tv American Enterprise Institute Conference on 2008 Financial Crisis - Part 2 CSPAN October 9, 2018 1:40pm-2:26pm EDT
address the markets. the american institute conference hosted last month's conference. >> the chairman has agreed to be interviewed by me, and we'll try to get as much useful information as we can. but first, i want to let you know that this conference is sort of retrospective on the financial crisis ten years afterwards, so a lot of the things that we are talking about are things that happened in the past, rather than things that are going to happen in the future. so i'm going to ask you questions about both. and let's start with something
that was kind of personal, and that is, you have announced that you're going to retire from congress. and this has been a puzzle to many of us. you're a highly respected member of your congress. you were mentioned as a potential speaker at one point. so i'm puzzled why you want to leave the congress at this stage. your time with the house financial services committee ends by house rules or republican rules. but why do you want to leave kopg entirely? >> well, before i address that, if i could just thank you for the invitation and i guess milton friedman didn't get it wrong. i'm having to speak so i didn't get a free lunch, but at least i got lunch. the rest of you, please enjoy
your lunch. again, as a member of congress, i'm used to speaking and having no one day attention to anything i'm saying. in other words, please enjoy your lunch. so to answer your question, you know, i think more people should be asking the question, not why are you leaving, but why did you stay so long, probably is the more appropriate question to ask. so, yes, i am term limited as chairman of the house financial services committee. and it's hard for people in this town to believe it, but a lot of us do have families and for those of us who have families back in our districts, i live in dallas, i work in washington, i commute back and forth. i've got enough frequent flyer miles to go to mars and back. so when i went to congress, peter, my daughter was in my arms, my son didn't exist. she's driving now, he has a
peach fuzz mustache. i'm told that your children may always be on the family payroll, but they will not always be in the family nest, so i want to go back and capture those last few years in the nest. and by the way, if you're ever in dallas, texas, soon, and you see a grade 4 fusion license tag cmg 2255, give it a wide berth. she's only been driving a couple of months. so, anyway, i'm flattered by the question. also, i got to tell you, part of me still believes in kind of the jeffersonian model of the citizen legislator. i thought i would do three to four terms. i got tempted by gavels and i don't want to be a member of the permanent ruling elite class in washington so it will probably prove to be the greatest
privilege of my life. but having said that, there's still a lot of business. i want to ask you a little bit about the financial crisis. something that has been bothering me for a while. i was on a group of academics, mostly, that was studying the crisis, with a view to coming up to some kind of proposal and at one point, we had a meeting with a highly placed member of congress. he's no longer in the congress, but he was talking to us about what was going on at the time of the crisis. and he said that he was told, and i assume others in congress might have been told, that the government was so worried that with the effect that the crisis was having on people, that they were actually considering
cordoning off washington with troops. you're looking at me as though it's crazy and i thought it was crazy at the time. but have you ever heard anything like that from the administration? >> well, the short answer is "no." i was a child in the 60s. i don't recall if the capital ever had to be protected in that turbulent times. otherwise, i assume we're going back to the war between states. no, i never heard that. i would hope that would be rather far-fetched. and if so, i think to some extent, peter, i'm convinced that in many respects, kind of the indecisiveness and, you know, changing the game plan constantly helped exacerbating the panic in the first place. and so that kind of thinking, and so i was not privy to it. i was a more junior member. and also, being in the congressional minority at the time, i assure you, a lot of
information didn't flow to us. i would be very surprised if that was accurate, but if it is accurate, very, very sobering. it was a surprise. he was a democrat, so he was in the majority. and i don't have any idea whether he was just telling this to a bunch of professors, in order to stress the gravity of the situation. >> still kind of sounds like fake news to me. >> yeah, with he was one of the first ones to come up with the idea. okay, what were you told in congress about the dangers to the country? what about the dangers to the financial system? what were you told as the t.a.r.p. issue became current and you had to vote on it. do you have recollections about -- >> well, you're forcing me to have a flashback here, but at the time, i was chairman of the republican study committee, which at the time was the
stoppable conservative caucus in the house. we now have two. so from that perspective, i did get to spend a lot of time on the telephone and in personal meetings with secretary paulsen, because, obviously, they wanted -- they really wanted full republican support for their plan. so i spent a lot of time with him, but i also vividly remember coming in and saying, we really don't know how much money we need. and frankly, we don't think we'll need money at all. but we think we need an authorization of a really big headline-grabbing number. and if you give us that number, we don't think we'll ever have to use the money. and oh, by the way, we're designing this as a toxic asset purchase program, not a capital infusion. we know 24 to 36 hours, whatever the math was, that changed.
