Minutes. I call this into order. Welcome back to the committee. Today, we continue our regular oversight. Since it opened its doors, it impact on nearly every forct of the Consumer Credit cards and Mortgage Financial education. The bureau has conducted extensive outreach to both industry and consumers and has proven itself to be a regular regulator. Today, has obtained nearly 900 million of refunds and over 375,000 Consumer Complaints. Many of the cfpbs most significant actions relate to mortgage lending. For example, the about our recently finalized its mortgage disclosure to improve closing and provide key long terms to cost and consumer and clear understandable. While the Consumer Experience at the mortgage table is an important aspect of mortgage lending, the ability of consumers to access affordable mortgage credit is critical. Include went into effect this past january. I look forward to hearing how these rules will impact mortgage , particularly for smaller lenders in rural areas such as south dakota. It is also important to ensure that they can lend in all communities. Since director cordray testified , surfaced r serviced many accounts. Encouraged i this action. I remain concerned about the high level of student debt which stands at 1. 2 trillion. This issue is particularly important to me is the highest proportion in the country with Student Loan Debt. Im interested to hear from director cordray about actions he plans to take to address this growing problem. According to data released last credit rulesmer in manyits fastest pace years with Credit Card Debt has risen at a pace not seen since 2001. The memory of the last crisis fades. We need an intelligent we need to make sure that consumers can make Financial Decisions will having access to affordable credit. I applaud the work so far. Look forward to the testimony. With that, i turn to the Ranking Member will stop member. Thank you. There has been a broad rulemaking agenda that would affect many consumers and stop as it proceeds with rules targeting shortterm and the dollar of credit, overdraft protection and auto financing, Mortgage Servicing and arbitration, it must fully understand how these rules will affect the cost and availability of credit for consumers will stop them is also commit to taking a balanced approach and to perform a thorough qualitative and quantitative analysis of each role. Im concerned many of the recent proposals will continue to push mainstream Financial Products into unregulated areas and diminish Consumer Choice and make certain products. Naffordable those outcomes could come at a great cost to the consumer and should be prevented. As the director is aware, and other initiative that is of big datacern to me is collection. I have asked questions such as how many consumer accounts the and how ititoring plans to use the personal information it collects. Unfortunately, my calls have been met with roundup efforts by the bureau. This april, i learned that the federal Housing Finance agency will expand to include a personss religion, social events, andjor life link to other lines of Consumer Credit together on potentially hundreds of millions of loans. This information is undoubtedly intrusive, unnecessary, and contrary to the public statements of not collecting and using personally identifiable information. Adding concerns is the admission by the project manager for the database that information on it would be easy to reverse engineer. Moreover, they have publicly indicated that borrowers do not have the opportunity or the right to opt out of the database. Finally, the recent reports about employment dissemination are also deeply troubling. To independent, external reports and testimony from a whistle lower highlight the failure of the employment rating in compensation system and certainable conduct of step today we will need to discuss how this occurred and why it took months for them to acknowledge and act upon these independent reports of what additional steps they are taking to increase the transparency and accountability. Thank you, mr. Chairman. Quacks thank you[to hear itne] any of the members who would like to give brief opening statements. Senator . Thank you. Background] [chuckles] emergency tone. Familyexperience of the of christopher my state of new jersey illustrates how challenging these issues can sometimes be. He was a student when he suffered a severe, traumatic brain injury. It left him in a vegetative for heor two years tragically passed away. ,uring this time of hardship his parents were shocked to learn that his Student Loan Debt continued, nor injury nor his stop the enough to growing. Some private lenders make clear they would discharge recent loans in the event we need to take a step back and think about how we approach the student loan. Before they can collect their paycheck, like christopher, something happens to them the burden in many cases will fall to family members. Many of whom who are already struggling to might ends meet. According to Federal Reserve bank of new york, the share of 25yearold student debt continue to rise and total Outstanding Balance exceeds 1. 1 trillion. The burden for families are real and the need for Consumer Protection i believe is critical. Thats why today mr. Chairman with senators brown and booker im interested in introducing christophers law. A bill that will require student loan providers to clearly communicate to borrowers and cosigners what their obligations will be in the incidents of death. The bill can save families years of potential hardship. I plan to introduce separate legislations. In the situation where the lender ultimating forgave his student loan death after six years. His parents were hit with a large tax bill on what is deemed to be income. Second its something unfortunate happen to the cosigners of Student Loan Debt, disability or bankruptcy, some borrowers gone into default. I look forward to discussing this issue with you further today director cordray and look forward to being able to make a change so that death and disability isnt a continuing challenge to families. Mr. Chairman i want to say briefly i will not be able to stay until the time when i will be up to ask questions. Im concerned about a process that is under way by which the cfpb is collecting a vast amount of information about credit card usage. Its a Staggering Amount of data about usage of credit cards and i have a series of questions and look forward for a follow up answer. Senator brown. I will be less than 30 seconds. Its to echo i wanted to echo the words of senator menendez. Im hopeful director cordray that you can help us address those issues. Anybody else . Like to remind my colleagues that the record will be open for additional statements and added material. Mr. Richard cordray is the director of the Consumer Financial protection about our. Director cordray, you may begin your testimony. Thank you chairman johnson Ranking Members of the committee for inviting me to testify again today about the latest semiannual report of the Consumer Financial protection bureau. The bureau as you know is the nations First Federal agency with the focus of protecting consumers in the financial marketplace. Financial products like mortgage, credit cards and Student Loans involve some of the most important transactions in peoples lives. Congress created the bureau to stand on the side of consumers. Those consumers are your constituents. Since we opened our doors, weve been focused on making Consumer Financial markets work better for the american people. My testimony today focuses on the bureaus fifth semiannual report to congress and the president which describes the bureaus effort to achieve that vital mission. Through fair rules, consistent over sight, appropriate enforcement of the law, the bureau is helping to restore american familys trust and Consumer Financial markets, protecting americans from improper conduct. Through our Enforcement Actions to date, weve made efforts to refund more than 3. 8 billion directly to consumers who fell victim to Consumer Protection laws. We fined wrongdoers more than 141 million, all which is has gone into civil penalty funds. In the fall of 2013, for the first time we took action in conjunction with multiple state attorney general against an online service. We took action for payday we took action against an auto lender for discriminatory loan prices. In addition to this public enforcement action, recent nonpublic supervised reaction and selfreported violations, have resulted in more than 70 million being remediated to over 775,000 consumers. In january as the chairman noted, mortgage rules that the bureau issued to doddfrank act took effect. We issued another rule mandated by the doddfrank act. To simplify this process, for individuals and industry alike which we call our project. In january as the chairman noted, mortgage rules that the bureau issued to doddfrank act took effect. We issued another rule mandated by the doddfrank act. To simplify this process, for individuals and industry alike which we call our project. We also issued an advanced notice proposed rule making on debt collection. Which is the about ours most frequent source of Consumer Complaints. Weve continued to provide providing consumers will online resources including the cfpb section of our website. Which i encourage you to use where we have answers for frequently asked questions. The consumer should be treated fair in the financial marketplace. They deserve a place that will facilitate the resolution to their complaints when that does not happen. To this end, the bureau strengthen its offers of consumer response. As of june 1, 2014 we have received 375,000 Consumer Complaints, debt collection, credit cards, mortgages, vehicle loan and payday loan and Student Loans opinion the progress weve made has been possible thank to the engagement of hundreds of thousands of american who used our communication tools, submitted complaints and told us their stories from coast to coast. Dialogue on this at two shins we supervise come as well as Credit Unions with whom we regularly at institutions we supervise, as well as Credit Unions with whom we regularly meet. Day we work to a compost the goals of renewing Peoples Trust in the marketplace. We want to make sure it is fair, tense parent, and competitive. In the years to come, we look forward to continuing to fulfill congresss vision of an agency of cultivating a financial marketplace. Thank you for the opportunity to appear before you today. I look forward to listening closely and responding to your questions today. Thank you for your testimony as we begin questions, i will ask the clerk to put five minutes on the clock. Dr. Cordray the cfpb has now been up and running for almost three years. What do you consider to be the most significant