we also know that recent planned outages put an unnecessary squeeze on prices when multiple refineries go off-line at the same time. this has happened in the midwest. meanwhile, the impact on consumers who were planning their budgets, their tight budgets am a month to month planning on their travel needs, and businesses that are trying to look at their expenses, this is extremely distractive for them. we have heard testimony of these temporary outages, that they were a result of a lack of information, a lack of .ransparency and i think we should be able to do better. so i would like you to perhaps touch on it in greater depth than you did in your opening testimony. what information-gathering and planning can be done in a transparent way to make sure that consumers are not bearing the cost of these kind of refinery outages, the planned ones that we saw earlier this year? act, policy in the 2007 but the information collection hasn't stopped in recent years. there are issues of funding -- but the information collection has stopped in recent years. there are issues of funding. let's start with you, mr. sieminski. >> first of all, you're absolutely right. back to senator wyden's concerns foundgasoline prices, eia recently in a study that we published on an energy page that gasoline prices for consumers are reflecting the highest percentage of their budget that they have all the way back to , so it is a very high price that consumers are paying and it is definitely impacting their budgets. on that federal trade commission study, with the fcc found was that the length of time that planned outages attend -- tend to occur in spring or fall, the length of time since the last plant turnaround is generally associated with more unplanned outages. so if you try to delay repairs to meet exit in shoes that come up, it could make things worse. -- so if you try to delay repairs to meet these things that come up, it can make things worse. it is worse when utilization rates are high. law to reflecty information on planned refinery outages, so we had a report that we did twice a year just ahead of the turnaround seasons in february and in the fall. what we found was that that report, although it helped provide some information, really was not sufficient to enable consumers or anybody else to manage the pricing situation. we had to stop doing that because of the huge budget cut the eia suffered in 2011. priorities.ke and if we can get that going again, i think it would help us understand the markets better. i am not sure it would completely address the situation of dealing with the volatility that is inherent in markets like these. need have three of us who to vote. i am going to work with the senator from wisconsin peer g is making a very logical point about transparency and information-sharing. if we can keep this going. i thank my colleagues. next. >> thank you very much. a number of questions, and i will submit this for the record. you cited problems associated with renewable fuel standards. senator murkowski both mentioned the higher rin prices related to the fact that the renewable fuel standards requires using elastic ethanol that is not an large-scale commercial production. the agency was levying fines on refiners for failing to blend a product that was not available. can you spend a little bit of arrived at valero the position that congress should now repealed the renewable fuel standards? that, we should repeal and start over. the situation has completely changed, as was highlighted on the panel. gasoline demand, energy security has entirely changed. is at a snowquester bill it he of this because of valero having a number of .ifferent components >> yes, and we believe ethanol will continue to be part of it. it is just this continuing for these things that are nonexistent. if you think about it, there are implications -- if we went to e15, it will be corn-based german, which works for our it will affect food prices -- it will be corn- based. >> thank you. >> ok, i guess we are adjourned. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2013] testimony will continue here before the senate energy and natural resources committee. the senate majority leader says there is an agreement that will impassethe chambers over stalled obama administration nominations. democrats have been threatening to change senate rules to prevent filibustering of nominations. the senate is voting on whether to advance richard cordray aust nomination to lead the consumer financial protection bureau. the deal being negotiated would allow richard cordray's nomination and any others to go through and get a confirmation vote. in exchange, democrats will agree to drop two national labor relations board nominations and president obama will nominate two new nominees for those positions. here is an exchange between senate majority leader harry reid and senator john mccain. president, after a required amount of debate, we're going to move forward with the richard cordray nomination which has been held up for some period of time. i would like to thank everybody on both sides of the aisle who have been a part of this debate and discussion. i would like to thank all of my colleagues last night who made the long, which is our custom, but the discussion of many of the issues that separate us, particularly this impending possible what many of us leave to be a crisis in the history of the united states senate. and i want to thank both of our leaders, senator mcconnell and senator reed and so many others who have been actively engaged in the conversations that have been on. i look forward to a vote as soon .s audible on mr. cordray i thank all of my colleagues for an evening that i thought was very important in our relations in the united states senate. >> the majority leader -- -- mr.a president president, we may have a way forward on this. i feel very confident. but as you know, that is why we need more time. what we're going to do is is go into courtroom. quorom.courtroom -- i think everyone would be well- advised. dot and t's to cross. i have to speak to the vice president. we will have a phone call. everything we are doing well. i will say that i hope that everyone learned a lesson last night. it sure helps to sit down and talk to each other. it was a very, very good meeting . it lasted four hours. we were still is highly engaged hours.end of the four so i think we see a way forward that will be good for everybody. i have a lot of accolades to go around for a lot of people. i certainly appreciate my .onderful caucus one of my senators told me this -- something like this, a person has a lot of humility. it does not matter what you ask me to do, i will do it. this is notope that a time to flex muscles, but it that i am going to tell one person and no one else how much i appreciate their persuasiveness, and -- let me think of a word that really describes this man, it is hard to find. i was told by another senator, do you know what this man did? do you know who he reminds me of? kerry. that is not anything to disparage john mccain. the john mccain is the reason we are where we are. a lot of people have been extremely helpful. this is all directed toward john mccain from me. no one was able to break through but for him. so we his own peril, and will have caucuses and will explain in more detail what direction we are headed. i think everyone will be happy. man,yone will not be -- ah, we got everything we wanted. but i think it will be something that is good for the senate. it is a compromise. i think we get what we want, they get what if they. not a bad deal. >> again, senators have reached a tentative view on advancing president obama's nominations providing a change in filibuster rules. a vote on mr. cordray's nomination continues right now in the senate. you can see our live coverage on .-span2 the house gavels in at noon eastern for general speeches. legislative work gets underway at 2:00 eastern. they have three bill schedule today dealing with easing regulation on small airplanes and oil pipeline standards. later in the week, the house debates parts of the new healthcare law. that is here on c-span today. right now, back live to to the senate energy and natural resources committee, holding hearing today on increasing domestic oil production and its impact on gasoline prices. >> a couple members of the committee are in the hearing room here. senators are waiting for the hearing to resume after votes on the senate floor. right now the senate voting whether to advance richard cordray's nomination for the consumer financial protection bureau. we are hearing live on c-span3, senate foreign relations committee talking to state the apartment officials to say that high risk to palm addict facilities must be upgraded or replaced to prevent any benghazi-like attack in the future. that is happening live right now on c-span3. >> the senate energy committee will come to order. as colleagues return from a vote, we will restart the hearing. thank you all for being patient for the vote. senator franken is next. >> thank you, senator. first, i think it has been thated out in testimony there are many reasons for gas price volatility. senator baldwin brought up refinery closures. i think the chairman gave me a bit of a shout out on keeping an eye on that. there needs to be more data on that to monitor an accord and eight those so what happened in minnesota does not happen. there are geopolitical issues, , supplyes, speculation and demand factors, and i do not think it is fair to blame the renewable fuel standard, which is the backbone of our renewable energy policy. i do not think it is the time to a number offs when cellulosic plants are expected to come online. us policy is helping to wean off of foreign