so we were also -- that is what we heard in early days, and a little bit thereafter, it was the world as we know it is coming to an end. the sky is falling. probably the single most used if not abused term in congress is crisis. but in this case, it had some weight behind it and it had some credibility. it had some legitimacy. and so, yes, we were essentially being told that we were on the precipice of the next great depression. i never believed it, but having said that, i did have some doubts. i did have some doubts. so from my perspective, we were being told, either choose between the next great depression or the slippery slope to socialism. and i didn't -- i just didn't
buy into it. and oh, by the way, if i remember right, t.a.r.p. started out as a one, two, three-page bill and ended up being almost a 200-page bill, and like many bills, they don't really hope that you read it. so i have that memory, as well. funny me, i don't like to vote on legislation that i don't have time for either me or my staff to review, silly me. so i remember that aspect of it as well. and so my thought was, yes, this is a legitimate crisis, you know. you more than others and other scholars here havin extensively on its genesis. but i also thought that we shouldn't have the bums rush to this one particular plan. because i thought, ultimately, we're going to have to live with the legacy of this. and we have had to live with the legacy of this. and i think part of the legacy
has been ten years of very tepid economic growth and diminished american dreams for many families. and i'm not convinced, look at gses that the same systemic risk isn't yet again building. and you know, i just pray we're not on another boom bust bailout cycle, but i knew we would have to live with it long term. and ultimately, what it led to is a far larger footprint of the government in our economy. but i'm not running for re-election, so i can be looser on my metaphors and historic illusions, but it's kind of like the soviet army coming to liberate eastern europe, and 40 years later, they're still there. and so, you know, if the government came to liberate our economy, i'm kind of ready for
them to leave. and go back to a much lower profile. and so again, those are some of the things that we were told at the time. >> well, you said that there was an argument for a very big number. that that would perhaps set people's minds at risk. did you vote for that very big number? >> no, not only did i not vote for it, i hope this is one of the times that "the new york times" got it right. they credit me for leading the charge against the bailout. so no, i did not support it. it's also not the only vote that i lost in congress, ultimately. >> as you well know, the first vote came down. went down in six, seven, eight, nine days later, version two was voted in. >> that was after a huge drop -- >> i think it was about 500 points, if i remember right. >> in those days, that was a big number, right? >> that was a big number.
it was a big number back then. >> was that influential? >> influential to many members, yes. even at a swing that large, i try not to overreact to one day market movement. number one. and number two, again, i just knew long term we would have to live with the legacy of whatever we did. and once you get on the road to bailouts, i don't know how you go back and reinstill discipline. and ultimately, market discipline is the greatest arbiter and protector of systemic risk. and i think even today we have lost a huge portion of that. and so again, bailouts beget bailouts. and so risk built up in the system that would not otherwise be built up, but for having
these federal backstops. so yeah, it got my attention, but not enough for me to want to switch my vote. >> okay. you're a tough guy. >> a foolish guy sometimes. >> but what i'm wondering about is, if the democrats had not succeeded in capturing congress in the subsequent election, and the republicans had then been still in control of policy, what do you think the republican -- a republican congress would have done in the context of starting again in january of 2009? obviously, one of the things that was on the table was a highly regulatory law, dodd/frank act. it wasn't called that, but that's where most of the planning seemed to be going. but would the republicans have
had a different way of addressing or remediating the crisis? >> well, i would call putting forward some legislation at the time. i just thought it was critical that we have alternatives. secretary paulson. so i had an alternative, which frankly was cobbled together from a few other alternatives. i know our current speaker, paul ryan, had -- again, i haven't looked at the details in years, but i believe had a plan to set up a temporary paid for insurance program for certain mbs. again, a little fuzzy on the details ten years later. so i assure you it would not be remotely resembling dodd/frank. also, the ranking member of our committee at the time, spencer
bachus, had put forward a program, again, central to the program would have been an enhanced bankruptcy regime for a large globally connected financial institutions, which i think, as you well know, was part of the financial choice act as well. so bankruptcy versus bailout, that would have been a key difference. and i think hopefully what we would have done is with respect to federally insured depository institutions, insist upon high levels of capital and with respect to wherever we had a federal backstop, be it to mortgage insurance or mbs, that we would insist upon traditional historic prudent underwriting standards, and again, far higher levels of capital. than what we saw in the marketplace. you know better than most that