accomplishment the bureau since 2011 and looking forward, what actions can we expect either the bureau over the next three months months . Its a broad question. First of all, the challenge of building a federal agency from scratch has been significant. Weve had some growing pains and weve been working through those. But at the same time, weve gone from zero employees to now close to 1400 employees. People who are very dedicated to protecting consumers to see theyre being treated fairly. The mortgage rules we put in place that congress is the such a high priority on, had been very significant. Thats a single biggest Consumer Financial market. The enforcement activity that weve had to ensure that institutions understand that people need to be treated fairly and money will go back to peoples pockets when theyre treated unfairly have been important. Our attempts to supervise to put programs with nonbanks to put them on the level with the banks. I think increasingly, not only are consumer response, which addresses individual complaints but also reveals the pattern of complaints buts our efforts to provide Public Information that all of you can see and share. I think it do affect the market in meaningful ways. The qm rule has been in effect since january. Would you discuss the rules impact in Mortgage Markets and home buyers . The qualified mortgage rule are ability to pay rule alternative names. Has been one of the most significant protections for the Mortgage Market to date. Its important provision to recognize the need to prevent similar financial crisis from growing out of the Mortgage Market in the future. I think its been widely acknowledged it will help to do so. I think its been a balanced rule making but its something were very attentive to and closely monitoring. If we see uncompensated consequences, we want to be ready to act. Weve been closed to National Organization of realtor the and others who are bringing us regular data to let us see how this may be affecting the markets. In the rural areas, thats an area we try to be sensitive. We had an original proposal not calibrated properly in terms of engaging what is rural. We backed that proposal off for two years while we reconsider that further. Weve been receiving a lot of comments. I think well have a proposal that will be more satisfactory to people within that two year time frame. Director cordray, the about our recently proposed changes to the q. M. Rule including a change points and fees limit, to allow lenders an opportunity to cure a loan that inadvertently exceeded the limit. Can you describe why the changes were necessary and whether you think any additional changes to the point and fees limit or q. M. Will be needed . The points and fees provisions stems from the doddfrank act. We have heard from a number of lenders about it including the concern that was stated i think Mortgage Bankers in particular but a number of people brought it to us. Although theres a point and fees capped under the rule and people should be able to go right up to the edge of that cap and making mortgages in the market. We like them and expect them to do so. There were some concern if they got close to the cap, they would have to stay away and create a gray area. A right to cure would be a way to ease that concern. We took that input to heart and we have proposed a provision to take account of that that weve now had comment on overwhelming supported by lenders. There are some differences about what time frame it should cover. I think its a reflection of our willingness to listen to lenders about whats actually happening in the markets how we can ease access to credit without lessening Consumer Protection. Thank you mr. Chairman and director cordray. I want to start out with regard to the big Data Collection issue. There are so many questions to ask on that, im just going to get into this briefly. I want to remind you, we need to get further answers from the agency with regard to literally the scope of and the content of the big data project thats under way to collect credit card information. I just want to clarify one fact in these questions. That is its my understanding that the agencys goal is to collect the credit card transaction information on 90 of the credit card accounts in the United States. Is that correct . I believe thats correct. Although i wouldnt put it that way. Were not trying to collect information on individual credit card accounts. Were trying to collect information that will give us the pattern of credit card activity in the marketplace so that we can protect consumers against the kind of abuses that led to the card act. Were also trying to collect information so that we can accomplish our task that the congress set for us, reporting to you every year and how its affecting the marketplace. Are, were talking about approximately 900 million accounts. You are collect and data on that 900 million accounts. Post oftand the purpose you stated your purpose for the collection of this data. I have significant concerns about the potential abuse and misuse of that data and the loss of privacy that comes from that. I want to move to the more recent development that we learned about which is that it withining with the fha mortgageo the national database. What we learned then just last april is that the two agencies are going to jointly work to expand the National Mortgage database. The information that came out in the federal register with regard to this proposed expansion is extremely alarming. I am reading from the federal register right now, the new expanded system may include without limitation borrower and coborrower information, name and address and zip code, ethnicity, gender language gender, language, education records, Financial Information and account information, including the life events of the last few years, and the list goes on and on. The question that have is, does this mean that the assurances that you have given us recently, and as we have discussed the big data projects, that you will not collect personally identifiable information on americans, is being changed . Is the agencies attempt changing in regards to collection of data . I believe what you are reading from is a sworn particular statement done for bureaucratic reasons under the law, for what could be the case. The National Mortgage database will not include personally identifiable information such as name, address and Social Security number and i also want to make a point to assure you, and your colleagues because the question was raised, there are no plans and we will not be including religion in the National Mortgage database. So, what i do want to say is the need for this information is acute. Chairman bernanke, when he testified here, said one problem with the crisis the mortgage crisis was they did not know what was happening in the Mortgage Market and they have reiterated this sense, we have to know more about the Mortgage Market to prevent this economy from cratering again the same way it did before. This is a similar rationale to your need for information about credit card transactions. But again, i have a concern that the government collecting this phenomenal amount of data about private citizens could be used in an invasive way. And frankly, my time is running out, but i hope that we will have another opportunity for additional rounds. I want to get into the question about whether we can reverse engineer this information, or if other uses could occur. I realize this operates in five minute segments and we are quite happy to have our staff continue, to talk back and forth about your concerns about this. I share those concerns and the gao is having a study on the report that you asked for and it will get into all of these concerns that you had back and forth with him at considerable length. They have a very responsible but competence of inquiry and comprehensive inquiry, making sure that things are not happening that we dont comprehend and at the same time recognize the issues of security and privacy that you are raising, i want to be sensitive to those for this agency as well. Personally, myself and our staff on these issues. Senator menendez . Director, in your midyear update on student loan complaints you highlight a factor where loans are put into default if the cosigner dies or becomes disabled or declares bankruptcy, even if the borrower has never missed a payment. That practice, to me is extremely unfair to the borrowers who have been making their payments on time and are in good standing. I am in the midst of drafting legislation to fix that problem. My question is what are some steps that can be taken under existing law to protect students from this practice, students who may be able to qualify for the existing loan on their own or under a new cosigner, and does the bureau have the opportunity to remedy this practice with you and if you need Additional Authority . Thank you for raising that issue. It was shocking to me and i want to describe this practice of people understand. The practice was that nowadays, the vast majority, 90 plus of Student Loans that people take out have a cosigner on them, and often a parent or maybe a grandparent. And a student who attends school for multiple years or graduates and begins to repay Student Loans may well have a spotless payment history, and yet suddenly something happens to the cosigner. At this point the parent or grandparent is aging, and eventually some of them pass away. At the time where the young person is affected by the death of their parent or grandparent, we saw student loan servicers calling in the account because the cosigner is no longer available, rather than considering the situation and working with the borrower, working out a payment plan or recognizing that they made the spotless payment on time, that is the way they heaped trouble on these poor affected people, and it was not right. I think that the issuance of the report itself has sent people scuttling throughout the industry to avoid a repeat of this. We heard from one of the major servicers the other day. I hate to interrupt you because my time is limited. But in the face of the report and public shame, is there any regulatory ability to do something about this or do you need Additional Authority . I would like for the focus to be to talk more with your staff, but i do think the shaming here is a great example. I am all for shaming, but i would like a guarantee. Many of them have trouble releasing cosigners, although this was an option available to the bar upon signing up. What is the feasibility for an automatic cosigner when the lenders conditions are met . I think this is possible but i am not clear in my mind if we need legislation on that or not. When things are written in legislation they are more secure and lasting, but we would be happy