but i do think with efforts to quantify how to get@@ )fúá ú this is for sheila. all the largest institutions, financial institutions international ties or at least most of them and money can flow

across borders very easily. aig is probably the best known example health problems can cross borders. how do you deal with the risk created in the country by actions somewhere else as well as and pact factions on the u.s. markets themselves? >> well, i think the international component of this is very difficult and as i said earlier i think we should try to lead and set the standards which we can then try to leverage into international agreements especially in these institutions get into trouble. the fdic co-chairs a working group to address just the situation where a u.s. firm with large international operations gets into trouble or vice versa. one advantage we have in the united states is we require banks to be chartered here organized under our law and insurance separately and

regulated as if there were domiciled here so if there was relation for those entities if they get into trouble. we do not require the opposite, banks and financial institutions must be organized separately so we suggest in the written testimony that might be something to think about what greater legal autonomy and organization withmr. chairman. >> senator brown. >> i want to follow -- thank you each of you for your public service during very trying difficult times. i want to follow on chairman dodd's given to the systemic regulator. i was intrigued by center bombings statement that we don't want to be all started by wall street and that we in the senate not be outsmarted by wall street by u.s. regulators not being in

the structure we built be outsmarted by wall street and i think you can sort of a longer time you spent watching whether it's the financial system or health care system history is replete with industry always trying to in some sense not accusing of illegality but some sense staying ahead of the share of that they are always trying to find a way around whatever rules we've right rudder it is health insurance companies gaming the system and we try to write rules for them or whether it is financially institutions or anything else in the whole regulatory systems and structure that we've built. i ask you, i start with mr. tarullo but as all of you give me a per prescriptive walk through of what in fact we are able to do with the system xb6 what kind of power the system eckert risk regulators should have to prevent another mortgage meltdown, what a specific issue can walking through for us and

and very understandable terms about what kind of power the systemic risk regulator has to prevent those kind of market meltdowns if you would. >> senator, again, i just want to qualify the notion of systemic risk regulator because again it depends how many of those powers you invest in a particular agency. i would say that getting to senator dodd's perspective where the power was all to be i think you are going to need to have simple but straightforward strong rules for precisely the reason you said, that if you try to go to activity specific you are going to always have people arbitraged and trying to do something that accomplishes the same end so one has to look to overarching rules that provide some constraint so i say that's

number one. number two, i think you do have to have an adaptable set of regulators and supervisors who are looking at emerging practices and are able and have the backup authority to act against those practices. number three, and i guess i would say on the consumer protection arena, i think that most importantly of all you probably need a change in attitude. because i think as again and academic teaching through 2000's i didn't see an enormous amount of interest and financial service consumer protection frankly at any of the financial regulatory agencies. there was as senator dodd we set out to take action. there was certainly examination of the word each of the agencies

had things they could have done. perhaps not everything. couldn't have stopped some things but could have stopped a lot so i do think on the consumer protection area the basic problem is one of attitude orientation and leadership. >> i want to hear from the two chairs, too but would you in writing discuss with me because i want to get to what you mean by changing attitude and more importantly how we get there. send me a letter about that. >> i'd be happy to. >> chairwoman shapiro. >> i agree is a challenge for regulators to keep up with financial innovation. and the latest trading practices and design from wall street. i say from some extendable st outsmarted itself the last couple of years and not just the regulators which is why through a lack of good risk-management procedures and lack of understanding entirely the nature of the businesses they were engaged in or the degree to

which they were dependent upon counterparties is significant contributors to the situation. i think there are a few things we can and must do. we've got to being unregulated products under the umbrella and i've already talked about otc derivatives and i won't go back through that but it is a very significant gap. i think we have to be much more robust about capital requirements and procedures within the firms and have regulators who are willing to be skeptical every single day and every hour of every day about the quality of risk-management procedures in the firms that we are all responsible for regulating. i think we need an across-the-board commitment to more robust stress testing so that we are thinking more about the huge impact but low probability events and factoring that and how we go forward with the regulatory programs and to refer back to something we said with senator corker i think we need to find ways to encourage