it would take a microscope to have observed the capital levels of fannie and freddie going into the crisis. they were not discernible to the naked eye of human kind. i think i just made that up. >> that about does it, i would say. well, republicans did take over congress at the end of 2010. in a rather red wave, so to speak, so when they came in, there was a lot of talk about repealing dodd/frank. what -- why did that not happen? >> well, i can assure you it wasn't from lack of effort on my part. i'm at least happy to say, as i'm sure everybody is familiar, the president did sign into law as 2155, it did not repeal
dodd/frank, but to quote our president, we at least did a number on it. so it is at least substantially repealed for community banks and a number of regional banks. >> so why didn't that get done? >> unfortunately, the senate is not a majoritarian institution, which i assume everybody in this audience knows. unfortunately, not everybody in america knows it. long standing debate. you will not find the senate cloture revisions enshrined in our constitution. you will not find it enshrined in our statute books. it's not in the code of federal regulations. it is merely a tradition. but because of that, almost every aspect of dodd/frank save a couple including revisions dealing with what we would call the siffy bailout fund, almost every provision has to reach a
super majority threshold instead of a simple majority threshold. thus, this is what you have ended up with. so again, once i became chairman, we put forth a piece of legislation that i believe effectively repealed and replaced dodd/frank. perfect law as it was, the bill as it was, it didn't quite see the light of day. never underestimate the senate's capacity to do nothing. but they did at least finally, finally act on something. and so that's what we have. if you are looking for some reason, again, most legislative matters take a super majority. >> well, what we see, of course, is that whenever legislation is passed, groups form around that legislation. and like it. and they organize themselves in such a way as to take advantage
of it. we saw that with the aca. yes. it becomes very difficult to repeal legislation, but at the very beginning is when i was thinking, it might have been -- there was a lot of talk at the beginning of the republican congress in 2011, there was a lot of talk about the possibility of trying to repeal dodd/frank. but it was not to be. and you think because of the senate. >> not only that. i vaguely recall that barack obama was president at the time. >> this was a problem. >> this was a challenge. this was a challenge. just for frame of reference, since donald trump has become president, i have been to the oval office maybe eight times for signing ceremonies for bills coming out of committee. in the eight years barack obama was president, i went to no signing ceremonies at the oval
office. so peter, that one simply was not in the cards because let's face it, along with obamacare, dodd/frank was really one of his signature legislative accomplishments. you're talking about the family jewels there. so you know, unless we amend that part of the constitution that gives the president veto power, that just wasn't in the cards. >> but are you saying again that certain financial interests get vested in certain aspects of the status quo? absolutely, and again, i find it most ironic that post-dodd/frank, the big banks have become larger and the small banks have become fewer. quite the contrary of what we were told. >> right. >> unfortunately, we're seeing more and more federalization of credit allocation, and to politicize the credit allocation function. this is not a good thing for
america. >> no, it isn't, and that's one of the reasons why this kind of legislation has many far-reaching effects, because it does affect competition tremendously. the smaller institutions as we have talked many times about this, the smaller institutions have to spend much more on compliance than the larger ones do because the larger ones can spread it over bigger assets. >> well, the larger ones didn't necessarily like it at the time, but they learned to live with it, and they finally recognized it as a competitive advantage. it is a huge barrier to entry. it is a huge barrier to entry. and we see it all the time. again, the smaller have gotten smaller. hopefully for those that are left and i haven't checked the stat recently, but for a while, we were losing a community bank or credit union every other day in america throughout most of dodd/frank. so i think with 2155, hopefully, we have arrested that before it
was too late. but so much more remains to be done. >> turning to things that are most current. you have reintroduced the path act. at the same time, you have expressed an interest for the first time in my knowledge of allowing the government to continue to guarantee something in the housing market through your agreement with john delaney. that was a surprise to me and others. >> but you invited me anyway. >> we would always invite you because you have always got a good answer for these things. so why is it that you made this change in what had been, as you described, a very conservative, nongovernment view of how the economy should work? >> well, peter, my principles haven't changed, but my time
horizon has changed. and my rate of time preference, if you will, has changed. since as you pointed out, i am leaving office. so i'm not sure who the patron saint of lost causes is. i'm not catholic. but between trying to get rid of the farm program, trying to get rid of xm, trying to get rid of the gses, i have taken on a lot of very, very tough causes. and unfortunately, after having battled for 16 years, i haven't found a whole lot of allies. early in my career, richard baker and ed royce today have championed the cause of, believe it or not, free market capitalism in the secondary mortgage market. but there haven't been a lot of people to take this up.