to work with you on that. Can you make that part of the agenda we will follow up on . We are now at 97 , it used to be 67 were cosigned by 2008 and then that number jumped to 90 . This whole issue of a cosigner, and a young person passing away or having a disability and then having their parents facing this debt, the whole issue of even if there is forgiveness at the end of the day, getting a big tax liability, these are issues we would like to work with you on. Because i have serious concerns about where we are at on those issues. I strongly agree with the issues you have raised in the concern you are sharing about them. When something gets worked out, after four or five or six years of hassle and frustration and struggle, this is not a good situation for people. This whole issue of a cosigner, and a young person passing away or having a disability and then having their parents facing this debt, the whole issue of even if there is forgiveness at the end of the day, getting a big tax liability, these are issues we would like to work with you on. Because i have serious concerns about where we are at on those issues. I strongly agree with the issues you have raised in the concern you are sharing about them. When something gets worked out, after four or five or six years of hassle and frustration and struggle, this is not a good situation for people. You would think that death in and of itself would have some finality. On the prepaid cards, the last time you were here in november we discussed the upcoming rulemaking on prepaid cards, something i follow for some time. You can have products that are largely remaining unregulated, and consumers can fall victim to all sorts of abusive fees, being charged to Customer Service to check your balance, or sometimes you want to cancel your card because the fee is too high, and you get more to close the account and we have legislation dealing with that. Can you give us an update on the bureaus work . I cannot and we have discussed this a fair amount. This is a market where people dont realize that they are subject to no Consumer Protections currently, and there are billions of dollars being loaded onto this card and that is a growing market. We anticipated we would have a rulemaking proposal out in june, which is this month and it will be the end of the summer before this can happen, but this does not indicate any particular problems about the rulemaking, it is just hard to work through these issues. We are getting there and we will have something very soon. Thank you, chairman. Mr. Director, as you know i am one of those senators who has taken the position and argued for some time, that there should be greater oversight over your budget process. In fact, there is not much limitation under the law and you can request up to 12 of the Federal Reserves operating budget, and the expenses must be reasonably necessary to carry out your functions, so we dont get a lot of oversight here, as you know. And i think that is very problematic. I want to focus on just a small piece of what you have been doing. With your spending. This relates to the building that you are in, the building is not even owned by your agency. Renovation costs started at 55, the Washington Examiner thinks this is up to 95 now. Now you are owned i think your own acknowledgment is that this is probably 145 million. There are some documents, from skidmore, owens and merrill, they are the architects of this building and here are some of the things you are working on. I am quoting from the document. At the western terminus of the fountain a raise water table spills over and down into a Sunken Garden below. The water cascade creates an atmosphere of white noise as visitors. Over the glass railing into the Sunken Garden pool, and the plantings below. At the western side of the plaza is a calmer and more informal seating area under shady trees and the soft contrast of the stone floor further implies a removed space of rest and contemplation. Additional seating is provided along the building edge at a lightly elevated temperature paved porch, covered by dark bronze colored trellis, with a light bronze color adorned with fines. The Southern Side of the raise water table over a water wall of naturally split granite. At this southern edge, a new water source creates a cascade of water that flows down into the Sunken Garden. Terminating in a raised pool, slabs of granite rest in the bottom of the pool. And then it talks about a fourstory interior glass staircase, a stainless stare placed in the vertical light wells, connecting level 2 through 6 to allow increased circulation while allowing daylight into the interior. It is nearly embarrassing, as i read through this stuff, and that is about the oversight that we have with you. To just raise these issues, do you think that kind of spending is really reasonably necessary, to carry out your functions on a building that is a leased building . Would you make the case to us that this is reasonably necessary . If i may, several things in your discussion i would like to attract. First of all, this has been out there on the Public Record for some time, this is a fiction of the Washington Examiner, that this project started out at 55 million and has gone to hire proportions. Higher proportions. There was never any expectation that this could be completed for 55 million. Much . What happened was in the first budget that we put anything in as a partial payment on the ultimate project, 55 million was listed in that years budget but was never considered to be the notion this has tripled in cost is a fiction by the Washington Examiner. That is all that this is. There was a review for this building before this was created, in which they anticipated that even at that point in time, the baseline needs of the building, such as a local problems and other things would require at least triple figures worth of construction work, and that didnt include a lot of the contingencies that go along with a project like this. I find this embarrassing, this is the kind of flowery statement that someone will make when they are trolling for a bid, trying to get the business and trying to make it sound is wonderful as they can. Much of the flowery words do not reflect the cost, and you can say this about many of the staircases and outer areas around the capital here, there is nothing special about this from the perspective of other government buildings and this is not a very special government building, this is a building that needs a great deal of work. I wish that it did not. We dont own the building so the notion that we are trying to create some palace that we do not own does not make any sense to me. I dont want to impose upon the chairmans patients here. Here. Ience would you be willing to give us a thorough accounting of what is being spent and on what, on this building . Absolutely. Senator . Welcome back, director. I am always amused, amused is not the right word but when i hear a number of colleagues, especially in the house, question the accountability of your work, i know that you have appeared in front of the house and the senate close to 50 times now, and thank you for being as accountable as you have. The report states that the cfp be will take steps towards providing new protections for consumers in the small dollar credit markets. I appreciate the beer is continued interest in providing oversight for this highcost market, but i am concerned that tailoring regulations of traditional the traditional payday loan market may leave some consumers vulnerable to hire problems as we saw the experience attempting the legislature to prohibit highcost and small dollar loans, targeting traditional payday loans, allows lenders to use other products to attract consumers to the debt and the ohio lenders organized under the thrift lending law moved into this as you know. Have they considered new oversight as they consider new oversight for the loan market, how do you think new rules will protect the consumers through a wide range of products, with one line payday loans and auto loans and other payment loans . The issue is extremely important to the bureau addressing this market because as you say, i have seen the experience in ohio where rules that were meant to address concerns about payday lending were circumvented, through migrations in the market, and this is happening across the country in a number of states. We have also seen this because the military lending act gave rise to similar problems. The first set of rules that was adopted in the military lending act about seven or eight years ago was narrow, and allowed those rules to be circumvented, by highcost lenders who continue to operate right outside of military bases or online with lots of patrioticlooking flags and they are peddling terrible products to our servicemembers. We have been working with the department of defense for the past year to revise those rules, this is the same kind of problem we will be dealing with in the small lending market. This has taken a somewhat longer to adjust this but i think it is well worth the additional time in order to make sure that what we do will not be made a mockery of by people circumventing this through transforming their products slightly. Thank you. I want to expand a little bit on senator menendezs questions about student Loan Servicing. I chaired a subcommittee hearing about this issue and im concerned that the problems we saw in Mortgage Servicing are being repeated in student Loan Servicing. Confusing loan transfers, the nondisclosure of those violations of Service Members writes, in adequate and inconsistent modifications and refinancing options, three or four witnesses agreed that we need comprehensive and consistent standards for servicers of federal and private Student Loans. Will you move forward with comprehensive student loan standards and how can we better align Service Incentives with borrowers needs as we move forward on this . I would agree that we see a lot of the same problems that are just absolutely bedeviling that absolutely bedeviled Mortgage Services and continue to do so, arising with student Loan Servicing as well. There are many characteristics of the product but poor Customer Service problems and problems with transfers, lack of information and harm to consumers because there is an eerie consistency there. What we have done in the past, we finalized the rule that was necessary for us to begin supervising student loan servicers, on the spot and going out to see what theyre are doing to comply with the law. That insight is helping us identify the default problem that was not well known before we called attention to it. Whether this will lead to specific standards, with the department of education on these issues, i dont know yet but we have the ability to go in and