It was at least fair, where the 1 were getting 45 and the bottom 99 were getting 55 . What is the configuration now . I might venture to say, mr. Jeffries, that the 99 are getting zero and the top 1 may be right now at 100 . So im asking for the conference to go and work for america. Not this configuration, but to in the 99 investment america. To be able to take the c. B. C. Budget and look at some of the tax reforms that could be utilized, to look at our job creation, which would include the maintenance and repair for public transit, highways, airports, port, railroad and bridges. The houston metro would appreciate having the opportunity to expand and create work from those who would on the rail lines to those who would build the rail cars, to those who would run it. And the opportunity for people going to work to ride on it. Work force Development Programs such as the Work Force Investment act, programs that ive had in times legislation ive introduced in times of high unemployment, to gively give those unemployed a say to pend while they retrain and retrofit themselves into new jobs. Veterans programs which provide for investment in our veterans, one of the greatest gifts we could have given to the Second Generation of veterans was a second g. I. Bill that democrats passed for the returning iraqi and afghan veterans. They provided opportunity. So, i simply come today with a number that, as i close, that i wanted to leave. Maybe my friends in texas will understand why this is so drastic. Because were losing out of the Gross Domestic Product in texas some 15. 2 billion. 153, losing 1,53,541 jobs in the state of texas alone. Someplace where theyre celebrating that theyre creating jobs. The sequester is causing the loss of jobs all across america. So tomorrow well be standing against the snap cuts that will be coming on november 1. Through mr. Obamas and the Democratic Congress or caucus support we passed stimulus that gave more food money to those who are in need. Why couldnt we keep that going . Simply to keep that going. But on november 1, because we have not acted, this congress will shut down the food for those who have gotten just a little bit to feed their family. So i am hoping that when they go to conference, what will be on their mind is their pledging allegiance to the flag of the United States of america, not to the 1 , but the 99 and we will come back out of this economy and there will not be a tale two of americas. But it will be one america where everyone has an opportunity and thats the model of america, united, investment into more than just a few people, but to a lot of people, giving them the opportunity to build this economy. I thank the gentleman for yielding and i thank my constituents in houston for understanding and recognizing that we must Work Together to build a better houston, a better texas and a better america. I yield back. Mr. Jeffries i thank the distinguished gentlelady from texas for a very, powerful, strong, thoughtful and comprehensive remarks and hopefully as we move forward in this congress, with the Conference Committee that representative lee just discussed, they will take heed to her plea that you keep in mind those in america and the middle class and working families, those who aspire to be part of the middle class, and be compassionate as we move forward to address the issues that confront this nation. Now, earlier this month, as a result of the reckless behavior of some in this house of representatives, we experienced 16 days of a government shutdown. It was a legislative joyride that was doomed to end in a crash and burn scenario as it did. And unfortunately as a result the American People have been left with the damage of a 24 billion hit to the economy in erms of loss, economic productivity. Thankfully as a result of the agreement that reopened the government, both sides agreed to finally move forward with the appointment of negotiators to try and resolve differences in the House Republican budget and the Senate Democratic budget and move forward with a plan for america. That both reenergizes our economy and deals with the longterm deficit problems that we will have to confront. The c. B. C. Budget that has been discussed here on the floor of the house of representatives we believe provides insight into the type of things that should be considered by the negotiators in the house and the senate as they move forward. I would note paraphernalia thetically that partner thetically that partner thetically that though the Conference Committee is just at the early stages at this point in time, this process really should have occurred months and months ago. This house passed its budget in. The Senate Passed its budget shortly in march. The Senate Passed its budget shortly therefore. And democrats in the house and the senate have been calling for the appointment of conferees since the early spring. But for some reason there was a refusal amongst our friends on the other side of the aisle to move forward, but were thankful that at this point theres an agreement finally to sit down. The American People have demanded that we attempt to find Common Ground to resolve the issues of concern for this great nation. Now there are two different approaches that have been put forth. Our approach is designed to deal with the deficit problems that we have in a balanced fashion. The other approach i believe is designed to balance the budget on the backs of the most Vulnerable People in our society. Children, working families, the poor, the disabled, middle class folks, senior citizens. Now, some may say, thats just hyperbole. Well, what does the budget on the other side of the aisle actually do . It cuts assistance pursuant to the supplemental nutrition assistance program, snap, by 135 billion. Thats not hyperbole, thats in the budget. In a country at this moment where 50 Million People are hungry, 18 million of them children can. The budget put forth by the other side of the aisle also cuts spending on higher. Ducation by 168 billion thats not hyperbole, thats in the budget. Making it more difficult for young people in this great country to access the American Dreams. Young people who are already in a debt crisis, Student Loan Debt in this country exceeds 1 trillion. We should be doing more to help people get a higher education, not less. Not less in this country. The document that was presented by the other side that will be subject to negotiation at the Conference Committee also cuts assistance and spending on medicaid by the amount of 810 billion. Thats not hyperbole, thats in the House Republican budget. Notwithstanding the fact that the majority of people who benefit from medicaid assistance in this country are actually children and the disabled and senior citizens. So weve got very different priorities, blue prints, road maps as it relates to dealing with the problems that we confront here in america. The balanced approach that we advocate for essentially has four different elements. First, we believe its important to invest in the american economy. Its time to invest in america. Invest in job training and education, transportation and infrastructure, research and development, technology and innovation. Lets invest in america. So we can create increased economic activity. Were in the midst of a very schizophrenic economic recovery. Its a recovery that has disproportionately benefited the wealthy in america. Lets just look at the facts that have been laid before us. Weve got corporate profits that are way up. Stock market way up. C. E. O. Compensation way up. Productivity of the American Worker way up. Yet wages have remained stagnant and unemployment