oil, and i think that is a good thing. speaking of weaning us off of , yougn oil, mr. sieminski and mr. hume, on the dramatic growth of oil production over the past several years. can you tell me how this increase of onshore production relatedg from shale and type geological formations? >> senator, we think that virtually all the growth is coming from light sweet crude oil production that is being produced with shale formations. >> and i think mr. hume would agree. you spoke of the renaissance in .il you can take -- can you tell us whether hydraulic fracturing and words on told drilling are the tools that you use to fracture these geological formations to get the hydrocarbons out? >> yes, senator franken. the greatest thing that has made the change is horizontal drilling. we have been fractured, treating wells, since before i was born. i grew up in oklahoma, and they were driving the trucks from my home when i was very young. hydraulic fracturing is not new, but horizontal drilling is. it has allowed us to economically access low permeable rocks. it started with the shell with gas. carbonates and sandstones where we are finding this light oil. we have very regrettable opportunities to continue growing this source for the next 10 to 20 years and beyond. >> i would like to point out to my colleagues that the reason we all go back- and we and read the testimony, we read the record very thoroughly of all the members. theirason we are seeing dramatic increase in production is because as early as the 1970's, the federal government invested in the research and development that led to hydro fracking. some of my colleagues frequently criticize the government's role in developing new technology, but as it turns out the federal government played a huge role in developing the technology being used today. government supported research and development of this technology as far back as the 1970's through the eastern gas project. micro seismic imaging, a critical tool used in fracking, was originally developed at a , andal energy laboratory horizontal drilling as well. have beens what we experiencing. that is the reason for this renaissance, is it not? >> that is correct. , can you tell me what fraction of shale oil resources in the bok information happened to resign on nonfederal lands, roughly speaking -- in formation? >> the majority of acreage that we hold is on private lands. >> i think that is consistent with data from the center for western priorities which found the oil and gas resources are found under nonfederal lands. so the reason we're seeing a bigger increase of production on private and state lands is really because that is where the majority of the shale resources are. that listing knowledge he. again, it was developed by the federal government. i i see my time is up. back to the chairman. >> thank you, senator franken. i want to thank the chairman and the ranking member for holding this hearing. it is a very important issue, and for all of you being here today. obviously, high gas prices on the west coast and supply and demand issues is something i have spent a lot of time on and my office has spent a lot of time on. and here we are again with prices approaching four dollars per gallon in washington state. that point, it starts to eat into our economic growth. cents in the past week, washington state prices are among some of the highest in the nation, $.27 above the national average. a new report conference sunday we suspected all along, during the past year, west coast gasoline prices have ceased to follow the crude oil price. i think my constituents would get it if there was a supply and demand formula that they can follow here, but they cannot follow one. i would like to enter into the record the report to illustrate some of the peculiar behaviors of the west coast petroleum markets over the last year. the report underscores the need for continued real oversight and investigation of refinery shutdown announcements. we found last year that in a west coast refinery fire that everybody said, oh, well, this is the cause of the spike, when in reality, data show that refineries were not off-line but were still imaging -- emitting which raises questions about who is actually following these markets and the transparency. i believe the eia should play a bigger role. we need to find out what caused these recent spikes. on october 1, a seemingly minor problem at an exxon mobil refinery led to an almost instantaneous increase in wholesale prices in california, adding $.50 in less than a week. a power problem that only briefly interrupted operations is supposedly to blame of -- on one of the highest price spikes in a decade. i guarantee when the explosion happened in the gulf, if prices would have spiked that much, the nation would have taken action. my question is, when these races spike to this level -- in both cases, crude oil prices were either level or falling during the highest price spike. inventories were either increasing or remaining at a average.five-year so we are not following supply and demand here. my constituents very much want to see more transparency there. , you mentioned the high degree of volatility due to refineries. mr. gilligan, you cited reasons. but just as these shutdowns seem to be hitting the press, what do we need to do to be eating more transparency in the market? getting more transparency in the market? >> we supported trying to get eia more involved about communicating about refinery scheduled maintenance is an outages. it is really the unplanned outages that tear up the market. in the upper midwest, there were two or three refineries that were down for maintenance, and generally that was understood. then all of the sudden you had a serious problem. there was the bp refinery. and there was another refinery outage. all of the sudden, you had a test tester feet -- you had a catastrophe on your hands. we think we need to take baby steps to see what can be done to improve communication and planning so that people are more aware of what potential problems could be. we are ready to sit down and talk with you and committee staff about what kind of things eia might be able to do to help everyone accommodate those changes, the outages that are scheduled. >> i mean i'm a do you think that the country would have stood for, when we had the gulf implosion and everybody being shut down, 10 other refineries in the united states saying, oh, i have planned maintenance so i am going to go down. what we have put up with that? >> certainly valero knows more about that than i do, but there is a large safety issue with that. they have to go down for maintenance or they could risk injury to their employees. you have to weigh that into it. simple.t that it can be very collocated. >> four or five refineries going down at the same time? off, valero announces its planned turnarounds. fornnounce them actually the financial community because they're very interested in it. there are also services that aggregate them and put them together. i think your question was addressing more we have a spot situation and all of the seven it moves dramatically. it is actually the expectation. supply and demand is there. it is the expectation. so when there was an issue from your example -- i'm not sure what is actually happening in washington. but when you have these issues because refineries are larger today, we have inventory in the system. there is immediate expectation and the wholesale markets that then goes through to the retail markets of how long are they going to be down. because this is a commodity, we are largely imbalanced in the system. when some of the supply comes off, the expectation is going to be tighter. and all of the sudden you get prices moving. then, if you will notice, over time, depending on getting it there, the prices come back down. >> i think it is one of america's most important commodities and probably least regulated. hamburger probably has more regulation on it than gasoline. yet, the fact that this price spike can happen without real supply and demand issues is a problem we have to address. , the fact that you bring up the jones act as something of a price increase, citigroup has been under investigation and paid penalties, both for fraud in the mortgage market and now under investigation by the fssa for manipulation and gas prices year the fact that you blame the jones act as some reason why we have high gas prices is just amazing to me. thank you, mr. chairman. >> i think my colleague. now -- senator? >> thank you very much. we thank each of you for your testimony. i want to talk a little bit .bout why a fuels i will start by saying -- do i make the assumption that all of you with a premarket competition is a good thing? anybody disagree with that? ok. again, that competition brings prices down. that is how our premarket system works. and what we're trying to do is get more competition into the marketplace. and we have a real dilemma going on. on the one hand, the tax structure has not been competitive because we have seen oil incentives that started in 1916. they do not have deadlines. we do not renew them. tois an ongoing effort invest. it has served us well. in an industrial economy, served the great state of michigan well. i am sure i would have supported those things. on eitherme thing biofuels or wind or solar technology. you can invest in plans for the future. what i see on biofuel and what i struggle with is, on the one hand, we see tax incentives that have been there almost 100 years . we see in the public interest andeting issues around café fuel economy. we want to bring fuel efficiency up. we want to bring the use of gasoline down. -- less demand for gasoline. we are trying to get more competition in with biofuels on