getting the first version of the path act through the committee was probably the toughest legislative assignment i have had in 16 years. and as i lobbied the house republican conference, i didn't have the votes to take it to the floor. so i battled this for 16 years. and i think you know the administration through the secretary of treasury is on record favoring continuing the government guarantee. so i don't believe in the government guarantee. i don't think it is wise. i think it is risky. i think it is unneeded. i certainly believe in the tenure i have left in congress, it will remain part of our housing finance system. and perhaps this is a little of the immodest texan in me. if there's going to be a government guarantee, i think immodestly, it might be a little better if i helped design it as opposed to somebody else.
i feel very strongly that systemic risk is building within our housing finance system once again. there's a guy over there who appeared at our recent committee who helped convince me of that. you were unavailable, apparently. i answer your invitations, you apparently don't respond to mine, but apparently, we'll let that be as it is. so i'm fearful, peter, that once again this systemic risk is rising. so i do not offer the bipartisan plan as a good plan. i offer it as a better plan than the status quo. and if i had to use an analogy, you know, if there is a pit bull in my backyard harassing my children and i have called the dogcatcher for 16 years to pick up the pit bull and take it away, i eventually conclude the dogcatcher isn't coming. so if the pit bull is there, i have at least got to put a
muzzle on it and put it on a leash, preferably a chain-link leash. so again, i believe we're probably headed towards some type of bipartisan plan that regrettably preserves the government guarantee. maybe over the course of another generation, but if we can't get it done with a republican house and republican senate and republican in the white house, i'm not overly optimistic. so i decided to leave this as a marker that if you're going to do a bad housing plan, this is a better way to do it. >> well, let me put it to you this way. if it is true that systemic risk is rising in the economy -- >> i think you said it was. must be true. >> i told you that. others have. it's rising in the economy, and it's rising probably, you'll
agree, because of the housing market. house prices are rising. and they're rising at about the same speed as they did before the last financial crisis. so many of us realizing that it is almost impossible to get legislation through congress that would stop this, have talked about an administrative solution. and there is to be a new director of the federal housing finance agency installed, hopefully in january. that new director has the power to withdraw fannie mae and freddie mac from the market, to reduce their footprint, if you will, in the market. is that something you would favor? >> well, it's not only that i would. it's something i do. i do favor, and i have let this
view be known to decisionmakers within the administration. and in the piece i wrote in "the journal" a week or two ago, i alluded to it. the only problem we have there is that that could be a five-year plan, maybe a ten-year plan. but as you know, the president gets to appoint a new fhsa director, who has, as you well know, clearly powered over the housing finance market. so i'm familiar with your plan. i thoroughly endorse the plan, and i think probably, unless the plan is enacted by an fhsa director, you'll never get a long-term bill out of congress that is better than status quo. but again, i don't -- i guess i left my crystal ball in dallas. so i don't know who's going to win the next presidential election. so what you offer is good. it is right. i think it brings parties to the table.
i mean, kind of the different stakeholders, be it the home builders, the realtors, the preferred, the democrats. somebody has to shake things up at fhsa. and know what is taking us back to status quo ante, and pretty well has undone most of the good work that ed demarco did when he was there. so i prefer a legislative fix. if i can't get one, a five-year administrative fix. and again, catalyst for legislative action is very much called for. so if you had a plan, again, where at least i believe you could take the pressure down in systemic risk, if you narrow down the types of mortgages that fannie and freddie can ultimately put their wrap around. if you insure that the g-fees
are properly calibrated, if you reduce conforming loan limits, and if you let the patch begin to expire, then yes, i think you will have some action. but i also think you reduce the systemic risk that's building in the system now. so yes. i very much endorse the plan and have said so, again, to key decision makers at the administration. >> oh, that's good to hear. >> and they don't always heed me call or take my advice. >> i have the same complaint. but the thing that worries me, i'll say, is if we start down the path toward legislation, we'll be wasting many years while the market continues to grow as it has. the house prices will continue to grow.