more engaged knowledgeable boards in these financial institutions. >> chairman bair. >> i would say going specifically focusing on the resolution mechanism regime we said just going forward that the wall street firm couldn't come and ask for assistance in the government without submitting to a resolution procedure meaning they would be closed effectively so i think they will stop asking number one if that is the trade-off. we do think -- i do agree there has been balkanization of regulatory responsibility and that is why we think a council with ownership and statutory manager mandate to be responsible for the system and addressed systemic risk getting ahead of systemic risk and change that attitude and get us working together as opposed to it's not my responsibility, that this agency over there. i do think the responsibility of the council to set minimal standards will be a check against regulatory capture, or perhaps waxed attitude so that is another feature that could

create more robust regulatory environment. >> thank you. thank you, mr. chairman. >> thank you, senator. >> senator crapo. >> thank you, chairman. and chairman bair i'm going to focus most of my questions on you although i may have time to get to others on the issue. i'm going to focus on the resolution of 40 again. i know that you have proposed the resolution of 40 be with the fdic and be expanded to bankholding companies. there is a bit of a discussion as to how broadly it should be expanded and where this authority should resolve or be placed. but when you look at the issue for resolution authority we have first of all the fact that right now we only have resolution authority for banks. and you have indicated that we should expand that to bankholding companies and we also have a, a piece of the

issue senator bunning raised with regard to international holdings and what we deal with when we have american institutions that have acquired sometimes dozens if not hundreds of foreign subsidiaries and how we deal with those kind of jurisdictional issues and i would be curious as to your thoughts about where should the resolution of 40 be placed? i think i know the answer to that. but also, how broad do we need to be in terms of the establishment of such resolution authority? ..

one of the things we suggest to my written testimony is also suggest in the administration's white paper to have their own and will so to speak so they need to have their own liquidation plan they need to update on a quarterly basis and this should also be facilitated by handling greater legal separateness, and the functional components and part of the problem is these things are intertwined. they may be finding assets to the united states in trying to tease the that out in an orderly fashion is difficult so we think there is the infrastructure that is to be put in place here. i also think by designating

someone, some entity as a resolution of the idea would facilitate international discussions. we are doing that now but we just have the bank piece of it and i think it is us or someone else to have the divine authority that would be the entity that could negotiate agreements with other jurisdictions that have systems and agreements in place for you to get a situation where an organization gets into trouble and we would have protocol some place. >> what extension of the authority at fdic to include bank holding companies have allowed to to reach to lehman brothers and aig? >> well, yes erratically it could have -- aig, in assuming that it's both banks collapsed in the fed has become a bank holding company as it was a. >> where would we stop -- i guess is expansion the bank holding companies of mission? i'm thinking we have an

insurance companies, hedge funds, private equity firms, mutual funds, pension funds. how broadly do we need to reach? >> again, we would not want the fdic to decide that, that is something the systemic risk council would be best equipped to do and also are not the ones to decide to close the entity and i could be done stairways. one would be to the systemic risk process we have now been holding company by the fed as the primary regulator and that's the way the process works. the primary regulator makes the decision to close institution frequently done in consultation but appoints us as receiver. >> the you think it would be adequate to simply extend jurisdiction to bank holding company's? >> if you wanted to do something quickly and as i've said before i am concerned we are not out of the woods yet and as the market starts to differentiate in these

government programs we may be back in the soup. i hope that's not the case but not sure. i think as an interim measure you could easily extend our authority to bankrolling companies. you don't need to do that in a systemic risk or anything else. i think when you do that down the road by yes of the short-term measure and i think we have out drafted language which would be simpler amendment process but that would be a very good tool to have now. >> and i assume and that he would agree that establishing an expanded resolution of a lenny would help us to get away from the concern that creating a systemic risk regulator for those so-called it too large to fail firms would create an implicit government guarantee that they would be propped up as opposed -- >> that's right so we want to be a bad thing that a good thing to be systemic, that's right and i thank you do that through a robust resolution regime that mesa could to the market this is the process used and