actually correct problems on the spot, which we did not have before and it is going to make a significant difference in this market, i believe, and where we will all lead we will keep you posted as we go. Senator . Welcome. I have been watching on television and i wanted to followup a little bit with the line of questioning that senator has. When you were here last time i asked you about the building and i believe that the quote was that the estimated cost to renovate was 95 Million Dollars at that time, that is your testimony back then. And now, the estimated total cost for the renovation how many square feet . I cant give you an exact number for the Square Footage but i know that the building is problematic. We are having to move out of it. I understand that, but you dont know how many square feet . You dont know if 145 million is a good number for the american taxpayer. On the renovation costs . I know that we have been through these numbers and it is i believe an appropriate value, this is taken into account in the lease that we negotiated so that our lease payments were less over 30 years to take effect and we, not the landlord would be making improvements on the building. This is a building that would be a White Elephant if this work is not done. This is a government asset owned by the treasury and the occ. His is also a building that will be populated more densely than before. This is a great cell job, administrator, but the point is that we are 17 trillion in debt and when you hear, regardless of what the flowery nature is that he has read to you, this will be optimum. This will not be opulent. If you have any of those waterfalls, that is what we cant afford right now in this country. We are running a 600 billion dollar deficit, and what youre trying to help people with in terms of the consumer being treated fairly, we will take back from them in terms of excess costs because we dont run things on a tight ship. My point being to you, the structural renovation is 139 million, the temporary lease is 22 million, securities and utilities this is 13. 6 million, the cost of architectural and Engineering Design contracts, 9. 2 million, and this does not include the Shuttle Service that will run back and forth. There is a lot of cost into this and im not saying that what you did was wrong, i am saying that we are buying top dollar design and construction, at a time when we dont have the money to pay for it. You have an unlimited budget, and as senator johansson made the point, we dont get any oversight. The fact is, who with you has the experience outside of washington of doing a rehab on a building . Who has private world experience in rehabbing buildings . I would like to ask you and your staff to come take a tour of the building. I am not saying it is not opulent and will not be opulent when it is finished. I dont say that this does not need to be done. It probably can be done, but can this be done for less and is done under the realization that this country is in trouble, financially. Are we spending money we cannot spend or are we spending money this is meaningful oversight that you have with me and we have the appropriations subcommittee on these types of issues both in the house and senate and this is something that i agree to when i was confirmed by the senate. We also do not have an unlimited budget. We have a budget cap each year. We have no capital budget. Every dollar we spend on Something Like this is taken from other work that we are doing, i am feeling that and i want to spend as little as possible. I will be happy to continue to keep you and your staff closely advised. I have a few seconds left. Who is the expert on your side that has the knowledge to make the decisions about a construction project like this, what is their experience outside of doing this for the government . We have people in the Agency Working on this in charge of the facilities, we also brought in gsa. They are the expert on the from the federal government on these projects. But you dont have anyone on staff with outside knowledge or outside experience to raise a 180 Million Construction project. I dont know if i would agree with that but that is part of the reason we brought them in. Can you answer for the record who on your staff and what the experience is about this project . I will be happy to have you or your staff meet with our facilities groups, and also the folks from gsa who are working with us about this. I brought the men because i share your concerns about this and every dollar spent on this is a dollar i am not satisfied with the work that gsa does on this. We are getting ready to put together a facility in muskogee and could have for less. The gsa is negotiating a four percent rider on the lease, within 8 Million Construction budget for a facility that will be three times the size of this with a five percent increase in veterans over the next 20 years in tulsa. Gsa is not really great at this either. I dont really know about that. But you are relying on the expert. If you have other suggestions i am all ears. The deal is done, isnt it . If you have further suggestions my suggestion is go to the outside of washington, in the middle of the country, and find people like manhattan construction the notes at the do this for less money, that will design and build this in an office that is adequate and build well, and do this in a way that says that we dont have a next or penny to spend, so how can we get what we need for the least amount of money. That does not happen at the gsa, that is not happen in most government agencies. You ought to set the example given the position that you are in. I am happy to talk with you further about that and i know that this is a concern for you. Senator . Thank you very much, mr. Chair, and thank you for your testimony. I will start and ask you to say little bit more about the restitution of the castle issue i believe that this is where steering payments occurred, to employees who were steering customers into high interest loans, and then getting bonuses for it. These payments were banned under dodd frank and now under your supervision you have taken action against their appearance. Can you summarize with this action ended up . Sure, and it is quite frankly the same as you described it. You have steering that was going on that we believe is in violation of the law and we were surprised the company did not recognize what they were doing was in violation of the law. There are many areas were you say that this is debatable, but this was absolutely clearcut. It took a while for that to sink in, and the matter was revolved was resolved with sniffing in payment and penalty and it is indicative of the need to oversee the actual enforcement of the rules and laws, and not just to assume that when they are on the books, everyone understands them, and abides by them, particularly if there are financial incentives not to do so. It is a great example of why you need an agency to bulldog the rules, and make sure that they are happening in the marketplace is that they should. 9 million on a return of 9000 to mortgage holders, do they also get a permanent discount on their Interest Rates for the high interest loans . I dont recall. I would be happy to fill you in on that, there was relief Going Forward to make sure that what we saw happening would not happen again. I think this signals the market as a public enforcement action does, that if either people are engaging in this and somehow thinking this is appropriate or that people wont pay attention, we will. I think it is quite important. You anticipated my next question, this kind of steering in which the Mortgage Originator poses as a financial counselor and steers people into high interest loans is just a huge predatory practice, i am delighted that you are patrolling against his predatory practice and i hope and anticipate that there is a substantial deterrent effect for what you have done. What is surprising to me is there is so much visibility on this issue, and it was so remarked upon, and explicitly dealt with by the congress, and by us, in the wake of the Mortgage Market meltdown, that i was just surprised to see a company engaged in these practices and even upon engaging with them, did not seem to be aware that these practices were illegal. Eventually that got through. Millions of american homeowners and mortgage holders will benefit from that action. So thank you. I want to turn to the issue of medical debt. Thank you for this report that you have put out, medical debt and credit scores. This is something i have been very concerned about, because essentially, when you get a bill on health care activity, you get these papers that say that this is not a bill, and then you get something from the laboratory and the xray technician, and meanwhile your insurance sends you something, this is what we think that you will pay that we are not sure. And it creates this whole confusing matrix that often takes quite a while to sort out, with the Insurance Company. In the course of that, medical debt is reported to a credit agency, putting a permanent scar on your credit record that has nothing to do with this because this kind of debt takes a while to figure out. I felt when those medical debts are paid off, they should be cleared from the credit record because of the logic behind the fact that they probably bear little resemblance to the role of other debts in anticipating whether or not you will make payments and you reported the case by about a 20 point margin, and this is the first solid evidence i have seen that this is a miscalculation of the ability to pay. Do you want to comment on this at all . I would like to reinforce what you said. Medical debt is something that we can all appreciate. We have all been to the doctors office. We have not been billed or we have been billed and we are not sure if the Insurance Company is paying for. It is very confusing for people and is often small amounts but this is often reported on peoples credit reports, and it may keep them from getting a mortgage or a car loan, something significant. This was 20 or 50 bucks and i thought it was paid by the Insurance Company. This is a great example, the first time we have had enough data and information to really dig into this and report to the Credit Companies that they are not scoring medical debt in the credit scoring companies. Appropriately compared to other debt. If we did not have that information we could not do that analysis, we could not show that and i think we are beginning to see the Credit Score Companies are responding to this and understanding that they have to up their game and think differently about medical debt for all the reasons i laid out so you laid out so well. My time is closing so i will say i appreciate the letter that i have received