is still stubbornly high. Working families and middle class folks have been left behind in the context of this recovery. Thats why we believe the first element of any budget has to invest in america. Because if you invest in america , you increase economic activity, you increase economic activity, you raise consumer demand. You raise consumer demand, the economy grows. If the economy grows by definition the deficit will be reduced. And let me also note, despite all the rhetoric from some of my friends on the other side of the aisle, under this administration , barack obama, the deficit has ctually been reduced by half during his fiveyear five years in office. In fact, i think as a percentage of g. D. P. , the deficit has been reduced to a degree that has not been seen since the drawdown in the aftermath of world war ii. So we hear a lot about fiscal irresponsibility directed at the white house, notwithstanding the fact that this white house has presided over a nearhistoric level of deficit reduction. Invest in the economy. Second thing thats important is that we should get rid of some wasteful corporate loopholes that have outlived their usefulness. If we just close or change the or modified some of the benefits that oil and Gas Companies have received, theyre making record profits, theres no reason for the loopholes and the benefits and the subsidies that exist right now. If we just were to address them, we could save the American People 25 billion over the next 10 years. If we were to change some of the loopholes that actually incentivize companies to move jobs overseas, we could save the American People 168 billion over the next 10 years. If there is such a moral imperative not to saddle our children with the debt burden that we have in america, if thats such a moral imperative, cant we not agree upon a single loophole that can be closed in the name of the children and the grandchildren of america . Not one . Thats what we believe is the right thing to do here in the c. B. C. He third thing that i think all of us on this side of the aisle are willing to concede that there are probably some areas where efficiencies can be found in the name of fiscal responsibility for the American People. Spending reductions sensitive to the fragile nature of our recovery should be part of any balanced approach to dealing with the problems that we face n america. And we believe that any budget agreement has to stand up for important social safety net programs in america. Like Social Security and medicare and medicaid. Programs that have been phenomenally successful particularly in reducing poverty amongst older americans. There are times when these programs are unfairly demonized. And made part of deficit reduction talks, even if the facts suggest they dont necessarily have a place in that regard. Social security, for instance, mains a solvent program at this moment and into the foreseeable future. Social security has nothing to do with the deficit. That in fact was a statement hat Ronald Reagan made in 1984 in a debate with walter mondell. It was true then, its true almost 30 years later. When you think about the attack on our social safety net programs and the obsessive desire to change, decimate socalled entitlement programs, often this discussion is raised in the context of the enormous debt problem that we have in america. 16. 7 drl. Certainly its a problem trillion. Certainly its a problem that weve got to confront in this country. But what also is often not clear is the fact that spending on socalled entitle am programs entitlement programs really do not account for the debt problem that we confront in america. And this is what this poster board and the chart so clearly illustrate. In fact, much of the debt that we currently confront in this america can be tied directly to policies emanating from the eight years that george w. Bush was at 1600 pennsylvania avenue. More than half of more than half of our debt can be traced to the failed war in iraq, totally unjustified in search of weapons of mass destruction that still havent found. Und and never will the debt can be tied to the war in afghanistan, the fact that it was misprosecuted as a result of being distracted by the joyride that took place in iraq costing lives in american treasure. The debt problem can be traced to the bush tax cuts passed in this congress in 2001 and 2003, without being paid for. And then, of course, the attitude towards wall street resulting in reckless behavior by some that collapsed the economy, robbed mills and mills of americans millions and millions of americans and the resulting bailout that took place and the need for an economic stimulus package through the recovery act, all of that accounts for a significant amount of the debt that we now confront. So now when both sides sit down at the negotiating table in the context of the budget committee, facts, d do so with objectively established as opposed to putting a bulls eye on the back of important social safety net programs like Social Security and medicare, just because some folks in this capitol dont like those programs from their very inception. The last observation that ill make is that the budget that has been set forth by the c. B. C. And by democrats in the house and the senate, as compared to the budget that has been been put are by the house g. O. P. Very different in the context of how we review and evaluate tax fairness in america. I think some would be surprised to know that in the house g. O. P. By t, it cuts taxes owering the top tax rate for highincome americans from 39. 6 to 25 . His is not a reagan budget supplyside economics. This isnt George Herbert walker bush or george w. Bush in 2001 or 2003, this is the current budget that we are going to have to negotiate and find Common Ground, cuts the tax rate from 39. 6 to 25 in order to slash all of the socialsafety net programs that we reviewed earlier. Wrongheaded policy . Well, as i close, and as this chart illustrates, when the top tax rate was at 39. 6 , notwithstanding the fact that so many people on the other side of the aisle in good faith constantly say that type of tax rate is the type of rate that hurts the economy, but under the eight years of the Clinton Administration, 39. 6 top tax rate, 20plus million jobs created. Eight years later, when the top tax rate was cut by this to 35 , we 39. 6 jobs, thats an applestoapples comparison that discredits the notion that lowering the tax rate somehow stimulates growth in the economy when the eight years of the Clinton Administration as compared to the eight years of the Bush Administration clearly discredit that theory in the manner that a former president referred to as voo do economics. So, im just hopeful as we move forward with this Conference Committee, weve got big differences, but that we can sit down and endeavor to find Common Ground, do the business of the American People, keep government open, invest in our economy, protect our social safety net programs and help create prosperity for the greatest number of americans possible. And with that, i yield back the alance of my time. The speaker pro tempore the gentleman yields back. Under the speakers announced policy of january 3, 2013, the chair recognizes the gentleman from california, mr. Roirk, for 30 minutes. Mr. Rohrabacher, for 30 minutes. Mr. Rohrabacher well, here we go again. Over the last 25 years, i and a small band of just refuse to go along to get along have engaged in a constant fight to maintain the intellectual property of american investors. The intellectual Property Rights of our invent tors is something that has been a great treasure. Our Founding Fathers felt