shareholders will take losses. >> thank you, i would love to have had the same question answered by our other two witnesses. maybe be able to get some of those. two have the other two witnesses comment on that? >> a really agree with what sheila has said it and very supportive of that and the only slight amendment that would have that would be for a bang: company's were customer camps are protected under sec law that there be consultation in the process with the sec i will expect there would be. >> senator, a couple of comments here. one, i would hope that in the universe would naturally not expand that greatly. that is as with comment before, chapter 11 is an appropriate route for most entity's financial and nonfinancial. this ought to be a somewhat discreet mechanism which is used only in a really unusual

circumstances. >> thank you. in that context i tend to agree with that as well but if we do keep this narrowly focused on as narrow as we are talking, then i think we really need to raise the question of the implicit government guarantee of the firms regulated by the systemic risk regulator or the system we established. >> and center with respect to bank holding companies you don't have to beat the question because there's no need to distinguish between systemically important and on systemically important, it's only when you get to the entity is not currently supervised the two have that issue. >> right. >> thank you very much. senator mark gulley. >> thank you larry much mr. chairman and one of the components of the president's plan is a the consumer protection agency, there hasn't been a lot of discussion of that this money so chairman bair can you give us your insights on the role of this potential institutions and whether it is a

program to create? >> we support the agency creation and we think that an agency that is focused solely on consumer protection and financial services to apply standards across the board for banks and nonbanks and mention the same standards, we think that would help the banking sector because i think one of the things that drove the rapid decline in mortgage origination sanders was it got started outside the banking sector and most of these high risk margins were outside the traditional banking sector but it is back in as competitive pressure to market share of banks and thrifts and lower their standards in kind. i think making sure they're even standards across the board is important. roy think the proposal could be strengthened is an horsemen focus. we think we have strongly recommended examination enforcement component burbanks be left with the bank regulators and i said that as a bank regulator but also an insurer of all institutions with taxpayer

exposure without insurance guaranty. there is a reason why we focus on potential regulation of banks and a lot of it is because of the fdic insurance which is back there taxpayer backstop and there are important synergies you can get between prudential and consumer and supervisions. we typically cross train our examiners. we have teams in consumer examiners with mortgages is a prime example of where abusive of mortgages to consumers were also unsafe and unsound and frequently we will find with the consumer price -- compliance problems that have any one of the problem with is management and institutions with a strongly that the rule writing should be for banks and nonbanks and we're on without examination enforcement mechanism should focus outside the banking sector where you don't have much examination enforcement activity at all with a mortgage broker soren pay lenders there are a

lot of abuses outside the banking system that we think could and should be addressed by this agency but we think there crocus to be on creating more robust enforcement mechanisms for the non big center. i don't understand and why taking on examiners from the bank regulators and putting in this new agency and making responsible for banks and nonbanks is going to work -- i don't think it will hear it would be highly disruptive to the fdic and that is 25 percent of my examiners pulled on of the fdic and i assume it's a similar percentage for the other regulators. now we think we do a good job on examination and enforcement. we've never had the ability to write rules so that doesn't change things for us away when asked to consider that change in the administration proposal but we do support the agency. >> someone related to the systemic risk conversation partly about institutions and parlay about practices. by practices i mentioned things such as prepayment met penalties

of mortgages, regulatory arbitrage, whether a fundamental conflict of interest in the rating system in witney into the rating is paying for that rating and the issue of the amounts of leverage that are established in the system under supervision of a sec para had is on this side when you have a consumer issue that would be driven by the consumer and into protection agency. when is it an issue that is systemic risk regulators would take on? and when would be an issue that the regular bank regulators say gone and how would get worked out in terms of how to proceed? >> well, i think it does go both ways and what we have suggested in my written testimony we think bank regulators should be represented on the board of the new consumer agency. i again and supervise a rethink the fdic would have been a

perspective that should be represented and be happy to have a hazard on our part because there are synergies and interconnectedness between the safety and soundness. it i think those need to be dealt with in that would be one way to deal of them. i should say though there has opened a separation between world writing an examination and horsemen with the consumer loss of these for banks. the fed has had that authority for federally insured banks. the fdic has never had the ability to write rules, it does have the enforcement component. >> i want one last question, paul volcker had a report that came out january that i think was called of the group of other airports that addressed the issue of proprietary trading by banks and essentially a using the capital assets of the bank should banks really engage in purchasing assets regardless of the risk and does that trade systemic risk? they have recommendations for constraints on proprietary trading. i open it up to all three of you -- do you have thoughts about