the likelihood of systemic risk continues or systemic event continues to grow. and so my preference is not to talk about legislation because it's too enticing for sometimes for people in the administration and in congress because it's where the action is. and there's a lot to be gained from trying to put a bill through, having many interesting meetings with people who are for or against. so that's why i am a little bit concerned about what you -- >> peter, i don't necessarily see it as an either/or proposition. i don't think that's so much oxygen out of the room. i don't see, again, why you can't do both. but the fhsa director, wherever program they put in place, at most has a five-year life span. that's what we know.
whereas congress could write something that is generational. so it would clearly be so much more enduring. and so, you know, to think that ten years later, three administrations, five congresses, and we're pretty well exactly back to where we started. is a proposition that i just can't -- you know, i'm just not at mapeace with. i can't abide by it. again, alongside you and others, i have been fighting this battle for the 16 years i have been in congress. i hope somebody smarter and better might succeed where i have not, but i don't know who's going to take up the fight. again, ed royce is leaving, i'm leaving. richard baker has left, and i haven't found that person who's going to take up this fight. but it is a fight worth fighting, and last i looked, housing is still roughly 80% of
our -- 18% of our economy. and again, there's no reason we ought to have a government guarantee in the secondary mortgage market. none whatsoever. as you well know, most oecd nations don't have it. they don't have anything remotely resembling a fannie and fannie. they may have an fhsa like structure, but nothing resembling fannie and freddie. most of them have fairly comparable rates of home ownership and none of them had the foreclosure crisis that we had. and i just believe, alex, if you can't get it done now, i'm not sure you're going to get it done. and so i'm trying to figure out, how do you rationalize a bad system? i still think you can do both at the same time. and i think, again, one may have to be a catalyst for the other. but please know, hopefully nobody in the room is satisfied with the status quo.
it's too risky, and as americans, we shouldn't settle for it. >> well, let me just say that i doubt that in the future we will have someone as head of the house financial services committee that is the quality of the man who is there now. >> thank you. >> and we will all miss you quite a lot. >> thank you, peter. [ applause ] >> oh, q&a. apparently we're not done. >> okay, that's a good idea. i didn't know we had that time. but okay. >> i didn't either. >> so any questions? yes, sir. please give your name and your affiliation. >> hi, carl gullivan.
you mentioned the politatization of credit. after the second bank of the u.s., he warned if we had another central bank, that the largest corporations and the most powerful financial and political interests would conjure more and more credit money into existence into the wealth of those who had labored had been stolen and most precious liberties stolen, sold, or bartered away. question, are the words that are still in the constitution, no state shall make anything but gold and silver coin a tender to payment of debts, it is still possible, still relevant to pay attention to those words and bring back an honest unit of monetary account using the monetary metals? >> carl, you have an advantage on me. i have not read jackson's farewell address. i'll say this. a little bit somewhat related to the gse argument.
i have learned a few things in my political career. and sometimes one thing i have learned is there are a thousand ways i can fight for freedom and prosperity every day. i have the band width to handle four, maybe five fights at any given time. so taking on the fight of our current fiat currency controlled by a federal reserve is not a fight i have chosen to take on. i mean, i have not been an advocate of returning to the gold standard. i have been intrigued at times with the currency to a basket of commodities. i have studied that proposition before. i think, number one, probably not a whole lot of appetite to be taking that on.
simply because also something else i have learned in my career. not that it's -- we put forward some reforms in the federal reserve. i like making speeches. i like making votes. most importantly, i like making progress for the cause of liberty, and as jefferson said, the ground of liberty is to be gained in inches. i often think it's to be measured in millimeters instead. so again, sometimes i concentrate on what do i think -- where can i make a difference today? but also keep the debate alive because i think some of the work i have may not realize progress for several congresses, if not a generation. but i don't see a whole lot of appetite in trying to return it. >> one more. yes. wait for the mike, please, and
identify yourself. >> joe, unaffiliated. was there ever like any serious attention paid to studying the extent and role of regulatory for barrons to large commercial banks during the banking crisis? the reason i ask is over 2008, you might have noticed that banks like citi failed to recognize a lot of losses that were known and were probably required by the accounting standards. and this is kind of a standard procedure of bank regulators. and the reason it strikes me as important is that had these losses been contemporaneously recognized, banks like citi would have been forced to recapitalize in more forgiving private markets and you wouldn't have had the entire t.a.r.p. situation that you did. >> sounds like a great question for somebody who might have served on the financial crisis commission.