so strongly with technology, freedom and with the profit motive, that that was the formula that would uplift humankind and they believed in it so much that they wrote it into our constitution. Article 1, section 8, clause 8, the Congress Shall have power to promote the progress of science, huesful arts by securing for limited times to authors and inventors, the exclusive right to their respective writings and discoveries. While this provision in the constitution and only place in the constitution, the body of the constitution where the word right is used. Bill of rights comes into the amendment process of the constitution but our Founding Fathers thought so highly of technology and tech noling advancement, the right of inventors was included in the body of the constitution and this provision served america well. Its led to general prosperity that we would not have had otherwise. It has led to National Security where we faced foes who outnumbered us so heavily but we relied on the technologies that were developed to help our armed forces defend themselves and thus defend the country and of course, served us well, because the technology and the freedom we have has created a society where ordinary people, decent people can live very fruitful lives and can enjoy the fruits of their labor. Americans work hard. And this wasnt just created by hard work. Thats the important thing to remember. Without hardworking americans, it wouldnt have worked, but the Technology Made the difference. People worked hard all over the world and worked long hours and with n poverty and we technology and thus what we have had is a success that has uplifted the common man and served as a light of hope for all of human beings that we can produce the wealth needed for regular people to live decent lives. That is the secret of americas success. Technology and freedom, and yes, perhaps, can include values. But it was our strong patent system and a respect for law that made the difference in that technology and freedom. Yet today, multinational corporations run by americans want to diminish patent protection in the United States. We have had the strongest patent protection of any country in the world. Yet, we have had for the last 25 years, major, major efforts to diminish the patent protection that we have and to what harmonize it with the rest of the world and just happens that the european and japanese patent systems are much weaker and offer less protection for the inventors. Over the years we have had to fight back and turn back to weaken the patent system a number of times. I have been part of that struggle. I remember when they were demanding for example and we defeated the bill published a patent, american published patent act or Something Like and what it was saying, it was the american patent published act. After 18 months, if someone hasnt filed for a patent, they were going to publish his Patent Application, meaning all the secrets would be out in the world and tried to push that over on us and we barely defeated that but we defeated it with a bipartisan effort led my marcy kaptur and myself and tom campbell and others. There was the effort to say that as soon as one files for a Patent Application, after 20 months, the ticking of the clock starts and you could end up with maybe five years of patent protection after it was issued. We have said 17 years after you are given the patent, you would then lose control and 17 years where you own your patent. They tried to change it and in a way if it took the Patent Office 10 years or 15 years to develop a concept of a new idea and to figure out how to patent that, only two years left. They were trying to destroy the patent rights that our people have destroyed and sometimes we turn those efforts back. Other times, we had to compromise and other times like last time around, we lost. For example, we changed the fundamental law over our objection, this body changed the fundamental principle that patents were to be given to the first to those who invinted. Thats been the fundamental guiding post. We changed that last year. We changed that to say, not first to invent, but the first person who files for the patent. Of course in an age when you have people who are able to sneak in on your computers and hackers around, that could turn out to be a catastrophe. And already, we could hear rumblings of that from china where patents are being turned out and Patent Applications are being put in and yes they can prove they were the first one and even if they found out about it some other way and cant explain it, no, they get the patent over the people who have done the work. Once again, i find myself fighting for the small inventors struggling to defend the patent rights of these people to own and control their own invention. There will be a haring tomorrow in the Judiciary Committee. Now, theres always been an excuse to change the fundamentals of the way our system works. Because weve had the strongest patent system in the world and theyve always tried to find some excuse of changing and and theres some Sinister Force at play that demands that we change the fundamentals of our patent system. Weve heard it before. For example, they claimed that there were sush marine patents submarine patents. Thats a derogatory term. That must be undercover or something suspicious about that. Well, they used that as an excuse to try to limit the time people owned their patent. Then they used that as an excuse to publish everybodys Patent Application even before it was issued. This time the new word, the new buggyboo that theyre talking about is and the scary word or the day is patentrol. Patentrol is being used as a word and they probably hired a very sophisticated Public Relations company to come up with that patentrol term. Theyre being used to fundamentally change our patent system, again, in order to diminish and damage the rights of small inventors. Well, they cant say that, that thats their purpose, so they have to come up with a scary word like patentrol. These socalled patentrols are holders are Patent Holders or they are companies which represent Patent Holders. Meaning people who own patents. They are engaged in defending the rights of those patents that they own. They either they purchase these patents or their Companies Purchase these patents. Basically from small inventors who didnt have the resources to defend and to enforce their own patent rights. Now these small inventors are now the partners of some of these companies or some of these individual investors, but it comes down to this, the inventor or the investor owns those patents. If you buy a piece of land or a participant from someone, you have that right. These patents that they own are just like any other patent granted by the Patent Office. But huge corporate infringers would have us believe that these patents are in some way unfair or evil. So what makes these patents different than the good patents that these very same corporations own . There are no differences. They are the same patents. The same kind of patents. Some of these multinational corporations have bought patents from small inventors. They own that and they enforce them through a type of legal action when theyre infringed upon. The multinational corporations ave coined the scare terms patent assertion entity or p. A. E. Theyve coibed nonpracticing entity, npe, and of course all that n. P. E. , and of course all that means patentrol. The p. R. Blitz which was created by a Public Relations company who made a lot of money coming up with that boogeyman is used to change the basic Legal Protection of american inventors and, yes, change the Legal Protection