this, it hasn't got a lot of attention and i'm curious of rethinking. >> well, it probably doesn't surprise you we would strongly prefer the proprietary trading occurred outside the bank and an affiliate and if it does occur in a bank holding company that includes depository institution. we think that is a risk i feared the should be considered if the congress decides to approve a the system for a larger institution. >> i would add that i think proprietary trading with either type spears money in the event of supported institution or a customer's money does absolutely create unrest and we need to be sensitive on the broker-dealer side and not permitted to proprietary trade with customer and funds in that activity taken up by the broker-dealer. >> senator, i would just say that regardless of where these activities are taking place they can create a risk under some circumstances, there need to be

capital liquidity and other kinds of regulations which contain the risk in a matter where it takes place. >> thank you very much. senator bennett. >> thank you mr. chairman, i appreciated and thank you to your witnesses eric and i think we've covered most of the ground and don't necessarily need to reread bent same set of leaves. but i have an overall concern here and i don't expect the specific answer. i just want to raise it and get some conversation. now systemic risk, what is it? if we don't have a definition of systemic risk that everybody can understand and buy into, we are getting into a messy situation that could end up being just as bad as what we have just come to

repair and i listened to all of this and think okay, if i were the ceo of one of these companies and it sheila, you're saying we want to stigmatize the company, if it becomes too big to fail are shown as systemic risk, the first thing i would say to all of my staff would be fine now and what will cause us to cross the threshold of being stigmatized as a tier one too big to fail and make sure we manage our business in such a way is to avoid that. now, if the definition of systemic risk is sufficiently lives we can find ways around the definition become too big to fail without being defined as too big to fail and end up with a board of or the single regulator whoever it is facing the mess that we have talked

about. is the definition is clear and accurate and then there vashon on the part of the ceos would be we want to avoid being stigmatized and the whole thing will be self policing. so the market will react to that definition by saying we will do this, we will do that in the other thing. so who gets to decide what is too big to fail? who gets to define what is systemic risk? and what should we be looking for as we do that blacks. >> i guess one last -- i have tried to probe into the lehman brothers decision because with the benefit of hindsight i think the lehman brothers decision is probably what triggered the mess that got us into the need for tarpon. in digging down through and i am told ultimately we did not have enough data. when we made the lehman brothers decision that said, yes, we will

allow leamond to go down we didn't have enough data and if we had had more we probably would have meant a different decision and would have stepped in to try to save lehman the way we saved paris terms of that -- a real-life example of what happens when you don't have a clear definition of what is too big to fail. comments? >> senator, i thank you raise you're really a critical point here and i think it is one reason i believe a sissons of the council will be so important because making a determination about what is a system of import institution and how its business practices are evolving over time to move in and out of that definition is something a council of a verse perspectives and expertise on different institutions will be well suited to do based on analysis of data, examination report, information and counterparties and so forth

and so i think for us to be able -- we can come up with a definition, institution whose failure puts at risk other institutions of a financial system as a whole but i don't think it tells us very much because it is intact some general so i think a council will actually have the ability and have to do the incredibly dynamic process and that is i think designating that is a mistake because you will be designated and people will shop at their business to fall under the designation but i think for the primary regulators and the council to understand those institutions that we need to be particularly august on will be important and facilitated by a council. >> i am glad that she referred earlier about a dollar threshold. might be the trigger and efficiency threshold might be the trigger and interconnected threshold might be the trigger.