behalf of the public. yet, there are no pumps. and who owns the stations in order to get the pumps? we are told the renewable fuel standard does work. the cost of rin is going up. not enough demand. yet, we cannot get more use and more competition because the infrastructure is owned by folk that -- and all fairness, why would you want the competition if it is your job to control the market? so we are at odds on how to move forward on all of this. i would just say, for the record, it is important to note that since 2005 in the renewable fuel standard was created 75.8 billion gallons of ethanol has been added to the gas supply, cut demand for crude oil and gasoline, biofuel production reduce the need for imported oil 462 million barrels last year alone. seems to me that is in the public interest. understanding all these other issues and so on. will start with you because you have said valero is currently were investing in renewable fuels and alternatives . i am wondering what role you see these technologies in the company's future, and giving your interest in biofuels, are you encouraging station owners to install biofuel blender pu mps? we are.urse, but we do not own any stations. they are independently owned. i am not sure the percentage that are small individual or small company, but they are not the big oil companies that own the gas stations. they are not. >> what would you say to encourage that? in order for us to give the infrastructure for real competition to give us a chance to show how it works and what the public thinks, i mean, how would you suggest that we move forward on infrastructure to make sure that we can have the pumps? >> i'm not sure i understand exactly your goal, but if you let me, we already have e10 in about 95% of all the gasoline sold in the united states, so 10% ethanol. we are a big ethanol producer. we encourage that. we support it. and we do it. 5%is our customers for that that do not do it. they do not feel like the ultimate consumer wants it. we support, and we will get 1 -- gladly blend for people e85. 15 are not supportive for e for all the reasons that have been stated. car warranties, pumps, and everything that goes with it. >> i understand. my own industry is concerned. >> but valero is very much in it, and we're very supportive of renewable diesel as well. --it is interesting. i appreciate because our industry is very concerned about it. but i am a nascar fan and they are driving on e15, you should hear those guys talk about the efficiency of e15 and what it does for their performance on the track. lots of octane. the question is, it seems to me we have a real dilemma. , on flexk mr. gilligan fuel vehicles in pumps and so on, if we had more flexible vehicles -- flex fuel vehicles, ps so thatblender pum drivers could choose a lower cost fuel -- i mean, do you think it would be a good idea if we had more of that? how would you suggest we bring these fuels to market in a more efficient way? >> certainly, it is a dilemma to have the population of flex fuel vehicles so spread out. it is not make sense for a retailer to put in an e85 location if there are not a lot of vehicles in his marketplace for it. customers notice that they have to fill up twice a week. that is because of the reduced gas mileage. so that hurts e85. about infrastructure, we spend a lot of time talking about making dispensers capable of e15. we currents and -- we are concerned about the stuff underground. the piping, the glues. how would this perform with the higher level of ethanol? we need more information about that. epa is working on it. epa and the petroleum equipment institute are building a database of equipment that they say can handle e15. the problem for a retailer is he may not know what he has underground. he may not know what piping was put in 20 years ago. he may not be able to determine if it is compatible. it is a real tangled web of issues. it would take about $3 billion to get a large portion of gas stations able to dispense e15. it certainly cannot come from the convenience store owner. the average net profit of a convenience store is about $40,000 a year. you cannot spend that kind of money on renovations when you are really close on the bottom line. it is a perplexing problem, but we are committed to finding solutions, but they are not apparent yet. >> i know my time is up, but i am just going to take another moment, if you do not mind, for a comment. i know this is perplexing, but when we sit back from where we sit and talk about where the money goes, where the tax incentives go, where the public therest is, i appreciate industry and we incentivize it, talking about picking winners and losers, we picked a winner. it is a very important industry. but when we look at where we go in the future, i mean, there are options for us on how we incentivize real, titian at the competition at the pump. there is one industry that has had an restrictive tax incentives, and others cannot invest to do the kinds of things you're talking about. there is no question that a convenience store is not going to be in a situation to do that, but we have invested a lot of tax money and continue to on certain kind of industries, in certain areas where folks are doing very, very well. the top five oil companies, i think we could redirect some of that to help some of those folks. it is in our interest to create, titian and make the renewable fuel standard work in a way that does not cause the situation they are talking about -- it is in our interest to create competition. the consumer interest and competition -- i am all for competition, and i am anxious to make sure we have the opportunity for lots of different choices on fuel at the pump. i think that is our challenge. hasour leadership on this been extremely important. there is no question that this relates to the marketplace. there should be something to bring together democrats and republicans, and i am interested in working with you. let me ask you gentlemen again about how we might help the consumer now, not some other time or have a big long fight in congress, but how we might help the consumer now with these price spikes that we're seeing. price spikes related to these refinery outages. , you're talking about how you all share that information. what if we just said when there was a planned or unplanned refinery outage, you had to report that in real time? it seems to me that could provide some measure of release to the consumer. what do you think of that, mr. require it? >> for a planned, obviously there would be a publication. people would know that these are planned. they do happen in the spring and fall. they're usually schedule. many of these is scheduled a year in advance for planned. it has to do with safety, equipment, risk-based analysis. we do all these kind of things. now an unplanned, obviously it is unplanned. that means if something happened right now and in this particular unit of a refinery, it goes off- line. as far as reporting it, i assure you that the industry press picks it up immediately and all the commodity markets. the thing the administration could do today to help prices is to get a hold of rin -- to help prices is to get a hold of rins. rins are out of control. you take $1.30 rin gallon, you go to e10. $.13 pers there are gallon train to be passed through in the marketplace. that is a huge amount of money in aggregate. >> we're going to spend a lot of issue.oking at the rins suffice it to say we do need to get our arms around this refinery outage issue. wasow exxon torrance picked up by the press, and it was not done accurately. it seems to me that this is something that can be done to provide real relief to the consumer. mr. sieminski, i want to walk through eia's role. eia007, congress directed to track refinery outages and flight those that would have a significant impact on supply. in 2011, before you arrive, the energy information administration stopped tracking refinery outages. why was that done, and what would need to happen to get that restored? budgettor, in 2011 eia's was cut overnight by $15 million, roughly 15% of our budget. we had to very quickly reports and analysis and data collection activities that we were engaged in. we looked at the refining planned outage report, which was being done twice a year, and our conclusion was that private that had been referred to earlier here were doing some of that and that our money could be best spent doing other things that congress has mandated. for example, recently we have been reporting on iran's production. and under the sanctions activities -- >> let me save some time here. isn't protecting the consumer a priority, too? i just described expensive misleading information that got out. there is a consumer price. -- a consumer priority as well. i mean, we have had some pretty ferocious debates in this committee over the years about price controls and burdensome requirements and the like. this seems to me a very modest step to make markets more transparent, to try to help the consumer in real-time time. how much would this cost for you to get back into the consumer protection business? >> several million dollars a year. >> well, i am going to follow this up, and i am going to walk through the sort of list of .ctivities that you all have >> senator, i absolutely agree with you that more transparency and the data and analysis is essential. i would not have taken the job at eia if i do not believe that. i would be happy to work with you on these issues. to, and i wante to really work with you looking at the context of the entire budget. certainly over the years there have been antitrust and competition issues associated with refiners. sharing information about maintenance and production schedules. but that is