of people who have bought the legal rights and own the intellectual Property Rights that they bought from the inventor. I suppose halloween is the proper time to talk about scary petroleums. How frightening. The socalled patentrol has been identified, this is how they do it, as being out for profit from technology that he did not invent. My, my. Someone who is trying to receive a profit by making an investment into something that they didnt build themselves. Huh . It doesnt doesnt that describe banks and Insurance Companies and everybody else who put investments down and hope that theyre going to have a return from those investments . But they themselves arent making anything. Theyre using money and paper and contracts and helping people who need help. I have consulted with a number of outside individual inventors and groups and they have reaffirmed that the legislation being proposed by the Judiciary Committee further disadvantages the little guy against the deeppocketed multinational corporations. This is achieved in the guise of targeting the socalled patentrols. Pay attention to the patentrol but dont Pay Attention how this weakens the small invepter. This means that persons or companies who have contracted with inventors who really need the help, to see that his or her patent rights are respected, are going to be undercut. How horrible it is of making business out of helping small inventors see to it that their patent rights are enforced. Proponents of this legislation are covering up the fact that they have stolen someone elses patent rights and now want to change the system so they can get away with it, so that someone whose patent rights they dont own, that they have blatantly and arrogantly grabbed and put into their own technology projects, that they dont have to pay for it. And when theyre challenged in court they can play, oh, this is a patentrol. No, what we have here is Large Companies who are willing to take from the little guy, which will in the end, yes, maybe be a shortterm help for those companies but it will undermine the progress of the United States of america. Undermine our ability to create wealth in our society that will make sure that our people can outcompete foreigners. Most of the corporations who are complaining about this are multinational corporations run of course by americans, sometimes not. Often the only way that a Small Business inventor can enforce his patent rights is by hiring a patents aertation entity as an advocate, meaning a patentrol. Sometimes the big guys want to simply steal the idea and say, sue me, because these little guys, these small inventors which are the main spring of so many ideas, they dont have the money to fight the Big Corporations. And now the Big Corporations want to make it impossible for them by changing the very law that protects them and protects their what they have created and their invention. One of the biggest alleged crimes of these nonpracticing entities is they dont make anything but just shift money around. Like i say, how horrible that is that some people make money in our society, although you cant really see what they actually make with their hands. Banks, lawyers, investment companies, Insurance Companies, well, they make money but they dont necessarily make things. But they are important to our economy and even more important to our economy are those inventors, if we change the rule so Big Companies can steal from them, those inventors will not be there in the next generation to come with the creations that uplift our people and defend our country and permit us to have security and prosperity. We were told that trolls are different. Lets put it this way, they are different, but theyre trying to make money off something they didnt actually make themselves but they arent trying to, as our multinational corporations are trying to do, to infringe on other peoples Property Rights. Look whos pointing the fingers. The arrogance of these megacompanies warning us against small investors having the help of some investor, this is nauseating. These attacks on the rights of Patent Holders are seen as valid and virtual white house. But if they happened against virtual virtuos. Remember the big groups that are angry because because they used patented Technology Without paying the owners . Justifying it on the idea of a lack of the owners enforcement, so these companies say, well, the patent wasnt being enforced so we could use it and now they were really upset when someone wants to enforce that patent. Now the rights of the patent of the patents are being enforced but someone who paid the inventor to sell them him that. A land own who are chooses not to develop a farm or land could be described as a nonpracticing entity. Should we make it simpler and easier for others to take or steal the land because that owner isnt using it . Should we make it harder for him to continue to own his land simply because he doesnt use it . Or isnt using it like others would want him to . How about a music lover who purchases the rights to a song or an entire catalog of artists songs. Should we make it hard for him to defend his ownership rights because he wasnt the musician . He didnt make the music himself . This campaign by multinational corporations and some of the worlds richest men is an attack on the little guys right to sell his intellectual property or to partner with someone else who can help him defend what is rightfully his. I dont have the time to go through all of the problems of this legislation point by point, i will refer to several problems brought up in this bill. The claim that this legislation is designed to go after patentrolls, to make them more accountable, thats what they claim, but how are they doing it . Theyre doing it by making it harder for every Patent Holder to defend his patent rights, every ordinary american. They claim they are making it easier and less costly to defend baseless claims of patent infringement. While they claim these are bad patents that should any of have been issued, they claim many things. Section 3 of this bill, for example, makes it easier to defend against false charges of patent infringement. But it also adds significant new burdens on to a Patent Holder who seeks to defend rightfully seeks to defend his patent rights. In addition, this section increases the potential down side risk of suing to defend ones own patent rights. We should be doing everything we can to make the system quick, cheap and simple to defend. Both to defend patent rights and to defend against baseless charges of infringement. But this legislation is primarily geared toward making it harder, more costly, more time intensive. That is exactly the wrong direction to take. The requirements will also require very thorough and expensive prefiling discovery processes. Again, discouraging underfunded Patent Holders from defending their patents. While there are limitations on a fishing triptype of discovery that may hold costs down and also protect Patent Holders from discovery i. P. , those protections dont overcome the provisions which make it more difficult to defend, perfectly respectable patents. In addition, by moving to what is essentially a loserpay system which is what this legislation is attempting, the little guy is once again put at great risswhk suing a Big Corporation for risk when suing a Big Corporation for entitlement patent he infringement. So now the lilling guy little guy might have to pay for the legal fees. The concept of fee shifting is alien to this countrys history but very common in europe and it has been demonstrated to have a Chilling Effect on litigation at the expense of the rights