there is no single triggered this has come down too. >> i think your question is going to have importance regardless of whether it is a counsel, the fed, a new agency are some the also the question you put your finger on matters the matter who the designator is. and here is the basic dilemma that you always. as i said a moment ago, with respect to arnie supervise institutions and bank holding companies, you don't have to draw that sharp line in the sand and. you can have an approach to regulation and supervision which is in a sense graduated. in squeezing more tightly as if there is more interconnectedness but there is no one place where you say this. the problem comes with institutions that are currently outside the perimeter of regulation and there the choices i think are several, basically rejoices -- choice one is you

basically say here are other group of institutions which we think under stressed conditions would pose a systemic risk because of the set of criteria. two, here is a set of institutions which we would ensue if that level of assurance, but it is to be in the ballpark of thinking about them. either of those required to draw a line somewhere. the third option, of course, is basically every financial firm matter what it calls itself has to be subject to basic rules and regulations, but that, of course, is itself a change from our current circumstance because we don't have that kind of perlmutter. i don't think any of those is a clean joyce. there are disadvantages and it manages to each and that is why i think the question you raise is one we will have to address as best we can no matter which road people choose to go too. >> i think we're suggesting

there is a resolution of any bankrolling company sold for resolution purposes would not guarantee it up front and whether it was used was a determination made by the primary supervisor about whether to avoid systemic ramifications from a normal bankruptcy process that should be put into this special resolution process which still has the same claims priority, the bankruptcy has unsecured it shareholders take a loss. before the government. but it is a way that we can plan and that we have additional power set up bridge banks to accept repudiate contracts and go to the list of special powers but they were better refine intermediaries but you don't have to make that determination in advance. in the context of whether assessment tool on the resolution funding and my senses it would determine who is not systemic as opposed to who is maybe anybody below number 25 billion you can safely assume they're not systemic so now become in the assessment and

even those caught would be risk-based so if you are plain vanilla regional bank and take deposits and don't do much else you probably won't have much of an assessment and if you are a complex with proprietary trading and etc. you will probably have a higher assessments. as dan said the only time i think you're we need to do in it vances if there was a large systemically institution that is not already under the selling in the supervision and i think the council should have the flexibility and authority to define this institution and bring them and a potential supervision if that is the case. but i think that is something the council should do and would be tremendous power and would benefit from a multiplicity of views on the council. >> the power to define becomes alternately the power that controls everything. >> and chile in terms of institutions especially, there

are only a few institutions and i will name specific that come to mind that when our baby under federal provincial supervision, so i'm not sure actually that piece of goods and prices would be that profound and. as a result of the crisis everybody has become a bank holding company are on their way to doing so so i am not sure in practical terms that would be that you to the change. >> yankees mr. chairman. >> i like to thank the panel for hanging in and has done a tremendous time, the last two on this and have a second panel so i have a slew of questions and try to as quickly and again solicitor martinez can get his cousin in and respect the second panel and we have tried to answer fairly quickly. i strongly made clear and believe that counsel is the right approach. i guess i would ask rather quick responses here. if possible even yes or no. i would love to show that

counts: be appointed presidential appointment with congressional improvement chair should have the ability to look across all financial markets, should be able to be the aggregate of data from all of the provincial regulators have to with an independence that i could aggregate and assess the data appearing to has as i think i am producing have the power to issue rules require an enhanced leverage or capital rules. and shouldn't be able to force the fed did today provincial regulators to take action and not have backup authority to take action so i want to try to -- i think senator bennett asked opprobrious questions about how to define and am trying to get into a high-rise structure with his counsel approach. recognizing governor tarullo may not confer on this king and sure, i talked about -- the board at this juncture as if

someone were contained in view of the council so that me just say i will take that and slip back into the prior role which is to say that i thank you need to ask yourself what some point whether you are now basically creating a new agency that has brought in all the functions of the other agencies. if you have a council that basically is able to direct everybody to do with the council of things you ought to do it's not that far from the financial services authority mechanism in the u.k. or something like that. obviously there are a lot of great nations along the way. >> thank you. in chairman bair. >> i thank you asked five questions and i think i have five, yes to all of them. i haven't thought carefully through the structure in terms of presidential appointee consume -- confirmed but it does need to have the ability to aggregate data to look across financial markets and all institutions is the whole purpose here added to my way of