why congress brought you all in, and now we're seeing, particularly in the midwest, what i think is the conventional wisdom in the energy business, which is why i walked through the charts with you, being turned on its head. i mean, people consistently in this committee have been told that the price of gas is related to the price of oil. does not seem to necessarily be true. it certainly looks to us that there is an inability to get real-time information with respect to these issues, particularly outages, and that is an important one. let me now turn to the question of exports. let's bring up, staff, if you would, chart number seven. we will bring mr. sieminski, mr. into it.nd mr. khan this was from energy information administration data divided on refinery capacity. there has been a reduction in the number of refineries in the united states, although new investment in those remaining resulteds is actually in increased u.s. capacity. this comes at a time when u.s. gas that has been declining. a number of panelists argued that the united states has surplus refinery capacity. exports of refined products have been increasing dramatically, aided by relatively lower crude prices, lower natural gas prices, which give our refiners a cost advantage. u.s. refiners are exporting roughly 2.8 million barrels of product a day. the united states is even exporting refined products to venezuela. show thes from eia increase in gasoline and diesel exports, especially from the gulf coast. for you all, to what extent do you see u.s. exports of gasoline and diesel continuing? again, this goes back to a question for the consumer. the consumer is saying, as senator baldwin says, as i hear from the people of oregon consistently, we are looking for some relief at the pumps here in the united states. yet, you all show up to these hearings and washington, d.c., and talk about more and more expert -- exports. tell us to what extent the u.s. exports gasoline and diesel is continuing and/or expanding, and we can bring at least mr. sieminski -- >> you can continue to watch this hearing at c-span.org. the house is coming in now. three bell schedule today, easing regulations on small air find an oil pipeline standards. later in the week, the house will postpone parts of the new healthcare law. the speaker pro tempore: the in order. be the chair lays before the house a communication from the speaker. the clerk: the speaker's room, july 16, 2013, i hereby appoint the honorable kerry bentivolio to act as speaker pro tempore on this day. signed, john a. boehner, speaker of the house of representatives. the speaker pro tempore: pursuant to the order of the house of january 3, 2013, the chair will now recognize members from lists submitted by the majority and minority leaders for morning hour debate the chair will alternate recognition between the parties with each party limited to one hour and each member other than the majority and minority leaders and the minority whip limited to five minutes each, but in no event shall debate ontinue beyond 1:50 p.m. the chair recognizes the gentleman from virginia, mr. wolf, for five minutes. mr. speaker, deuteronomy 16: 20 says justice, justice shall pursue. as we quietly mark the 10th month of benghazi terrorist attacks last week, i wonder if there will be justice. there are less than three weeks remaining before the congress departs for the august recess. when we return in september, we will be only two days away from the one-year anniversary of the benghazi attacks. this looming anniversary should stand as a stark reminder of the many unanswered questions that remain about what actually happened that night, how the administration chose to respond or not respond to the americans under assault during the eight-hour period. that's why over the next three weeks i will be coming to the floor regularly to remind the american people about the key uestions that remain to be answered. i will also be sending series of letters for the state department, the defense department and the c.i.a. formally requesting responses to some of these questions. while i'm skeptical that the administration will be forthcoming with answers, i do hope that these questions will underscore for the congress and the american people the woefully incomplete status of investigation. i have long been concerned that the investigator strategy will not yield the necessary answers. that's why for the last eight creating e advocating a bipartisan select committee to thoroughly investigate the benghazi attacks. my bill, h.res. 36, has 160 co-sponsors as well as the support of many family members of the benghazi victims, the special operations community and the federal law enforcement officers association which represents the diplomatic security agency that were at the consulate in benghazi. perhaps the most telling signs of the incomplete state of the benghazi investigation is the fact that not one of the survivors of the benghazi attack from the consulate or the annex have publicly testified before congress. despite nearly a full year of multiple committee investigations, not one witness has been brought before the committee to publicly testify under oath about what happened that night. instead of learning the details of the attack and the u.s. response and public hearings, the american people may instead read about it in one of the books that have been announced in recent weeks. it is clear that the survivors from the consulate and the annex have worked with authors on two separate books that are scheduled to be published over the next year. the first "under fire: the untold story about the attack in benghazi," describes in vivid minute-by-minute detail of the assault. this excerpt contains important new information about the level of sophistication of the attack and how the terrorists had apparently had detailed inside knowledge about the american consulate. and it notes that each terrorist vehicles flew the black flag of jihad. the report makes clear that the result was -- of careful planning and not some spontaneous attack on a target of opportunity. a second $3 million book deal scheduled for publication in 2014 was announced last month with four unnamed u.s. security contractors who are based at the annex and responded to the attacks that night. i suspect, given the critical role played by the contractors in responding to the consulate attack and later defending the annex that these individuals have important information that deserves, deserves to be heard by the congress and by the american people. i also wonder, mr. speaker, whether any of the $3 million they're earning from the book deal will be shared with ty woods' widow and child or the parents of glen daurgetty who did so much to save our americans. i can't help but ask why the ongress has not asked or subpoenaed these individuals to testify before the house committees that have been investigating this over the past year. if these questions are not answered, the american people will never know what took place in benghazi. i yield back the balance of my time. the speaker pro tempore: the gentleman yields back the balance of his time. the chair recognizes the gentleman from oregon, mr. lumenauer, for five minutes. mr. blumenauer: thank you, mr. speaker. last week's farm bill debacle in the house of representatives highlighted a fundamental disconnect. my friends in the republican majority felt that nutrition for poor people was not a priority because they were concerned about increasing government dependence for lower income americans. yes, there are more people receiving sflap, what we used to call food stamp benefits, because that's how the system is supposed to work. after our nation, with a much larger population, now over 313 million people suffered a near collapse of the economy, we would expect in the face of persistent unemployment and job loss that more people would be on food stamps. they want them to get this assistance. it helps the families and it helps the economy. yet, by the same action, my friends passed the most expensive farm bill provisions in our nation's history. now, just like the direct payment program, which gave 75% of the payments to 10% of all farmers, the new price targets and crop insurance programs manipulate the market, concentrate wealth in the hands of the few and fails to implement any basic reforms such as means testing and payment limit. the irony was not lost on many who watched the price tag go up and the benefits be concentrated in the hands of the few. the bill lacked meaningful reform long overdue elimination of direct payments was coupled with lavish increase in new entitlement, shallow loss provisions for crop insurers. it lacked -- it locked in the currently high commodity prices as a threshold going forward. there are additional direct payments for cotton and a refusal to reform the egregious sugar provisions. subsidies for wealthy farmers were supported over innovation, research and conservation. now, lavishing support on those who need it the least while stripping out nutrition support through the snap program because they didn't want to foster dependence while a blind eye was turned to abuses in the lavish crop insurance program where fraud is 50% higher than in the maligned snap, the food stamp program. i am hopeful that if this bill goes on to conference we'll be able to reduce the costs, provide adequate support by reinstituting nutrition programs and address long overdue reform for crop insurance. you know at the same time there would be some provisions that could actually bring people together. for years i've been working in areas of protecting the pollinators. 