of those who cant afford to sue because they cant afford to lose. The corporations, they can afford to lose. Theyre personally not coming out and having to pay anything. But the small inventor, hell lose everything in his life if he loses. He will owe them that much money. And the Big Corporations of course are very capable of handling their own legal fees. Section 4 requires Patent Holders who believe they are being infringed upon to discuss all of his partners and assignees and other information to court and to the Patent Office as well and to the accused infringers. Well, what we have then is if you sue somebody because theyre infringing, theyre stealing your intellectual property, you have to give up all of your privacy rights and from that point on youre an open book to anyone who is your competition, anyone who is youred a never safer ed a your adversary and theyll probably, as we see, as happens with these large corporations, you now are wide open to victimization by the corporates. If a state or the government infringes on your patent, there seems to be a provision in the bill that could say that you cant sue to get paid for what the government has stolen from you. That has to be looked at and looked at by the court. Section 9 claims to make technical corrections to the bill but make changes the way Patent Holders are allowed to preserve their patent rights. One of these socalled protections removes section 145 them e law which alouis to bring suit if they arent getting if they arent doing their job for some reason, whether its corruption or incompetency, the patent applicant by this rule, by this bill, will not be able to seek justice in the court system. This is totally inconsistent with what our National Tradition is all about. It concentrates all decision power in the Patent Office with the exception of one appeal to the circuit courts which is required to give deference to the Patent Office. This is the opposite of what we want to do. We want to make sure that people have a legal right if our government is off base to appeal it to another branch of government. Thats why we have the judicial and the legislative and the executive branches of government. Here again, part of the bill going in exactly the wrong direction. We reviewed this legislation and it is the title is Small Business perspective on a good patent bill. This is the analysis of the patent bill that were talking about and it quotes this source as would repeal 35 u. S. C. 145 and thats the one i was just talking about which is long rotected patent applicants determinations by the Patent Office, they note here since 1836, anybody could repeal a decision within the Patent Office, but now they want to take that away, diminish the rights of our inventors which will mean we will not have the same type of innovation and creativity that we have enjoyed. All of this is being done on the notion that those evil tro lmplmp s are driving up the number of patent litigation. A report from the world intellectual association and General Accounting Office says that is not true. They may be backing up you the little guys but that is not a major cause of litigation. We have the experts telling us that their excuse is wrong and the g. O. P. Suggests there are many things we can do but what is being suggested in this this bill and others are suggesting is going the wrong way. The bottom line is this these provisions make it more difficult for the Patent Holder to defend his rights and raises the stakes so the downside of pursuing an infringe meant in cases become more costly. We are hurting the little guy and making it difficult for the ideas, the creativity of our country where we can be brought to play to uplift the lives of our people, to create more energy, create Higher Quality goods and compete with the people in africa and in china and india. But if we are going to do that, we have to got to have the best technology and taking our Great National asset of a Patent Office that has helped our ountry and helped keep our country safe by producing the best Defense Industry and the average americans can outproduce their counterparts overseas. We are going to take the genius of our inventors and we are going to squash it by giving in to corporate interests, of multinational corporations that not owing their allegiance to us but their company which they see now as an international company, not even an american company. I ask my colleagues to join me in rejecting this attempt to diminish the fundamental Property Rights, intellectual Property Rights of the American People in the name of some troll or scary title that would get us away from the basic fundamentals of what is being proposed. I ask my colleagues to join me n opposing this legislation. The speaker pro tempore does the gentleman yield back . Mr. Rohrabacher i yield back. The speaker pro tempore the gentleman yields back. Mr. Rohrabacher would you like a motion from the floor to adjourn . The speaker pro tempore the gentleman from california. Mr. Rohrabacher i do now move that this body do now adjourn. The speaker pro tempore the question is on the motion to adjourn. Hose in favor say aye. Those opposed, no. The ayes have it. The motion is adopted. Accordingly the house stands annual convention on monday heard from Consumer Financial director. Bureau this is 40 minutes. Thank you. Good morning, everyone. It is an honor to be here this morning to begin my mba executive service during the year of the nbas 100th anniversary. I am truly excited to be serving our membership with such a great team of professionals. Us in the room know to well the 2013 has been a year of regulatory implementation. Many of the new rules we are implementing were a direct result of the money 10. Frank act. E 2010 doddfrank we thought it would be appropriate to hear directly from the policy leaders at the forefront of that change. Their jobs and responsibilities are challenging, protecting consumers and this finance Real Estate Market from the robins of the threat of the past and simultaneously crating an environment of economic growth, stability within the marketplace. Applaud them for their inclusiveness during the revelatory making process and understand the importance of coronations and of coronation input and industry professionals. Pleasureves me great to look on our first honored guest. Designatedbama Edward Demarco the director of the federal housing act agency. Previously, mr. Demarco served as a chief operating officer and see peter and Senior Deputy director cents tossed in section. Director indippy fhfa. Finally, during the past four mba in its members have are yed our operative open and collaborative relationship can please welcome ed demarco. Morning, everyone. Thank you for inviting me to speak this morning. I would like to start by congratulating the Mortgage Bankers association on this hundredth annual convention. That is quite a history that traces from a much different and limited housing system to one that creates our greater access to credit but that is recovering from a nationwide trauma in housing. Is that thes recovery is taking hold. The opportunity for rebuilding our Housing Finance system to a stronger, more competitive and more resilient market is before us. Yet challenges are all around us. An array of new mortgage rules, many are developing a response to the regular tory failures and creates uncertainty across an impact. We have the opportunity to rebuild a secondary mortgage political the regulations are numerous. Havee mae and freddie mac been in conservative sure in conservatorship hearing a lot has been accomplished. The enterprises financial position has