thinking. and i believe very strongly the power to set capital requirements and leverage limit limitations then credential regulatory requirements. and i would have one caveat on the ability to force them to take action if they don't do that in my view on that would be to raise standards yes, not to lower standards. >> chairman bair. >> i would say, yes. >> one of the things that senator corker has brought before you all in number of times and i agree is the notion of an enhanced resolution authority with the fdic and the bank holding companies, i concur with his approach in our goal ought to be allowing these institutions to actually fill in an orderly process and not be simply propped up as 9m. there is a lot of question beyond that and in interim basis here, but one of the concerns with the administration's proposal is there is still

that's how you and the resolution? there is still the idea of having to go to the treasury to get this retroactive finding of the resolution and clearly you don't want to have a pre done so much of existing small banks. how have you thought about a pre funding mechanism and how we make sure that the pre funding if you do agree with the refunding is a large enough now that you will catch potentially some of these institutions that may not be obviously a falling into the current fdic coverage area? >> well, i think we support a brief and a mechanism and it is important to note that this fund would be for working capital. this is not an insurance program so we would be gearing teeing liability and this would be for working capital to facilitate resolutions when necessary to make sure there is no disruption

to the system. at an issue would take time to build that up so initially might have to establish a line of credit with the treasury department. this should be completely separate from the deposit insurance and depository institutions resolving the bank calling company with both banks and non-bank functions we would allocate losses to read in a way that would keep them completely separate. similarly those with large to was the bases should be double assessed so that will take care of the bank and anything else outside the bank. i do think refining is a born from the perspective that not only make you share there is something to call upon so you don't need to borrow from taxpayers to one of the resolutions but i think it is a tool that can complement prudential supervision that a dozen have high-risk be repaired and we have risk-based assessment for deposit insurance and set of cornyn 2006. we like some of the impact his hat on behavior and i think the

assessment produces the same type of thing so for instance if you didn't want to -- so extreme as to shareholding companies maybe you say we can do until the above charge and higher assessment. i think it has a way to impact behavior but not in the way you have a hard it limits in unintended consequences. >> senator, and there is another one of the areas where you have downsizes well as upsize which are weighed go so the downside in an exposed funding hasn't been suggested, you have to go back and do an assessment expo and more money from the treasury in the interim, i simply hope not delano reserve said the of this mechanism. but if you go to the pre running around, there is not really much experience to know what your pre funding as she law party said,

you're probably not going to be at a problem in the near future where you have what you would need if you need a backup line of authority. i guess the incentive question with a single question would have to be asked, if you are a have a preset pot of money which is reserved for resolution situations, does that make it more likely it will be used? i don't think there is a clear answer to that either. >> i'm going to make one quick comment because i don't want to interfere with senator martinez time, but as we think about these gradations and as we think size i hope there will be scaling as opposed to a simple line that you cross over. the one question i also want ask for your answer on but as we look at bank holding companies taking on a whole series of additional luncheons that oftentimes look a lot like hedge funds functions as you mention it chairman bair in terms of internal training functions,

should there be additional capital requirements for these nonbank the functions that are taking place inside bank holding companies as we look at putting barriers on the two big to fail in size and also sometimes a series of additional luncheon's? i will move now to senator matisse and. >> thank you, appreciated. i believe a lot has been covered and i don't want to go over ground covered with there is one area we haven't talked about and i like to know the views of all three of you with the tse's. there entity is that i thank you find too big to fail and that also were systemically very risky, however, they had this implied a government guarantee that they continue to enjoy your and obviously we have done a great deal to do what we should have done it much earlier which is put a regulatory scheme in place that might prevent some of the problems in the past, but capitalized kevin huge and ever-growing market share which

continues to this day and implied government guarantee which provided investors a buffer from reality or from the consequences of investments. i think the whole ball of wax or mortgage system became very much trouble as a result of their activities and actions. and i cannot, i think we will look back on this time and what we have been too i think it would be impossible to overestimate the impact they've had and the problems we have seen. how did they fit into what we are talking about here? what is the appropriate place for them to fit? is there a future they even should have a government sponsored enterprises or should they be simply part of the private sector? as i looked at each of your functions they all under chairman schapiro but not a lot exactly, so we are still in the