250,000 little species that poll nate our food -- pollinate our food that help create $200 billion worth of food crops worldwide. ne in every three foods we eat is due to pollination. chocolate, tequila. many of these depend on these humbled workers. yet, we've watched real threats to the critical habitat for pollinators and i hope we can add a simple nonpartisan provision that will make a difference for these protections. neoneconoids are insecticides which have been due to large bee dieoffs. we had one incident in oregon last week. they have been banned in europe. i'm hopeful, as the farm bill goes forward, we can address putting a temporary ban on their sale here in the united states. taking a deeper dive on the impact they have on pollinators, indeed, on the entire food chain for this very persistent substance that has the potential of affectings the impact not just for the health of bees but for our families as well. i'm hopeful we'll have a farm bill that can include low or no cost provisions, like poll nating protection -- pollinating protection to strengthen agriculture. these are vital products to our nature and food chain. the farm bill didn't use to be a partisan battlefield. and if we can focus on providing help for people who need it the most rather than lavish subsidies for people who need it the least and focus on innovation, on conservation and, yes, pollinator protection, things like this can strengthen our food supply, save money, protect the environment and maybe enable us to get some progress in an area that so far it looks embarrassingly remote. thank you and i yield back. the speaker pro tempore: the gentleman's time has expired. pursuant to clause 12-a of rule 1, the chair declares the house p.m. ess until 2:00 today. >> our live coverage of the senate continues on c-span2 and we'll take your calls and tweets about what's happening in the chamber at 12:30 eastern time on c-span2. before the votes today, vice president joe biden swore in newly elected senator ed markey. he fills a seat vacated by secretary of state john kerry. >> mr. president, what is the business before the senate? >> the swearing-in of the senator from massachusetts, the chair lays before the senate a certificate of election to fill the vacancy created by the vacancy of senator john f. kerry of massachusetts. the certificate the chair is advised is in the form suggested by the senate. if there is no objection, the reading of the certificate will be waived and it will be printed in the record. if the senator-elect will now present himself -- >> reserving the right to object. i know a lot of people want to say some real nice things about this good man, but you're going to have to do it later. we have a lot of things to do here and as he will learn, the senate is not always as punctual as the house. so all those who have these wonderful things to say about this good man, do it later. >> if the senator elect will now present himself at the desk, the chair will administer the oath. >> all right. raise your right hand. read the whole thing straight through. please raise your right hand. do you solemnly swear to support and defend the constitution of the united states against all enemies sforn and domestic, you will bear two faith and allegiance to the same, you take this obligation freely without any mental reservation or purpose of evasion, and that you will well and faithfully discharge the duties of the office on which you are about to enter, so help you god. >> i do. >> congratulations, senator. >> thank you. >> senator markey was elected to 20 terms in the house before his election as a senator from massachusetts. a couple of tweets from reporters about the tentative deal on moving forward with president obama's nominations and avoiding changes in filibuster rules. david drunker of roll call tweets, schumer confirms g.o.p. can still filibuster obama's nations and dems can still go nuclear if they think ours are unreasonable. another one from fox news, 17 senator r's voted for cloture or quartering nomination. hoeven, isakson, johanns, kirk, mccain, portman, and wicker. the senate has moved forward with that nomination on richard cord ray to continue as director of the consumer financial protect bureau. that vote was 71-29. we'll take your calls about the emerging deal on filibusters on c-span2 starting in about 15 minutes from now. now, federal reserve board governor daniel turillo discusses the economy and implementation of the dodd-frank financial law. he spoke at a breakfast hosted by politico's chief economic correspondentent, ben white, his comments are just under an hour. >> good morning, everybody. thanks for coming out. on a nice seenably -- seasonably cool day. sorry if there was confusion on the time and got here early. we'll get started quickly. joining me in federal reserve governor daniel turillo. he's at the center of the fed's regulatory efforts and a member of the open market committee, perfectly situated at the corner of wall street and washington for our discussions this morning. i want to thank everybody who came out, everybody joining on the live stream. thank you for being here. very excited for this breakfast. i'd like to encourage those who are watching on the live stream, tweet questions at me, #for morning money, i can follow them on the tablet and we'll get your questions a little later on. housekeeping item, if you got a cell phone, keep it on tweet the meeting, anything you like, put it on mute so we don't interrupt governor turillo. let's get started. i want to first start by welcoming you. thanks for coming. ask a little bit about your view on too big to fail right now. do we have banks in this country at this moment who are too big to fail? and if they got into trouble in a crisis, would be bailed out, despite all of the efforts thus far, obviously there are some still being implemented by the fed and other regulators, but based on dodd-frank implementation as it stands now, do we have too big to fail banks in this country? >> the way to begin assessing this is to realize that too big to fail is not a binary status. i don't think you have an institution that either in some absolute sense or absolute sense isn't. think about what happened during the crisis where the reserve primary fund, pretty small money arket fund, when it became insolvent set off a crisis in the rest of the money market funds that required intervention by the treasury and the fed to keep that industry supported. one would never before the crisis have thought of reserve primary fund as a systemically important institution. there is an important lesson there which is that to some degree too big to fail is a contingent status. it depends on what's going on in the greater environment of the financial system. having said that, it's obvious that the risks posed by any particular institution can be substantially greater and the imminent failure of some institutions can pose a much more obvious threat to the financial system than others. for that reason we do conventionally identify some institutions which may not characterize as too big to fail but at least as systemically important. and i guess i would say that with respect to those largest, most complex institutions in the united states, that while a good bit has been done and as you mentioned is still about to be done under sets of regulations and agreements that will be implemented, my own view is that we still do need to do more to get to the point at which the risks of opposed by some of these institutions are confined to what we would think of as manageable proportions. first let's start with what's been done. with more than double capital in largest institutions. we are on our way to a set of liquidity requirements both short-term and then some longer period we'll negotiate something which is medium-term liquidity requirements. we have the orderly resolution, liquidation authority in place being implemented by the fdic. we've got the stress it'sing regime that fed has put in place. an awful lot has been done and some of those things later liquidity requirements are still to be done but they are on the horizon. the big area, the big area, i think we need to do more about is short-term wholesale funding. >> that's an obvious follow-up. when we do something on short-term wholesale funding what would you like to see happen in terms of reforms to make these banks less reantant on short-term funding. >> there is an opportunity here, and that's the stable funding ratio for those in your audience who don't know, the basil committee has been negotiating two kinds of quantitative liquidity arrangements. the first liquidity coverage ratio which short-term, covers 30 days of vulnerability, has been completed, and we and the other banking agencies will put out a proposed reg in the fall to implement them in the united states. the next stable funding ratio is supposed to deal with a somewhat situation liquidity of the banks. and right in its original concept, it sort of preceded on the assumption that a matchbook was more or less safe position to be in. my own sense is that while it's better to have a more matchbook than less matchbook, it is still the case that large amounts of wholesale funding, in particular institutions or the system more generally, make the institution and/or the system susceptible to runs. so in the first instance i think we should see whether we can adjust the stable funding ratio to take that into account. if not, i think we have to do something independent of that, and that's why in that speech a couple months ago i floated the idea of tying short-term wholesale funding to an independent metric of some sort, and then possibly tying it to higher capital levels as well. >> on the leverage ratio proposals that just came out, you proposed going beyond what basil has proposed, 6% at the bank holding company level. 