stabilized. Weve made significant progress in the conservative in the conservatorship of business. We begun the process of building a future housing system. But much remains to be done. The singlefamily Mortgage Market remains heavily supported by taxpayers. While there is progress on the legislative front, the timing of rotter housing a broader Housing Finance reform remains uncertain. Objectivehe needed was to stabilize the enterprises operation and to ensure that markets continued to function. The second phase focused on developing tools to assist troubled homeowners while reducing credit losses. The next phase is determining a responsibility to direct the conservatorships going forward. They lost of us is the appointment of a conservator for the workers of reorganizing, rehabilitating or winding up of the affairs of a regulated entity. All of these three things cannot reorganizing, rehabilitating, and winding up the affairs of fannie mae and freddie mac. This is a path we set last year. Forthpecifically, we set three strategic goals in the plan. The first is to build. Build a new the secondary Mortgage Market are. The second his contract. Gradually contract fannie maes and freddie macs presence in the marketplace while shaking their operations. In the third goal is to maintain. Maintain foreclosure prevention activity, any Credit Availability for new land refinancing mortgages. Anddentified four new refinancing mortgages. Much progress on those goals have been achieved. As time moves on, the scale of the enterprises operation in conservatorship cannot be remain cannot remain static. The amount of taxpayer capital became fixed, limiting risk exposure vital to maintain the remaining capital support. Is that fannier mae and freddie mac will cease to operate in their current corporate form at some future date, a date to be set by congress. The conservatorship strategic fhf as conservatorship designed to an is prepare the companies and the market for that date while andtaining market stability liquidity from now until then. The Strategic Plan aims to move the transition with postconservatorship market quick it as simple and as as possible to. More clearly define this rocess, fhfa will establish multiyear targets for fannie and freddie to further achieve these strategic goals of building for the future, contracting for the footprint, maintaining market stability and liquidity. In the next phase of the haveconcert conservatorship we want achieving the three goals. We have three main tools to this objective. Transactionsharing are important for reducing the taxpayers longterm risk exposure when. In 2013, we set a target for each enterprise to achieve 30 risksharing transactions using multiple types of structures. Oth companies are on track to meet this target and the transactions completed to date have been well received in the market. Planning for the scope and depth of risk sharing to sactions to continue expand. While these transactions and very positive, they do rely on the underlying infrastructure of fannie and freddie. Going forward, i expect to see ork done on other types of transactions for certain enterprises he guarantees. The alternative approaches will contribute to our efforts to the future by helping o develop a securitization infrastructure that is less reliant on the enterprises gse securitization model. Second, guarantee fees are about were prior to y conservatorship, a key reason to increase guarantee fees is to the pricing for credit risk closer to what would be equired by private sector participants. While that level is difficult to evaluate with precision, i elieve were getting closer to a level that would encourage more private sector participation and we plan to pursuing gradual guarantee fee increases in the near future. One of the most direct ways to reduce private payer articipation and reduce exposure when is through a reduction of the maximum size of loans that the enterprises guarantee. This summer, the president s ndorsed a maximum reduction in maximum loan sites. Since then, theres been a discussion about the near term loan limits. The as a result, i said that fhfa follow the practice of conforming he 2014 loans in late november at which time further information will be provided on potential reductions n the size of loans the enterprise will guarantee going forward. Fhfarovide further clarity, will give Market Participants six months notice of any change. Is across the board, not just in some parts of country. Consistenting with our practice, any change would be measured and disrupt o as not to markets. These steps are important and to carry out the conservatorship responsibilities, the experts also focussed on building toward the infrastructure to upport the Single Family Mortgage Market. Fhfa is looking to redefine the in ways to support the finance reform options congress. Is a these efforts platform with a focus on functions that are routinely the secondary Mortgage Market such as issuing securities, providing investors, paying and disseminating data. These are all functions where standardization could have clear benefits to Market Participants. We announced the formation of of equally owned subsidiary fannie mae and freddie mac. His that has its own location and leadership will manage the development of the platform and legal ted data and infrastructure for future securitization. Next year, a key objective will nba ormalize a means for members and other participants or the process of the securitization platform. Im committed to ensuring broad to this effort. Committed to an outcome that shrinkens, not weakens to access the secondary Mortgage Market. Hfa wants to see a competitive marketplace, competition and hus consumer opportunities is enhanced when large lenders and small effectively compete in to families gages and compete and surface those mortgages. There, we must be willing to envision the Mortgage Market differently than it has in the past. Nother example is in the putback list Loan Originators face. The Business Practices in the approved. Be long served as a key risk fannie maehanism for and freddie mac to ensure that the loans sold to them meet the their ments set forth in seller guides. The tremendous breakdown in loan the boom n quality in period of the last decade led to nprecedented delinquencies which led to unprecedented loan putbacks. Nd as cob serve tore, fhfa believes standing requirement was a necessary albeit painful taxpayers andtect losses where it exists. Demonstrates the need for improved Quality Control to Quality Control on loan originations. Weve been working to that end. Arlier this year, we committed that the enterprises would take two significant steps regarding and warrant. First, all claims to be made on need torvatorship loans be made by the end of this year. Ts time to wrap up all open issues dealing with that period and move on. Fannie and freddie are on track to completing their repurchase requests. Mutual sed with the cooperation of many counterparties to resolve the hallenging Business Matters in a professional way and i look speedy resolution in the remaining claims for the coming months. Of this ince the start year, the model has been changed Quality Control place in cess taking time of purchase rather than the mortgage n feels the purpose. Limited d except for issues such as fraud is limited to three years for performing loans. Future, we will continue the mply and improve upon framework. Important strides have been implemented this year. But there is still a learning process going on. Futer improvements can will be over time. Technological d developments to contribute to reliable issues for warrant relief in