i wonder if any such person would be available. so i'm sorry, you're speaking of a retrospective at the time, is that the question? >> yeah, sort of retrospective at the time, but also going forward, i know you're interested and you worked a lot on trying to figure out the right capital ratio, leverage ratio, et cetera. and one primary input into that is the numerator, which is what is the accounting capital at hand, and when banks don't recognize losses, all the other things like risk equated assets and all these things become less relevant because you have this fake capital in there, and the capital requirement ceases to be many things of meaning. >> i'm sorry. i really -- i studied it before. i'm not really equipped to speak about citi's case at the moment. i don't have a memory. >> what's citi? >> well, i think the question is
about how you measure the capital, and you actually had a very good approach to that. with real assets. and equity, and so why isn't it adequate for a regulatory -- >> it should be, and again, one of the great myths about the financial crisis is this whole myth of deregulation. and when i think of sarbanes and oxley, you know, you can't intellectually sustain the argument that there was any kind of deregulatory movement leading into the crisis. and although i doubt i can necessarily prove it, i would think almost second only to nuclear engine, nuclear power and possibly the practice of medicine, i don't know any more highly regulated industry than banking and finance. so clearly, that was not part of
the problem. so i don't think you can make the case, number one, that deregulation led us there. certainly, more regulation was not the answer. but you can make the case that there were inadequate capital levels. you can't make the case they were inadequately complex. so again, you know, i still remember ike's praise about fatal conceit, and i'm not trying to take away from all the very smart people in the fed. i'm not trying to take away from ben bernanke, but when he announces months before the crash essentially all is well, all is well, well, all wasn't well. and they're not gods. they're human beings. and for us to think that somehow an economy and a financial system as complex as ours can be reduced down to regulatory
formulas is just hubris. it's absolute hubris. so the answer is, again, let's have more loss absorbing capital in the system. and let's have far fewer regulations. and that was the tradeoff in the financial choice act. and i still -- a few more minutes, don't i? i don't. all right. >> that's the right answer. >> that's the right answer. >> so i think we probably have to give in to the gods of time. but you have been very informative, as usual. and we have learned a lot from this. >> thank you, peter. >> thank you. [ applause ] campaign 2018 coverage
continues tonight with several live debates. at 8:00 p.m. eastern on c-span, utah's senate debate between republican mitt romney and democrat jenny wilson. to fill the seat of retiring senator orrin hatch. on c-span2 at 8:00, massachusetts governor charlie baker debates his democratic challenger jake gonzalez in that state's governor's race, and 10:00 p.m. eastern on c-span, the arizona second congressional district debate between ann kirkpatrick and republican leah marquez peterson. you can also watch the debates on c-span.org or listen on our free c-span radio app. your primary source for campaign 2018. american history tv is in primetime this week on c-span3. tonight, federal appeals court judge douglas ginsburg on the history and evolution of the nation's highest court and the debate over originalism.
wednesday, a discussion on southern culture in the u.s. with history professor tom lee of east tennessee state university. thursday, a look back 100 years at german u-boat campaigns during world war i. starting with the 1918 u-boat attack that sank the ss morack and the diamond shoals light ship off the coast of north carolina, and on friday, descendants of presidents ford, truman, mckinley, johnson, and roosevelt share family stories at the kennedy center for performing arts in washington. watch american history tv this week in primetime on c-span3. wednesday morning, we're live in hartford, connecticut, for the 44th stop on the c-span bus, 50 capitals tour. connecticut secretary of state denise merril will be our guest on the bus during washington journal starting at 9:00 a.m. eastern. on friday, we're live in
providence, rhode island for the 45th stop of the 50 capitals tour with rhode island education commissioner ken wagner at 8:30 a.m. eastern. >> senate judiciary subcommittee on federal courts looked at the structure, size, and operations of federal appeals courts and their respective circuits. one issue was whether to split up the large ninth circuit of the u.s. court of appeals on the west coast, which was dealing with the backlog of cases. a senior judge and two law professors testified before the subcommittee. >> this hearing is called to order. the federal courts occupy a unique role in our constitutional system of republican self-government. one of the bedrock principles of our identity is as a credo nation that governments derive their just powers from the consent of the governed. that idea translates in a pretty