5% at the bank level. flip it, sorry. there's been criticism that there is too much time between now and it's proposed and the 60-day comment period for banks to lobby it and to maybe make it somewhat less stringent. they stay it's too limiting to their ability to make loans and drive the economic recovery. was there a way to do it differently, an interim final rule, something that would be more immediately impactful on these banks and make the system safer faster? >> you got to remember that as i mention add moment ago we have already doubled the amount of capital in the largest banks, and all of them are continuing to build capital in accordance with our expectations and indeed the requirements of basil three and when we put out the surcharge proposal in the fall. the banks are already on for regulatory anticipated regulatory reasons and upward trajectory. the leverage ratio is a complement, important complement to the risk-based capital requirements, making sure it's harder to arbitrage. if you have just a leverage ratio, there is a incentive to do the riskiest things you can within that leverage ratio. when you have only risk-based capital there is an incentive to try to arbitrage those categories. so if you put the two together, you have a little bit more coverage. all of these requirements are intended to be phased in over a period of years. in doing so, you minimize the chances of disruption to the flow of credit and capital more generally. but i think we have also demonstrated that it's actually been quite successful approach when you look at, again, the path of capital built in the united states since early 2009. terms of the reg, interim final -- interim final rules are intended for circumstances that are supposed to be exigent where there is a very powerful reason for not having the kind of notice and comment which the administrator procedure act contemplates and which most people think is a very good idea because it means that the proposals made by regulators have a chance to be scrutinized by everyone in the public. so obviously with this as with basil 3 and volcker and everything else, we go out for comment. i think you also can see in the proposal that there is a very strong sense in the agencies that the 3% ratio is just inadequate. that's why we made a proposal for something more. >> what do you make of the arguments from the banks that would be covered by this? the largest financial institutions, that it will limit the flow of credit and liquidity and will -- taking into account going too far to regulate banks without taking into account the and on thehe economy accessibility of credit for the banks? do you think there is a legitimate argument there this particular leverage ratio change could be damaging to the economy in some way? >> we'll be interested as always in people's comments. comments from all directions and people can make observations that they think are salient with respect to the impact on the economy. i guess i would say more generally that there are at least two considerations here. one, in the first instance we do have to look, getting back to your first question, we do have to look at what is going to give us a level of safety and stability in the financial system that will protect against a recurrence of the kind of extremely severe financial crisis we had a few years ago. and the analytics behind that has suggested that among other things, and perhaps central to their reform process, is the need for substantially more and better capital than existed precrisis. stabilizing the financial system, being kind of an insurance policy against a severe crisis, is the big benefit that one gets from higher capital levels. are there costs associated with that? sure. there are almost always costs associated with any kind of policy that tries to protect individuals. if you tell people they can't drive as fast in order to stop there from being fatalities on the highway, some commerce will take longer to do. we have balanced this and i think the transition periods mean that there will be a minimal disruptive effect on the economy while we get to larger and higher capital levels. >> senators mccain and warren and cantwell along with others introduced a bill to reintroduced glass-steagall, slightly different from the bill mccain introduced three years ago arguing that we should recep pursuant to clause 8 of rule 20 investment banking from consumer banking in a way it was before the repeal of glass-steagall. you have spoken about this before. do you think that's a good tie deto protect thecies -- good idea to protect the system, to protect the individual consumers? would that address too big to fail in the way we haven't addressed it so far? >> there is, and i think quite appropriately, a continuing discussion of ways to take additional steps to provide more of that safety and stability i was talking about a moment ago. i think it's useful to begin by identifying for ourselves what the criteria we want to bring to bear on reform proposals are. and i think probably the two most important, and mott hard to identify, are, firster -- and not hard to identify are, first, how efficacious would our proposal be preventing the problems we had five or six years ago or preventing problems right now without a whole lot of imagination one could foresee developing. secondly, what would be the cost, but particular what would be some of the unintended consequences of a proposed reform measure. and i think if you use that as a very basic framework for thinking about reform proposals, it helps you think through which ones one might want to pursue sooner. which ones maybe have more priority on. and which ones you want to take more time to assess. that's the backdrop, nom number -- number one. number two, it's important to keep history in mind here as to how glass-steagall ended up being first narrowed and then in graham-leech-bliley in that separation of banking and investment banking aspect, eliminated. this -- the commercial banks beginning in about the mid 1970's, began to experience a real squeeze in their business models on both sides of the balance sheet. on the liability side, deposits, basically they had been very cheap sources of funding, indeed for a while suppressed by federal reserve regulations the amount of interest you could pay on them, deposits had been this very predictable, beneficial for the bank source of funding. that were becoming less an less reliable because other savings vehicles were developing for american households. mutual funds, money market mutual funds, a variety of ways that an individual home -- household could get a higher return on its savings. obviously meant that bank deposits were becoming less attractive. eventually interest rates were deregulated and so the funding was a little more available but somewhat more expensive. on the asset side of the balance sheet, the growth of capital markets in the united states had over the preceding couple of decades led to a situation in which very large companies essentially did not borrow anymore from commercial banks. they may have standby funding arrangements, but they didn't take out big, longer term loans. capital markets had made publicly issued bonds much more readily available first to the biggest and then eventually the big and then some medium large companies as well. all of that on both sides of the balance sheet was to the good for the economy as a whole, good for households to be able to get higher return on their savings, good for companies to have a lower cost of capital, but it did produce the squeeze on banks. so to some degree what was happening in the 1980's and 1990's was regulators and congress were reacting to the squeeze which was calling in to question the viability of the very large banking model. that was a lot of what lay behind, as i say, the erosion of glass-steagall. when glass-steagall was final with the underbrush was swept ay in gram-leech-bliley -- gramm-leach-bliley, it was a lost opportunity. it was a lost opportunity to put in place a regulatory system that responded more to the new forms of funding, the new forms of activities. so with all that as a backdrop, the way i think about glass-steagall is roughly the following, which is on the benefit side, there could be some benefits in having a separation of banking in commerce, prophylactic-type benefits. as i think we saw in the run-up to the crisis, many of the institutions that actually provoke the most serious phase of the crisis were not within the commercial banking system at all, either individually or by affiliation, and indeed they had no access to the discount window, the most moat vabblecompferings would be lehman and bear stearns. -- the most notable example would be lehman and bear-stearns. you didn't need a commercial bank to do that. so there's some question as to how much that separation would actually prevent the kinds of problems we saw from developing. and then secondly, there is at least some question as to whether one would lose something, which is the benefits of having large institutions with a capacity to -- doesn't say it had to be as large as some our institutions are are today, but relatively large institutions with the capacity funding of any sort that a client may need from a line of credit at a commercial bank to underwriting a bond to going out with an i.p.o. now, what those benefits are, little hard to pin down. there hasn't been as much research as i would like, but it's arguable. when i put those two things together, efficacy and at least some questions about unintended consequences, my own sense is that i wouldn't have this approach as high on my list. there was a problem with bear. there was a problem with lehman. there was a