the future. Still, this will take time. Constructive dialogue etween you as Mortgage Originators as fannie mae and fhfa will lead to further enhancements to mortgage improved originator systems and greater confidence that loans sold in market will not come back some day due to defects. Wrapping up the past is resolved label ms on private Mortgage Backed securities. Hese are anag louse and they too need to be resolveled. The 18 four of outstanding lawsuits in this area and we hope to build upon the cases to resolve pending ones. In expeditious resolution of claims will ng allow the conservatorships and the Companies Involved to put problems behind them and devote their energies and resources to improving the system for the future. As policy makers think about the would note that our current Housing Finance system the great ts in depression. As a nation, we should look at opportunity to build a new Housing Finance system not for the next three years but the should last for decades. T should not be about considering what freddie mac and fannie mae consider, but the finance. Longterm operation in the conservatorship is not sustainable because each company lacks capital. Capital base, the and on the remaining finite taxpayers. To the g a subsidy Mortgage Market crowds out capital and underprices risk in the market. Places longterm Decision Making in the hands of a overnment agency, decisions that could be made by private sector businesses based on on private eturns capital. Some point, the lawmakers will eed to decide on appropriateness and level of subsidy for housing. Such a decision should include governmentowned corporation should undertake some or all of the activities of freddie or whether some or all of the functions the d be repositioned in private sector. Carry meantime, fhfa will out as conservator, accelerate ease transition to the postconservatorship markets. And stability in the market as they contribute directly to the building of the postconservatorship market. Thanks very much. Best of luck to the rest of your conference. Thank you, ed. We appreciate your time here today. And there we go. Is the consumer and Protection Bureau richard coregray. Appointed by president obama in january of 2012 and the senate on jewel 16, 2013. Of the attorney general. 200 for retirees, investments, and Business Owners took major steps for foreclose euros and financial predators. The treasurer and and financing activities. During the career, he was an professor at the State College of law. Erved as the state representative for the 33rd ho house district, was the general. Hes argued seven cases before the United States supreme court, appointment special oth the clinton and bush justice departments. Please nd gentlemen, welcome richard coregray. Im not earth, wind, and fire. But thank you for asking me to come and speak to the convention. Here today as you know represent the single in our Consumer Market nation and in fact in the with the the world mortgage dropping 10 trillion in value. Firsthand how the market is on economic stability and well being. We saw this all too clearly five disruptions in Housing Market precipitated the financial crisis that caused so of damage to the people this country. And the current economic recovery is occurring in large because the Housing Market is showing increasingly strong recovery. The credit crunch, the financial ensuing deep relate session will likely stand s the most significant financial events of our generation. They caused americans trillions wealth,rs in house hold many lost their jobs, many lost their homes. Almost everyone saw their savings shrivelled. You had the graphic view from since history unfolded with the boom and buls of the Housing Market. Loans dysfunctions in the supporting mortgagebacked securities sent profound shots everberating throughout the financial system. The crumbling of the housing jobs in every d economic sector and communities throughout the country. Astounding. Ns were the American Dream of homeownership was shaken to the foundations. Confidence hope and future. In the aftermath, the consumer act was passed and that covers a wide range of opics to ensure the problems that led to the crisis would not happen again. Among the steps taken in the law was the creation of the Consumer Protection bureau. Part of our mission, therefore, ensure the recent economic meltdown does not repeat itself. To theelopments that led crisis are inconsistent with the fair, transparent, and competitive markets that were promote. To the aftermath of the crisis compromised consumers access to credit which were also directed to promote. These objectives, Congress Gave us a number of handed ensure even oversight of Financial Markets and to prevent bad practices from taking root. When honest and innovative businesses can succeed on the merits, it gets the fair competition that drives growth and progress. Appropriate market oversight and even handed enforcement empower onsumers to make sound Financial Decisions they can live with over the long term. Of this in mind as best we could as we worked to evelop and complete the mortgage rules we had last january. As youre well aware, two of the extremelyules will be important in addressing the most Serious Problems that undermined market. Tgage the ability to repay or socalled mortgage rule was many ed to lend irresponsible lending practices y making sure the simple proposition that consumers are getting mortgages they can actually afford to pay back. Our servicing rules contain provisions designed to ensure objectives, fair and face the orrowers who potential loss of their homes. Were committed to open transparent Decision Making. Before we finalize our rules, we solicit esearch and input from all stake holders, consumers, advocates, industry and public officials. The best decisions will be those that are best informed. Our s no question that processes, including the many meetings we took and the broad led to better ed outcomes on the mortgage rules. Throughout the process, we heard overwhelming that the Mortgage Market in 2012 was vastly the Mortgage Market in 2006 and required much more focus on access to credit be true in more normal circumstancings. Constrained mortgage so close to today is how to contour mortgage rules, especially the ability to pay the qm rule. By obtaining and analyzing more up to date data, we came to more conclusions about how to define a socalled well tailor the gage and consequences. One further illustration is the treatment of smaller creditors rule. The analysis of performance data and loans origin naltsed in the boom to recognize that most of the traditional lending in tices should not be put question by the ability to pay. Institutions make loans that they keep in their own ortfolios, they have every incentive to pay close attention payhe borrowers ability to the loan. Their underwriting standards did not deteriorate before the heady financial crisis. They lost market share to those ngaged in the more lending practices of that era. The rules contain provisions to avoid a one size fits all approach by extending rotections to meet the special circumstances of smaller mortgage lenders. Mortgages cover the vast majority of loans made in todays market but theyre by no mortgage of the market. This point is important and misunderstood. Loans made to a borrower with ther assets or individual circumstances or repayment ability are nonqm because they meet the 43 debttoincome ratio or not ligible for purchase by the gses but nonetheless are based on sound underwriting standards performed well over time. Lenders that have long upheld such standards have little to the ability to pay