in regard to payday loan practices and the statement that if they engage in abusive acts they will hold these institutions accountable, no matter how their products are structured. This is certainly a big concern to states like oregon, to have tried to comprehensively protect against predatory triple digit 500 interest in payday loans, and lenders using online practices, and remotely generated checks, they are basically polling and violating the law. In a straightforward way but able to get away with that because of the distance and they are able to pull money out of checking accounts. A lot has to be done on this and thank you for taking a look at this and we will continue to work with you on this. Senator . You and i share common experience, and that is running our own local Consumer Protection bureau, when we were both attorneys general. And when i look at this, i kind of look at the broad scope of possibilities for protection of consumers, not just laying it at your shoulders. One concern i have is the need to do court nation, with what is happening on the state level, understand what is happening on a state level or a local level, and then probably understanding what is happening with all of your sister or brother agencies, that also have overlapping jurisdictions. One frustration that i hear, here it comes again, yet another agency to be talking to without any coordination and so i ask that as you look at each one of these issues, that you look at coordinating with the state and understanding better what state agencies are doing, a good example was already today, with prepaid cards you said there is no regulation. There is in the state of north dakota. I made sure that there was regulation. You can say with certainty that there is none when i know that there arent number of activities going on in states and it is important for us to understand them. I would also say that we have referred north dakota to your Consumer Complaint website, and have gotten really very favorable reviews back. Yet another avenue for people to raise concerns. With that said i would also say that one issue i worked on when i was attorney general, was the issue of bank privacy. I share senator crapos concern about the amount of data being collected. I understand the need to have enough to do the analysis, but we need to be very mindful, of the sensitivity of consumers today, about their information. There is a growing insecurity and if they look at federal government we had not exactly given them reason to believe that we will be confidential with it, or that we will be straightforward. I look forward to the report, i look forward to other enhanced discussions and i want to mention something on payday lending. I was probably one of the first foolish people to way into that area, back in the day and i will tell you a quick little story. The payday lending that was going on, was just as egregious as it is today, it has just taken different forms. But why i was unsuccessful in getting appropriate regulations is that 900 consumers signed a petition telling me to mind my own business. And so we need to be aware that in that lane, there is a desperate need, that is not being fulfilled for shortterm credit, whether this is to buy cars or diapers or whatever that this is. We need to be mindful of that as we look at this that we dont close off the avenue for that kind of credit. I listened to those 900 consumers and i think that this was done incorrectly and i have a lot of concern about what is happening with payday lending, until we have a country that has maybe more economic justice, we are going to need to give people access to that kind of credit. I just wanted to talk a little bit about Student Loans, and ask you your opinion. The Administration Says that they will be cap repayment at 10 . All that this is going to do for a lot of consumers in my state, student borrowers in my state is expand the time. That they are going to have. So they will never be out of Consumer Debt. Senator warren and i have a deal to restructure Consumer Debt. How do you see the restructuring of Consumer Debt benefiting longterm the credit worthiness of americans who currently have that level of debt . This is obviously a complicated subject that depends on individual circumstances and borrowers, but what upset someones credit most of all is ending up in default. And if the payment levels are unrealistic, particularly a lot of young people coming out of school today are not fighting the jobs that they hoped to find particularly in the wake of this financial crisis. And so the incomebased repayment was an attempt to maintain some sort of balance, whether this is the exact right balance of what it should be, is hard to say and i am not an expert on it. If we did an analysis of student debt, and we started restructuring at the way that we set up the ability to restructure this, how could we be at the 10 and shorten the time period of repayment . It depends on the range and i know that this is something your authority is trying to address. It is not the same but there are a lot of parallels. This is sensible loan restructuring, sometimes you have Loan Modifications that end up with higher payments, this is not a formula for success but this has been the winning and the most optimal way of addressing some of the mortgage problems that people are still digging out from. And it could have Student Loans as the same type of approach that could be beneficial to people. One quick comment, we have a state owned bank in north dakota. You are the only one. We have recently announced the program for restructuring student debt. In one month there have been over 1000 applications. It tells you the absolute essential need for assisting people in restructuring this. Thank you. Senator warren . Thank you, and thank you secretary cordray for being with us again. I covered arbitration clauses near the end of the term and students came in thinking arbitration sounded so friendly and inexpensive. But after studying the law they discovered that arbitration stacks the deck against customers in favor of large corporations. They often have a financial interest in remaining in the good graces of the corporation that places lots of business with them, corporations usually hold all of the key evidence in the dispute, but are under no obligation to turn it over, and the arbitrators ruling cannot be overturned even if it contains legal mistakes or factual errors. The bottom line is that when a customer thinks he has been cheated with the bill is wrong or an arbitration clause in his contract makes it impossible for him to get any real help, it is no surprise that many big banks and other big corporations help customers to agree to force customers to agree to arbitration clauses knowing that this means the customer is going to have no real remedy if things go wrong. So director cordrey, as you know, doddfrank requires the study to have a to authorize the bureau to prohibit or limit the use of such clauses based on this study. The bureau released a preliminary report last december, and they were damning. They are everywhere, particularly with the largest banks and they dramatically limit the Legal Options available to consumers. I know that there are additional issues the bureau wants to examine in the final study. When do you think the bureau will have that study . This is an interesting area, where, if you look at what the industry says, and then you look at what consumer groups say, sometimes there is some relation between the two, but here there is almost none. As i understand, congress waded into this area in a way that is more interventionist than congress has been in other areas, where the arbitration act has been viewed by the courts as being a favorable policy in view of arbitration. Under dodd frank this has been barred by mortgage contracts by the congress and in terms of the Consumer Finance what congress has said, there he specifically and carefully to us, is that there seemed to be very different views of this. We are going to direct you, not suggest but mandate, that you perform an appropriate study, a comprehensive study, and make your best judgments about pros and cons of arbitration clauses, and based on the results of that study consider what policy interventions may be appropriate. The bureau has been trying to appeal to that and quite frankly we have erred on the side of this process but ultimately i think this is the right thing to do here. We put out an interim Progress Report where we covered certain subjects, and we have more to come. I believe we have indicated that the that further work on that is ongoing, this is very active and i think it will be completed this year. And then we will be in position to make policy judgments based on that. I think that some people think that we should take forever on that, other people think we should have finished it yesterday. I have my own views but we are pushing along and trying to the work that congress set out, in that framework with 2 steps. But you do anticipate it will be this year . I am very glad to hear that. I have a second question. I am sure that you will tell me that you need to see the final study before deciding if the issue rules for forced arbitration clauses so let me ask the question this way. What kind of evidence would lead you to believe that the bureau should issue rules on forced arbitration . It feels very much to me like a case under advisement in court. I should clearly not prejudge the issue of policy intervention before we finish the study. We are well along but not yet complete. In the end it is going to depend in part on things like, how does arbitration work . Does it provide a meaningful avenue for resolution for consumers, does it not . Why doesnt it . Does it matter how the arbitration is set up, there are a variety of things that we are considering, the other is how it compares alternatives in court. I think that we can all look at that and come to the same conclusion about what kind of evidence that we think matters, but i would really like to today, here if i can, stay away from trying to prejudge that. If the evidence supports that, the bureau is willing to review rules on forced arbitration . Congress gave us a clear task, look at this closely and study this, give us your results and based on those results you can have policymaking that reflects the conclusions that you have reached. I realize arbitration has a very Important Role it can play in our legal system as long as parties choose arbitration freely after the dispute by forcing customers and the arbitration system that banks control this is just another way to tilt the Playing Field against consumers. The cfpb can limit this and i look forward to the final report. Senator crapo . Before i go back to data issues i had one