problem. if we look at what is where we got today a love for us to focus on what got us here rather than just -- obviously a ideas a big part of the problem and obviously a lot of other issues and relationships and interconnectedness and all of that, but would you please address gsc's from a. >> center, the guarantee is no longer complicit. [laughter] >> someone say never was. >> there is considerable force to that as a well. the board as you know long before my arrival there had expressed concerns about the gsc's and i don't think anything has happened in the last 10 months would have reduced to those concerns. i guess i would just say that telling word and again there are in number of ways one can go but going for what would be critical is to distinguish a private role from a public role. if there is a real public role

played by gsc's and that is why they were originally started, but when you're going to have a public role that is when guarantees, implicit or an explicit are going to be involved and that is when trying to implement a set of policies of those activities are going to have to be constrained and you are going to have to make sure that the entity is really functioning as a public entity under a certain obvious that have constraints. buy characterization of some of the gsc's over the last 10 years would be that nobody could tell where the public ended and the private began. >> what i would just end and that the fed there was an early sound of a risk and treasury especially when i was in treasury similarly would try to sound the alarm,. >> i will speak up for a judy. >> absolutely, i think this council would be able to give voice to the concerns and real authority to adjust, so i think

that is one of the villages of the council and i think the administration proposed putting at age eight on the council and to consider with the gsc's adel of the future is but of congress and continue in and really are still with tremendous systemic exposure so i think this would be a primary where in the past to have had a mechanism to pour some real action to the council and going for and if they continue to lunch in this way the regulators should be represented as well. >> i don't have much to add a levy stand up for sec, long before i arrived with the push for public reporting i think dan makes a good point about establishing the public and private role and the intended consequences of having public policy. the mission is to be transparent and well and is heated by the marketplace. >> i think the market, when you put the paper in the market and people in west, i don't know how bad is a republic role. i know of you have a board of directors beholden to the investors or the public role and

that is my trouble of the whole idea of the gsc's charters. and i for one would wonder noir how their future should really be and whether, in fact, they still have a role that this has been in the past version we dramatically alter it going gordon. thank you for your input and being here this morning. to make senator menendez. >> thank you mr. chairman and thank you for your testimony. for those of us struggling to define the boundaries of systemic risk are which is said that one of the key questions and i know you have been asked some of these and given answers, but to me it is more complicated than just the size of a firm or what businesses and, but how significant is activities are. as well as how extensive the relationships are with other firms and consumers so we have used tear out into big to fail and sometimes i wonder whether we should be looking into interconnected to avail. in that respect, you know,

should for example, the extensive relationships with small businesses and consumers can to defining systemic risk by way of example c19. see id is the largest lender to small businesses in america, and has been in financial difficulties. it seems to mean that unless an entity like i can find its way out of his financial difficulties we are talking about hundreds of thousands of small businesses across the nation who won't have the type of financing they need to conduct their activities which is the greatest creator of jobs in the country at a time unless the country is desperately in need of jobs, so how do we look for example at that? is that an element of systemic risk? it is then the line for me a

little bit better initiatives and tell me why it is not. >> i will start, and i don't think any of us probably was to be speaking with reference to any particular entity so let me just try to speak in more abstract terms. i think we do need to drive distinction between entities that are economically significant with an entity is that a system of financial risk. there are many entities in this country whose failure would work very adverse economic consequences on a lot of people who deal with them, a lot of employees and communities, suppliers and the like, but which don't create a system of financial risk in this sense that they're a failure leads to a kind of immediate cascading a fact in a way to leverage that is consecutively held by a lot of institutions that have a counterpart relationships with one another suddenly becomes a problem as asset values

deteriorated and margin calls increase you have to put up more collateral and sell assets because you don't have enough collateral to put up. that is a pattern that we saw with. and leamond in aig and, in fact, to go 11 years and said that as the long term capital management. >> cascading of thousands of businesses that would have assets wouldn't be systemic risk? >> it would be a severe economic problem, but in the reason i say wouldn't be a systemic financial risk is that it does not unwind essentially overnight killing the animal beall industry would fall and the same context? >> the judgment on the automobile industry was there were a truly enormous costs particularly in a situation in which the economy lewis headed down so quickly in and i