rule. The Strong Performance of their loans over time demonstrates the care they have taken and underwriting to ensure that orrowers have the ability to repay. Nothing about that traditional ending model has changed and they should continue to offer the same mortgages to borrowers evaluate as posing reasonable credit risks whether criteria tomeet the be qualified mortgages. Last week we took steps about lending risks associated with qualified mortgages. Ogether with the other banking agencies, we explained the viewpoint that we do not decisione a creditors to offer only qualified ortgages would absent other factors elevate an institutions fair lending risk. Some r issue that consultants and lawyers have raised is whether the law and the ule will deliver assured and predictable Legal Protections even for qm lobes. They will doelieve so. There are two key points here. The size of the qm space and the effectiveness of the legal safe harbor. First, by expanding the mortgagen of qualified for a period of years to include the nly loans that satisfy 43 debttoincome test, but for loans that are eligible purchase of gses while theyre n conservatorship or eligible for the insurance from the fha, the va, or the department of the qm space is drawn quite broadly. Coverage the rules even more. Precise s for the impact mandated by the statute, that threshold is more than the average lender origination fees reported by bankrate. Com and the most recent annual survey and our rules provide a higher threshold for smaller loans. Elements of other the qm definition, we estimate that more than 95 of the made in thens being urrent market will be qs, as moodys analytics recent lip confirmed. Core logic put out such figures. By their own admission, those intended to take the expanded view of qm that would take effect in january. As instead offered rojections as a more distant future when the expansion expires in a period of some years. Technologies as long s it remains in effect for gse qualified loans, which may well be for several years, the impact a the regulations, this is quote, will be minor. Second, our rule does apply the harbor to all prime qm loans, which affords protection against legal challenges for loans that satisfy the qm criteria. Key point here is that we left little room for legal a given s to whether mortgage is qm. We purposely drew bright and define the to contours of a qualified mortgage debttoincome ratio or eligibility for purchase by the gses while the conservatorship or portfolio loans made by small creditors as specifically defined. A large number of industry commenters asked for the bright ines and we agreed that approach made sense. If those lines were not drawn as then y as they have been, much would have remained to be fought out in the courts for ears and years before the definitions were made clear. To avoid the rule hat result which is why its drawing up hypothetical disputes n how debts and incomes were calculated and their angst to criticize the rules or the anxiety about them. Provisions will take effect in january and we have a team devoted to the regulatory implementation process. Were engaged in vigorous outreach and assistance to financial institutionings. We view this as a joint enterprise and were interested make rning how we can things go more smoothly and results. Better e believe that the bureaus rules does not end with finalizing a set of regulationings. Its not good enough to take the view that once the rules are published, the work is done and e can say to the Financial Institutions that its your problem now. F the whole point of our regulations is to protect onsumers, then we should care and we do care about how rules implemented. D and how they can be more easily addressed and the amount of weve shown ed and we do care deeply about these things. Implementation process goes further to responding to industry inquiries times during the day. We take more affirmative steps to help the industry understand our rules. Plain language compliance guides. We launched a series of videos rules. Ing the we worked closely with examiners for a common understanding of and do not es do require, which were published the effectivee of date and are available for your perusal. Is to provide as much dvanced notice as we could about what we expect as the regulators. This work reflects the consumer and the prudential regulators and the mutual desire to conduct examinations consistently. A checklist of things to do the rules take effect the qms and fair lending earlier as i mentioned and were consulting with best to groups to how educate consumers with information about how the new rules will affect them. Aware of critical operational and interpretive issues with the rules, we have them. Sed we made a commitment to significantly affect decisions through writing through amendments and rules be, the themselves. We issued various amendments over the course of the year with in mind, to assure the effectiveness of our rules industry easier for to comply. By addressing and clarifying the reduce questions, we the need for individual institutions to spend time uncertain heir own judgments on these matters. We understand even though the amendments responded to your requests to remove bstacles to implementation, they require you to make further djustments be but do not believe the implementation process should slow any lender servicer. Congress established the deadline for the Effective Date to write and we set the deadline. Eflect that the ability to pay rule has been oflemented since the passage the doddfrank regulation in 2010 and little more than the in the years since the crisis. The general contours of the servicing tools tracked the problems identified in this industry for more than five most of which were squarely addressed in the settlement tgaging adopted in 2011. We believe its critical to move forward so that these rules can new protections intended for consumers and the ertainty that the industry has been seeking. That will encourage consumers to the Mortgage Market with improved confidence with how the market will function as lenders will be able to conduct their mortgage businesses profitably. Poses a tand this challenge for industry just as a riting of a substantial set of mortgage rules by last january posed a significant challenge for a new agency. Had we failed to to do so, many key statutory decisions that enacted would have taken effect in their own right, which everyone recognizes would been much harder on industry and much worse for the Mortgage Market. All in this together and we appreciate the urgency and mortgage ces that the industry could bring to bear on the Effective Dates. The oversight of the new mortgage rule unless the early months would be sensitive the e progress made by lenders and servicers making efforts on good faith to come into compliance on time, point weve been discussing with our fellow regulators. Our rule making process is designed to produce rules for tangible value for consumers and make the Financial Markets work better. As weve shown over the last year, we recognize that without effective implementation, this cannot happen. Thats why we share the industrys focus on putting the ules in place successfully and why weve rolled up our sleeves and worked alongside you to help it done. When our rules can be understood consistent lip and applied ffectively, it can produce better outcome for consumers, honest businesses, and for the as a whole. At the consumer bureau, we envision a marketplace where even handed d oversight prevents welfare nhancing innovation, where Consumer Protections and
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