more question about operation chokepoint. Several federal banking regulators are pressuring banks to end relationships with legally operating payday lenders and gun stores. And retailers. This is known as operation chokepoint. Are you familiar with this . I have certainly read numerous press accounts of this, and therefore i would say i am familiar with this. Is the cfpb participating in operation chokepoint . I think that they have a job to do as a Law Enforcement agency, to Police Illegal lending, whether this is online or in person than much of what we are talking about here is online. There is the further issue that has been raised, what about the illegal lending that operates by piggybacking on the existing Payment System . This is not something that the banks like or risk they want to be exposed to. Some of them get to the area of prudential regulation, with the operation risk and risk i am not an expert on. Does this mean you are participating with operation chokepoint . I do not know what you mean by participating. I think that the agencies involved are trying to discuss the appropriate approach to knowing your customer. This is more about the prudential regulator term, at our concern at the Consumer Bureau is that we are supposed to be policing the nonbank lenders as well as the banks and many of the nonbank lenders on the Payment System if they are operating illegally. This is one of the Enforcement Actions i talked about in my opening remarks that needs to be addressed. This is about whether the activity is legal or illegal to me. It should not be about whether this is favored or favored. What i understand again, we just got this in the news reports but what i understand is there is a conscious effort to force legallyoperating payday lenders and gun store retailers to stop their business. That is in the report and i dont know if that is accurate or not. I dont know if that is what people intend or if that is what is happening. The focus of the bureau is on clearing out illegal activity and it is hard enough to do. What advice have you given, if any, to the department of justice . I have not given advice to the department of justice. Let me switch back to the data issues, and mr. Chairman, i have a lot of questions on this and others that im just going to have to submit for the record. I hope that we can do that. I want to talk quickly about this new project on the National Mortgage database you are engaged with. When i lead to you that long list of personal identifiers, but the federal record said will be collected, you indicated that that would be the list i dont know what you call a sworn list this is a term of art that only bureaucrats can love. It is called a sorn. I dont even know the acronym but this is sort of a statement of operational risk, Something Like that. This is excepted but this is also a statement in the federal record or register, that says that this data will be collected. But here is the difference. I believe that in order to access data, we have to secure this from somewhere, procure this or whatever. It comes in whatever format it starts out in, it is already being bought and sold by the industry in that format. For us in order to create the database that i have pledged to you, will meet the kind of criteria i have laid out, identifying personal information. If it comes to somebody in a different form, it needs to be deidentified before becomes part of the database. You are actually collecting all of this information . I do not want to jump to that conclusion. They are collecting information and identifying what may be, depending on what the additional original dataset, out in the marketplace being passed around if, for our purposes it includes that kind of information it will have to be identified before it becomes part of the database. What the fhfa notice says as it will include that information in this notice says that they will deidentify that for some purposes and the question comes back to, is this an unnecessary invasion of the privacy of citizens . When you look at the information that is contained this can be scary. But at a 2013 urban institute conference, prior to the issuance of this notice in the federal registry, the fhfa said that the information in this would be easy to reverse engineer. And i have been told that by many other experts who we have talked to. Is this not correct . I would like to address that. That is a truncated quote, it is cut off. There is more to that and i believe the individual went on to say that the risk is important that we follow this properly. This quote was part of a longer passage and the full passage needs to be quoted in order to put that in context. Taken out of context it sounds worse. I actually watched that on youtube they can do that if they want to. Isnt it possible to reverse engineer . Every expert i have talked to about this says that you can reverse engineer and obtain the the deidentified data. In the Real Estate Market with data that has been on the books for decades, there is a lot of information available, in the Real Estate Market and the Mortgage Market. I recall that when i taught at law school back in the 1990s, my students coming to me and saying, this is the kind of information, this is the kind of information they had my mortgage and purchase price, this is out there and it has nothing to do with whether or not this exists or doesnt exist. This is a robust market. My time is up and let me say i understand this. It is concerning to me that this information is Still Available in the public and private sector. I do have concerns about that but the concern i express today is concerned that the government is collecting this. I think that the rationale for the government to collect this information does not necessarily justify the level of potential invasion of privacy that is involved here. This is a much longer discussion. Let me again state my attitude towards this. I know that you know this but i will say it again. This is an area that is a classic area, where congressional oversight is very important. You are very concerned about this and the public should be concerned about this and your work is making us be on our toes to make sure that we are doing things as right as we can. The gao inquiry has been significant and exhaustive and it will result in a report. We are working with them and whatever concerns that they raise we will take to heart. I am happy to have our staff spend as much time with you and your staff as you would like on this because it is not just something youre interested in. I am interested in this, too. It is important for the agency to get this right if we can. But we have to have information to do our work, rather than just throwing darts against a wall. Which is not something you or anyone else would like. The enrichment of the credit card market or the Mortgage Market, it is critical for you to engage in the policymaking and for us to engage in good policymaking. You cant even criticize this very well unless you have information into whether or not what we have done is good or bad. I am sure there will be much more discussions about this as we look forward to the gao report and we will continue to engage on this until we get it right. Thank you. Director i thank you for your testimony today, and your leadership at this important agency. This hearing is adjourned. [captions Copyright National cable satellite corp. 2014] [captioning performed by national captioning institute] House Majority eric cantor has lost the primary challenger and Tea Party Candidate david 44 to 56 . Of congressman cantor spoke for five speech. After his speech, a newscast in richmond. [no audio] and in the process, raised our kids. One of them is here. The other two are off working. A motherinlaw and mother, brothers, it all starts with family. We know that. I want to thank them. [applause] and then to all of you, so many of you who not only today spent endless hours in the heat with your undying loyalty and effort, i want to thank you for that as well. I tell you, absolutely. [applause] it is not only be hundreds of volunteers. It is also my team. Serve thes constituents of the seventh district in the District Office have continued to serve. But also my political team. They have put in so much extraordinary work to try and win this campaign. They have done so for the last decade or more. I want to thank them [applause] now, serving as the seventh district congressman and then having the privilege to be majority leader has been one of the highest honors of my life. And whatt out to do the agenda that i have always said we are about is we want to create a virginia and america that works for everybody. Efforts asfocus our conservatives, as republicans, on putting forth our conservative solutions so that they can help solve the problems for so many working middleclass families. That may not have the opportunities that we have. We can also put our solutions to work for the most bald herbal. I spent a lot of most vulnerable. I spent a lot of time of education opportunity make sure that everyone in america can have access to that american dream, starting with quality education. Intalk about resources a lot campaign and in congress. Im really proud of the Gabriella Miller first Kids First Research act. [applause] it says as conservatives that we do not believe you ought to spend taxpayer dollars on political conventions. That in fact it is probably better to help cure disease because not only do you save lives and help people, you can ultimately solve the federal deficit problem by bringing down health care costs. [applause] these are the kinds of things that i know will continue to work on. I know there is a lot of long faces here tonight. It is disappointing, sure. But i believe in this country. I believe there is opportunity around the next corner for all of us. I will look forward to continuing to fight with all of you for the things that we believe in for the conservative solutionsause those are the answer to the problems that so many people are facing today. Thank you all very, very much. [applause] cbs news begins now with a breaking news alert. From one of the most shocking upsets in virginia and u. S. Political history greater u. S. House majority leader eric cantor losing the primary. We have team coverage. And chaos at what was supposed to be a victory celebration. Protesters meeting resistance at eric cantors Election Night decision. It is a political upset the likes of which we have not seen in recent memory. House majority leader eric cantor, a seven term congressman, lost his primary race tonight to keep party steve bratt, a political novice, and it was not close. One. Brat has brat celebrated his victory, but would begin with joe st. George at the hotel which was supposed to be the site of the