problem with the civs. i think the problem was on short-term runnable funding more than it was what kind of firms they were affiliated with. >> a long way to say no you wouldn't support -- >> i guess it's a way to say look, i think people should continue to explore and ask questions about and analyze what the impact of various proposed reforms would be. for me the priority is in the short-term wholesale funding area. >> you mentioned civs and there were banks in the commercial space that got in trouble. citigroup is the greatest examples of that. and arguably one of the main reasons glass-steagall came down was lobbying pressure from those who wanted to create the one-stop-stop supermarket like citigroup. people don't talk about citi that much when talking about the crisis and the cost of the crisis and the bailouts that took place, but citigroup required a lot of federal assistance, reimposition of this law would arguably prevent the situation of a supermarket like citigroup again. is it a reason to support legislation like this to prevent the creation after supermarket like citigroup? >> of course, ultimately just as a factual, historical matter, i think in the end the biggest gramm-leach-bliley itself on citi was it allowed citi to absorb travelers. the irony is that was a fairly short-lived marriage. i guess the real point is that the vulnerabilities posed by using short-term funding to fund longer term assets, our vulnerabilities that can develop in many kinds of institutions. and so if we are trying to solve for that problem, i think we should solve for that problem no matter what the institution in which the activity is taking place. >> politico profinancial services covers this stuff in a great amount of depth beyond sometimes even what i'm able to comprehend. i want to bring in politico financial services to this discussion. kate has a question for you from our friends there. >> a hallmark of dodd-frank it requires different agencies to collaborate on difference rules like volcker, in practice do you think this leads to better outcomes or are there too many cooks in the kitchen sometimes? >> it's definitely been a complicated process. i think that if you think about the precrisis period. the three banking agencies did a fair number of crules, particularly capital rules, and guidance for banks together. they have worked out a reasonably good a-- way of dealing with one another. there were fairly notable disagreements in that precrisis period. certainly since i have gotten to the fed i think the relationship among both the staffs and principals at those agencies is pretty well developed and sort of a shared perspective. it still takes time. the important thing for people to realize is, even when everybody, this is overwhelmingly the case, is ting in total good faith, if everybody has their own perspective, and that needs to be worked through, it just takes a lot longer for staff to try to incorporate all the views that in the volcker rule, for example, i think 22 separate people have defined relevant agencies, have a say in. and when agencies that are not necessarily sharing the same basic approach like the three banking agencies have to deal with one another, again there may be some learning. i think there has been some learning. that's been the good side of t but it really does take -- side of it, but it really does take quite a while, and it does require sometimes you have different elements of proposals being placed together in a way that no one agency would on its own have done. i think someone -- being in the middle of it it seems very long, can be frustrating, it takes that much time. you don't get frustrated with the individuals, you just -- with the process taking as much time as it does. the i think probably we'll have to wait until the whole process is over for more objective observers to ask the question, on net has the value of different perspectives been such as to make that kind of rule making with multiple agencies the best way to go? i think it's a little early to judge yet, but i think it's undeniable that that feature of d.o.d.-frank is part of what's -- dodd-frank is part of what's slowed down the rule making process. >> you say there isn't any personality conflicts? >> i have been in and out of government for a long time now. it doesn't much matter what the particular ibs constitutional structure is -- institutional structure is. there certainly is going to be greater or lesser number of policy conflicts and sometimes personality conflicts. i guess what i would say about this set of exercises, i think people have gone out of their way in general to try to be cooperative and cliegeyabble precisely because everybody ecognizes the -- collegial precisely because everybody recognizes the magnitude of it. >> i want to get back to regulatory questions in a moment. i look at the clock and i know our time moves fast. we want to talk a bit about monetary policy and this interest time the fed is in right now. i wonder, first, whether you were surprised by the speed and intensity of market reaction to the chairman's press conference on june 19, particularly in the bond market and reaction to the 10-year treasury to those comments. how do you feel about that market reaction? do you think since that has happened the market has gotten back to a more point of equilibrium that's of fair value? >> it's probably worth going back to the middle part of the spring when yields started to rise. this was before the chairman's j.e.c. testimony, much less before the fomc in june. and i would think that the overwhelming explanation for that rise would have been some anticipation that things were getting better in the economy. if you will, the good reason why long-term rates will begin to go up is an expectation that conditions at some point in the future will warrant higher interest rates. o actually dealing with an upward trend that then obviously did have a jump at the time of our june fomc meeting. i think that having spoken to a lot of participants in markets over the last several months, i heard from an awful lot of them, it was almost unanimous i think, the sense that there are going down.jumps up and and many of these people were supporters of the policies, not all, but many were supporters of the policies 245 would have -- we have been pursuing in our monetary policy, but they all basically said, are you going to have jumps up and down whether inequities or bonds or both. so i -- whether in equities or bonds or both. i didn't find it surprising there might be that kind of reaction. you don't know whether people had certain trades that they wanted to unmind as soon as they got a hint that maybe at some point even if it were quite a ways in the future there might be a change in the l sat program. what i think would want to clarify things is exactly what our position has been on monetary policy. of course i'm speaking only for myself, but here i think i'm echoing things that are in the fomc minutes and in the statement itself. and there are two things i think to keep in mind. first, with respect to the large-scale asset purchases, qe-3's it's been called, what we are talking about here is eventually a reduction in the number of purchases per month, nd then eventually a cessation of new purchases. o one is talking about unwinding or selling the securities that we have been buying. and that is also, remember, data driven -- data driven, depending on the economy as we see the economy develop, then we'll make our judgment. we are not specifying, no matter what happens on this particular day we are going to have a change in the flow. so that's one thing. still be a very accommodating policy. two, and probably even more important for people to realize, is there is not some sort of connection between an eventual reduction in the size and cessation of the purchase program when it comes, and a move to increase the federal funds rate. ip can't overemphasize the poshes -- i can't overemphasize the importance of noting that the federal funds rate numbers, the 6.5 unemployment, half a percentage point above the 2% inflation target, are themselves thresholds and not triggers. that is to say when one or both of those is reached, what will happen is the fomc will sit and think about whether under these circumstances it's appropriate the federal e on funds rate. it is not automatic, and indeed it's not difficult to imagine circumstances in which one would say that even though, for example, the 6 1/2% unemployment rate has been reached, inflation might still be subdued, we might see there is a good bit of slack in the labor market, perhaps labor force participation is still not bounced back but there are good reasons to believe it will. what is set off by those thresholds is a consideration of what to do next. and we -- nothing has been pulled forward there in any respect. it is really in a sense a reaffirmation of the fact that there are two different but complementary policy i.n.s. trulets at -- instruments at play here, each moving on its own set of contingent conditions as assessed by the committee. >> in terms of those targets, ich aren't triggers, thereby holds, being met, there is a -- thresholds, being met, there is a general consensus in the economic community that the feds' forecast for economic growth the rest of this year are probably too rosy. we are not going to hit those levels. and it looks like second quarter number is going to be very weak based in part on the continued fiscal drag that we are going to see at least through the second quarter, probably late into this year. what is your view on the state of the economy right now and your forecast for the rest of this year? do you think the feds' current published forecasts are too ambitious? too