victory celebration. Begindont usually Election Night broadcasts from the losing candidates headquarters, but this was historic on local, state, and national levels. This is all that is left of the cant or Victory Party cant or cantor Victory Party. Obviously, we came up short. A shocking night in virginia and national politics. Longtime congressman eric cantor defeated in the Second District gop primary by Randolph Macon professor david brat despite outspending his opponent by 10 to one. There are long faces here tonight and it is disappointing, sure. But i believe in this country. I believe there is opportunity around the next corner for all of us. Insiders telling us they expected to win by up to 30 points. A recent supporters showed up at the westin hotel expecting a Victory Party. Nothing but shock and sadness by nights end. Serving as the seventh district congressman and having the privilege to be majority leader has been one of the highest honors of my life. Any word to your supporters . After his concession speech, cantor the hotel and swiftly departed via motorcade. Perhaps even knowledge that the ballroom would you rub with progressive immigration protesters. They were forced to leave by Hotel Security and police. And heas done so much has been such a good congressman. Liker longtime supporters virginia, the results dont seem real. There is a war in the Republican Party. Saysngtime republican john he will be voting democrat in november because of the selection. Im a longtime republican and i plan on voting for the democrat. An election that will not be soon be forgotten in virginia and in United States of america. I have been speaking with several political analysts over the course of the last several hours. This was an upset that very few people saw coming. There was a lot of commercial spin in this election, a lot of advise by the ad buys by cantor and he left few weeks. Perhaps they knew something that we did not. Thank you for that. He outspent his opponent by 10 to one as you said. Weree at brat headquarters supporters are in a joyous mood. Supporters are in a joyous mood. This is almost like an impromptu Victory Party. They are attributing it to his grassroots effort. I can tell you this Victory Party was supposed to wrap up at 9 30 but you can see behind me that a lot of folks are still out here. One supporter told me this is like david beats goliath. For that reason, they say they will continue celebrating well into the night. There was not a quiet moment in the room. This is a miracle from god. As david brat supporters learned they beat out eric cantor for the house representing the seven conditional Congressional District rate i have been after mr. Cantor for six or eight years. That sentiment was echo throughout the room. I try to get him to do town hall meetings. He refused. People told him what we want and he would not do it. I voted for cantor the other times but this time was time. Brat pull peoples that reporters that he did not run itt his opponent but run against his opponent as a person but his position. When i go to d. C. , every vote i take will move the pendulum in the direction of the people, away from washington dc, back to the states, back to locality, and back to you. He feels the tea partys image is distorted and in turn, brat may not get support to win. Ares concerned that people doing in the world. We spoke with pat mullins and he says brat as the partys. Or. We are excited for him and do everything to get him elected. Live, this was certainly a surprise for many people. It seemed like brat was surprised as well. He did not have a victory speech written. When offthecuff, thinking people who of guided him to his this point. He will face a democrat nominated at his party convention. Amazing stuff. Even able winner thought it was an upset. Even the winner thought it was an upset. How does a seventerm congressman House Majority leader lose . Is absolutely stunning this could happen. What happened is we are attributing it to two features. First, i think that dave brat did a very effective job criticizing eric cantors support for Immigration Reform and i think that had a lot of residents in the community. Secondly, as you saw in a lot of these shows, what we had is a lot of frustration with washington in general and i think he mobilized that tea party frustration with extraordinary effectiveness and ultimately pointed to a weakness in cantor, that he was not a great retail politician, did not do the town halls, did not have the kind of touch that a lot of republican activists wanted to see out of their congressperson in washington. He got outspent badly but managed to pull out the upset. Money cannot buy anything. We will have you back cannot buy everything. We will have you back. This is jack trammell, brats opponent. He has accepted his partys nomination. He is a professor in teaches courses in disability coaching at Randolph Macon. You can continue to follow this major story and find cantors concession speech and brats three speech on a website. In a moment, we will talk about what it means for the immigration debate and other big issues. We are going to wear out the word shocking defeat an earthquake to describe the turmoil. Is this the last were going to see of eric cantor . Can he run as an independent . He could potentially run as a writein and i think that is the open question that is on the table this evening. If you look at eric cantors speech, he said he came up short this evening. He did not say anything to congratulate dave brat. He did not tell his supporters. O go support dave brat i think what eric cantor is doing is to take a day or two to reflect upon what happened and see whether or not he wants to mount a write in campaign, something that would be very difficult, that would divide the Republican Party in virginia. It would anger the tea party further. He may want to try what Lisa Murkowski did in alaska and see whether there is an opening for this writein campaign. At least, this evening, what was so fascinating is that he did not tell his supporters lets get behind dave brat. He won this primary fair and square. Im supporting him. That was not set at all. Make sure that everyone can spell his name properly. What about big issues . Budget issues will be a big dogfight with the president. What about immigration . If that is gone now . I think it is gone in terms of republican support. I think the shocking defeat of said timer brat and time again that he had been too liberal on Immigration Reform and sync that he was a supporter of amnesty. Saying that he was a supporter of amnesty. That was his major issue and saying he was able to defeat a House Majority leader is sending reverberations through washington i think youll see a lot of republicans have real second thoughts of joining with president obama and the democrats on any form of Immigration Reform prior to 2014. On the next washington journal, congressman paul kozar rarizona. Veterans health care. Later, a writer from the Christian Science monster on the swapistrator position to five prisoners for bowe ber gdahl. Wednesday, but director secretary budget director secretary will be conferred. You can hear his testimony live at wednesday at 2 00 p. M. On cspan three. That peoplee things do not recognize is that during the war of 1812, it was fought until after 1814, early 1815. Americaeally about reestablishing its independence against the british. This was our second american revolution. For flag is the object which Francis Scott key penned the words that became our national anthem. The image in 1995, as the flag was made to look old and and restored. Ole there was a bottom section a was reconstructed. When the flag was moved, there was a deliberate decision by the curators not to do that again. That the flag was becomes a metaphor for the country great is tattered, torn, but still survives. The message is the survival of the country and the flag and we are not trying to make it look routine. Pretty we are making it look like it endured its history and is celebrating its history. This year marks the 200th anniversary of the naval bombardment of fort mchenry during the war of 1812. Learn more about the flag that Francis Scott key wrote about what we tour the smithsonians starspangled banner exhibit. Sunday night at 6 00 and 10 00 p. M. Eastern part of American History tv this weekend on cspan 3. The House Foreign Affairs Affairs Committee tuesday examined the policies of counterterrorism. This is one half hour. The subcommittee will come to order. Terrorism remains one of the most dangerous threats to u. S. National security and our interests worldwide. A recent study by the Rand Corporation found from 20102013, the number of jihadist groups worldwide grew 58 . The number of jihadist fighters double to a high estimate of over 100,000. The number of attacks by al qaeda affiliates increase from 392 1000 attacks. Al qaeda remains a central part of this fight. Despite the death of and so osama bin laden, the group operates in more territory and has more safe havens than it did five or 10 years ago. On this map to my right shows the global threat of al qaeda, the red being al qaeda and the blue being other terrorist groups. The territory generally that they control in the regions. Estimates have grown but they come from all over the world to fight and on the government side, there are about 3000 socalled terrorists and on the rebel side, there are about 8000 fighters. Some estimates put the number of foreign drivers up to 11,000. Al qaeda phillips in yemen and somalia ash affiliates in yemen al qaeda affiliates in yemen alia remained the most dedicated of affiliates. Boko haram are on the rise in nigeria. Andaeda in afghanistan remained determined to make a comeback. The five senior taliban leaders that we just exchanged for sergeant or Sergeant Bergdahl will not make afghanistan a nicer place to live. This subcommittee has explored these details in great detail the last 18 months and it seems the situation is getting worse, not better. The facts suggest that the fight against al qaeda and their affiliates have gotten worse as well. I added two amendments to be Defense Intelligence authorization on this issue. The director of the National Intelligence must report back with a comprehensive strategy to combat al qaeda and its affiliates including a definition of how the it ministration views these groups. Is secretary of defense required to contract that administration to combat al qaeda. The was necessary because administrations rhetoric has been all over the map, literally ranging from nearly defeated to a growing threat. Looking closer at the ct bureau itself. I look forward to reading its findings sooner than later. Today we will hear from ambassador tina , the new coordinator for counterterrorism and the department of state. The Administration Says that is one of the top foreignpolicy goals. If that is true, it does not make sense to me to let the coordinator position for over a year. Now we have an ambassador and im glad to see that that position is here. The mission of the state Department Counterterrorism bureau is to develop coordinated strategies to defeat terrorist and secure the cooperation of international partners. Is an Important Mission very few of its resources are being spent on evaluating taxpayer dollars. Just three outside evaluations have been done since gao determined the need for evaluations. Bureau has yet to complete a single impact evaluation, the most regressive valuations that truly measure whether or not money is making any difference. It is not clear why it took the office so long to get those three evaluations. It is not clear to why the bureau is underfunded devaluations. Only one external violation with currently on the docket. We will have plenty to talk about with our ambassador. Terrorism is anatomy we cannot afford to it nor or underestimate. Lets turn to the Ranking Member from california. You for coming and i know she has to leave for an Important International trip. Our efforts against terrorism can be divided into five general categories. The threat of and military force, which is the responsibility chiefly of the pentagon, our sanctions activity, which the state department is very involved in, but is the focus of the treasury department, and our intelligence communitys efforts both in terms of gathering and analyzing intelligence, which of course the state department does as whatever black in,or community may engage and finally there are two areas with the state Department Takes the lead. One of those is assistance. It is to our allies abroad and in terms of our training grants is the. , and the other outreach on the ideological front but with diplomacy. Focus onre today to the issue of counterterrorism within the state department which directs u. S. Government efforts and coordinates our policy. This agency has a history going back to 1972 after the munich master of Israeli Olympic athletes. The budget has declined munich massacre of israeli over the cap please. The budget has declined as of late Israeli Olympic athletes. The budget has declined as of late. There is a program that trains foreign Law Enforcement betting counterterrorism and offers assistance to foreign governments on a fit on effective counterterrorism techniques. I would hope that the government of nigeria would be more anxious to take advantage of our efforts in this area. There is the Regional Security initiative which strengthens the capacity of foreign allow fors to regional cooperation. Finally, there is the office that is part of our Public Diplomacy efforts and i will hope that the state department will have on staff and consult ash consulting relationship of muslim scholars so we are in a andn to argue for koranic verse four koran occurs that such for koranic verse that adopting hundreds of schoolgirls from a school is not consistent with the teaching of the muslim prophet. The Government Accountability toice have been critical monitoring your counterterrorism efforts, as has the state Department Inspector general. Is percent of the budget spent on monitoring and evaluation. Focus on thent to importance of sanctions, which i realize may not be directly applied by your office. Our ownnt take sanctions laws seriously and enforce them, we cannot expect the rest of the world to do the same. The fact that iran has been brought to the table as a result of sanctions policy. Now we have the french bank par ibas, which has been accused of , violations ofns sanctions, u. S. Law, particularly acting as the anchor banker for the khartoum regime, a state sponsor terrorism, and one would hope that the state department and your office, ambassador, would treasury pushing treasury to be as tough as possible in this instant. Rather, hopefully with your voice, it would be a strong voice for tough sanctions actually applied to those who intentionally violate the law. With that, mr. Chairman, i yield back. The ambassador tina kaldanow is the ambassador at large for the counterterrorism of the u. S. Department of state. She previously served in various abroad in afghanistan, bosnia when herzegovina, and serbia. Mentioned,ing member the ambassador is on a types get also i will dispense with the rest of the introduction even though the resume is long and good and i will go straight to the witness for statement. Thank you very much, mr. Chairman. It is actually up to you but if youut, prefer, i have submitted the testimony for the record. If you care to, we can go straight to questions. I have some comments that i can make and make introductory remarks, but it is your choice. Ambassador is correct. We had a written statement. If you wish to go ahead and summarize it and maybe mention some things that are not in it, that is fine and we will go to questions. I think the thing i would highlight the most with the written testimony and what i was prepared to present today is precisely what you highlighted at the outset of your comments. Is an opportune moment for a hearing because it is an important time in our counterterrorism efforts. The changing threat is also what i would highlight. The threat continues to evolve from something that was more centralized and hierarchical in terms of structure of the network toward something that is far more diverse and diffuse in terms of structure and its components. I think we recognize, in my bureau, but more broadly in the u. S. Government, that to succeed against a more decentralized structure among the terrorists, we have to adapt their own approach and we have to be flexible and nimble. That has become clearer over time. That all thesay things you mentioned, you discussed an array of threats and variety of groups that concern is. You mention syria, which continues to build as an issue and we are paying close attention to. If whole variety of affiliates of al qaeda as well as what we call likeminded group, not formally affiliated but a number of the groups have expressed some sort of institutional affiliation affiliation is too strong a word, but they have indicated sympathy. To succeed against decentralized network but one that is geographically diffuse, we have initiated a number of things programmatically but also in changes of policy that we believe address the threat as time goes on. We can talk a little bit about the resources that we are dedicating to this. The kinds of programs that i am putting forward we have a whole array of programs that we try to levy with our partners. I should say that the president has articulated a model in which we are moving from a very direct actionoriented type of approach, where the United States is doing the bulk of the work on coward counterterrorism. We will continue to defend our interests robustly. We must. What were finding all across the globe is that these groups that are now more diverse and diffuse are also posing challenges in local areas to local partners that we have. G toeed to be workin find a commonality of interest and a give them the skills, capacity, and the kinds of resources that they need in order to address that threat affectively, which is in their interest but also in hours. Downsition ourselves well the road so that we do not have to take out large military efforts. We have ways of addressing that before we ever get to that. Again, i am happy to talk about any of those things, including some of the issues you raised about the actual implementation of our program, depending on what your interests are. A few questions. The Ranking Member of diluted to alluded tog his this during his openening statements. The network, how much money has United States government frozen regarding the network that we know . Published report that we have is the terrorist asset report we put out on an annual basis. Last one we have was published as of 2012. It is retrospective. Unfortunately, we do not have figures that would encompass the latest. As of the end of 2012, we have not frozen is typically any ,ssets from the Haqqani Network at least not as far as report details. But there are things to bear in mind. One is the report focuses heavily on the state sponsors of terrorism. The cup the hot connie group is not a statesponsored group. Bankingtes outside the network where we would seize or freeze. I want to highlight something that the Ranking Member mentioned. The power of our sanctions and designations lies not always and how much money we freeze or sees as sieze as assets in the United States. Often times we take that designation, moving to the u. N. We are able to mobilize a series of efforts that bring in the entire international amenity. International community. It raises the cost for that one isual so that no doing business with them. These are the kinds of business things from these the kind of things from a moral and pragmatic standpoint that we are able to do through sanctions. We regard them very seriously. I think her treasury colleagues would say the same. We are constantly talking to our partners overseas in order to get them to take those obligations seriously. We also put a lot of effort against giving countries the skill set and institutional structures they need to combat terrorist financier it finance. Do you know any organization that has seized any assets of the network . I dont have that information with me now. It may be hard to track because i dont know that i have access to every country cost seizing or freezing of assets. We will come back you with this full enhancement. Same question for boko haram . Similar answer because the information we have is as 2012 and they were designated as a organization in 2013. I do not have that information. We can look within the u. S. Context or outside of it. We can provide that. When will the report be updated . Basis,one on an annual usually in may but for the preceding calendar year. What does the money in your budget go for . The money in the budget outside of the ct bureau . It goes for an array of programming. I want to correct one thing that mr. Sherman had said. Im not sure where the 22 me and figure came from. Forfy 15, we will be asking a total of where does the money go what does that money do . Taxpayer wants to know where that goes. What do we say . Absolutely. Does, is it builds capacity among our counterterrorism partners all over the globe. What does capacity mean . It means a variety of things. Im from texas, would you simple for us. Tell us what capacity is. It means we have prosecutors can prosecute bad guys. It means we have judges who will judge those people within the law. Of does it go toea
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