hopeful? do you see the economic recovery gathering pace? >> first a technical matter, the projections that the chairman was reporting on at the june press conference are basically the central tendency of the aggregated projections of 19 individuals in the fomc. it's not a -- this is useful to point out because some central banks have a process whereby the members of the monetary policy committee sit around put together their individual projection then try do come out with a consensus. we don't do that. having said that, i think the most important thing again is that my decisions, certainly, and i anticipate those of my colleagues, will be based upon what we observe about the economy, what the outlook for labor market improvement is, which is a standard we have articulated for the lsat purposes. so if it turns out that the central lendency of fomc participants has been too optimistic, that would suggest that the path of the economy is not going to go as the chairman related those expectations in june, and therefore what a monetary policymaker would call a reaction function is going to dicate that we should behave differently. so in a sense this is kind of a self-correcting mechanism in there. more generally on the economy, it's interesting. i think for the last several years my own view has been that the spurts in economic growth, job creation, that we would see for a period of several, four, five months, were largely the result of monetary policy stim plus effects, fiscal policy stim plus effects, or some combination of the two. i was skeptical that there was self-sustaining, underlying momentum there because of the large amounts of household debt that had built up, because of the depressed state of the housing market, because of the major dislocations that had occurred in the american labor market. so at various steps of the way when some people are getting a bit more optimistic, my end relying assumption would be we are going to have some backsliding. indeed that has taken place on each of those previous three occasions. beginning towards the end of last year, i think actually the analytic frame has shifted somewhat. i think it's the case now that household debt -- it is by no means the case that households are back in the circumstances of the precrisis period, but enough households have got a lot of work done on their own balance sheets. we know that the financial system is stronger than it was. large corporations are very cash rich right now. they have been in very good shape for some time now, large nonfinancials. so it has appeared as though those proverbial cliched head winds that the economy was facing because of the financial crisis, something that pushed down asset values and left people with a lot of debt, had actually diminished substantially. and i think for this year the question has been to what degree will the fiscal drag that has taken place because of the increase in the payroll tax and equestration, retard the rebound of the economy which otherwise seemed poised to start a steadier, not a spectacular period of growth, but steadier period of growth. i think the jury is still out on that degree. i think it's undeniable that those fiscal effects have had a drag and significant one. c.b.o. thinks about a percentage and a half, point and a half off g.d.p. this year. for all of us the question is going to be can the economy with such underlying momentum as it peak up, work through the period of fiscal constraint which is probably second and third quarters of this year, before those effects begin to diminish a little bit. there will still be negative effect, but they should diminish a little bit in the beginning of next year. that's the question that i'm going to be asking myself as we come up into the next several fomc meetings. what does the data say about whether that underlying momentum is enough to sustain positive growth through this period, or to what degree the fiscal constraints risking again that kind of backsliding we have seen each of the last three years. >> how much of an additional risk is it to backsliding if we get another debt ceiling debacle /government funding, government shutdown debacle? that will be october, perhaps debt ceiling in november. there is no clear path towards resolution of either of those. how much of a risk do you think that poses to the economic recovery, in addition coming on top of the fiscal tightening we'll continue to see? >> as we saw a couple years ago in terms of confidence in markets and certainty for businesspeople trying to make investment decisions and the like, those kinds of high uncertainties, the so-called fiscal cliff, cannot be helpful. it's just something that is out there that can inject more doubt, more uncertainty into a group of consumers and investors who are already asking a lot of questions about the underlying strength of the economy. >> this is a twitter question, but also one on my list, which is your view on the bernanke effort to bring more transparency to the central bank, particularly, inflation target, he's held press conferences, attempted to be more open in his communication with the general public. less inscrutable as previous chairmen may or may not have been. do you think on balance it has been a positive thing? are we in a period where the fed communicates better with the public about its policies? >> let's start by thinking about this as citizens. -- the the reasons why principle -- principal reason why wants transparency is accountability. that is where we are a nation of delegated powers in which the people delegate to the congress under article 1 of the nstitution which in turn delegates to a variety of government agencies. and there is a very strong interest in any democracy in the people being able to observe how . ose delegees so i think in the first instance the transparency policies, which the chairman championed long before he got to the fed, can be understood as a way for congress and through congress the public to evaluate how the fed, which entity, has a nt lot of independence for a very good reason, but with that independence it needs to give people an opportunity to evaluate what its policies are, what its reasoning is, how it -- what it's trying to accomplish in pursuit of the dual mandate congress has given us. i think in and of itself that's a reason for a significant amount of transparency everything from fomc statements to the chairman's press conferences, to hawkins' testimony and the like. there is a second reason, which although perhaps not peculiar to monetary policy, doesn't apply in every area, and that is that in monetary policy communication of the central bank's thinking and intentions and frame of reference can itself be a policy instrument. we are talking about the thresh homeds a moment ago. the thresh holds -- thresholds a moment ago. they are essentially a transparency polcy. here's the way we'll think about the federal funds rate over some extended period of time. in doing that, in monetary policy, one hopes to provide more information to market actors. everyone from investors to people who are thinking about buying a house. to be able to get a better sense, not a perfect sense, but a better sense of how the path of monetary policy may play out depending on economic conditions. and so i think you have a second reason, and again the chairman academic persona had developed that notion rather substantially before his arrival at the fed. so i think those two elements put together make a strong case for a fair amount of transparency. then i would underscore that by saying, particularly when we are pursuing unconventional olicies. the lsats are things that were not known to or certainly were not in the arsenal of tools used by the fed in the decades preceding the crisis. these were things that were used precisely because of the highly unusual circumstances. and i would say under those conditions we have, again, for democratic accountability reasons and for the efficacy of monetary policy, probably more of a reason to have the chairman speaking more regularly and at more length about those policies. and i do think it is -- it has been very helpful for the understanding of the fomc positions to have the chairman do the press conferences four times a year. it not only allows him to elaborate some and the reasonabling of the committee, the kinds of discussions we have had. but, and i think this has actually been really successful, it allows the most informed reporters who follow the fed regularly to ask the kind of questions that inform people generally would ask. i for one at least think it's been a highly successful and important innovation. >> we also support allowing reporters to ask questions. we appreciate that. we'll get back to the nitty-gritty of regulatory policy in just a moment. people listening to you notice you have a nice boston accent. i have learned that are you a boston red sox fan which we will forgive you for in the context of this debate, but tell us a little bit how you came to be where you are. give us a little bio on daniel tarullo and your rise to the federal reserve? >> try to make this short. probably the proximate, if i can interpret that question, how did you get interested in banking and financial regulation, i had in previous times in the government been in the antitrust area, done international trade, been in the clinton white house in economic policy. when i was in the clinton white house, i was the assistant to the president for international economic policy, during the asia financial crisis, so this was an interesting and intense learning experience about what can happen with the reversals of flows of capital in fairly short order. .

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