gather that is why the administration and many members of congress thought that action and should be taken. but that did not pose a systemic financial risk. even though it did impose substantial financial hardship. i don't think any of us wants to tell you that an approach to systemic risks will either prevent or mitigate or an economic problems. >> let me take a different tack on matt. so we are looking and its three or $4 trillion commercial mortgage problem coming down the pike in a marketplace with that at this point in time i am told that entities across the country there is no largely speaking in the private sector, there is and the wherewithal for that market to take his mortgages that will be rolling over and having

looked at our lack of action on the home ownership side and what happened there. is that something with that we think it poses systemic risk or do you put it on your same category. and make trade enormous economic consequences but does not have financial risk although i would say that of all those people the false and cannot find a mortgage in the marketplace those institutions will be holding a large number nab back up by some degree of security of the properties will have large numbers of the false unless under a marketplace that has reduced in value and less than holding presently requires so what is that? >> i think it depends on where the concentration is to be done and what the impact of the value of institution holding any formal of exposure would be. let me just say with respect to

commercial real estate. i agree with your assessment that is a looming problem, it is a looming problem for communities in the economic performance generally, a looming problem for financial institutions in this country. whether or not, i don't know that one can classified in and of itself as being the systemic risk or not, it is surely an issue and a problem which is what i think all the bank supervisors have been paying attention to the exposures and speaking only for the fed why we did extend the town of program to commercial mortgages because of the absence of credit flows in the absence of secondary markets. >> i would add briefly that i think your question really points out something very important and focused on an systemically and foreign institutions but there are absolutely systemically risky practices that it engaged in by

a broad range of institutions no one of which might be systemically important institution but those practices taken together across the marketplace as a whole absolutely have the potential to create broad systemic risk with the financial system at large. >> my time is up but i will summon a question to you, chairman bair, about two fdic dispute riss is committed to banks because i don't quite understand the the community banks not the cause of the talent as we face getting into the same rate as entities that create some of those risks, have greater risk for all so i don't quite get a bone love to hear the answer to. >> alan lead to thank you senator menendez and think the panel you have hung in it for a .

having worked very closely with him in 2004, i'm grateful for

his health and friendship and i'm pleased to add my name to the list of those -- who are enthusiastically supporting this nomination. as a ceo of silicon valley's no, ma'am companies, mr. roos has a deem knowledge in the science and the global and having seen firsthand the u.s. japanese cooperation in these areas is well positioned to broaden and deepen our collaboration on issues, commerce, trade and global health. leaving eight offices from san francisco to shanghai has showed his skills as a problem solver and a diplomatic and he and his wife, susan -- i know their children and outside of politics i'm really pleased to be able to support this nomination. if confirmed, his many and diverse talents will serve him

and our country well in tokyo. america has no better friend in asia than japan. our treaty relationship and the strength of our extended deterrent has been a linchpin of peace and security in the region for decades allowing japan, china and their neighbors to grow and prosper. today, japan is in the midst of a season of political upheaval. and possibly of change. but no matter what happens, our commitment to japan's security will not change. our relationship is based on the bedrock of common and enduring interests and values. and that's why president obama's first official working visit was with the japanese prime minister and that's why secretary of state hillary clinton's first official trip abroad to asia began with a top in tokyo. so we will work closely with whatever government emerges after august 30th to maintain peace and stability in asia. at the same time, the world expects japan to embrace its

global responsibilities as a prominent player in approximate greening our planet and the developing world and a respected leader on nonproliferation and a highly regarded practitioner of soft power around the globe to lead by example. while most of my comments have focused on this first panel, let me say the committee is deeply respectful of the service and qualities that each of the other nominees bring to the various ambassadorships represented here. we're eager to hear their thoughts and hopeful that we can get all of you to the floor of the united states senate for approval as rapidly as possible. senator webb? >> thank you very much, mr. chairman. i would like to associate myself with a great deal of the comments that the chairman made without being redundant in many of those areas.

we have, i think, an extraordinarily competent group of ambassadors to move today. i'm pleased to be supporting those nominations. and i noted last week during a hearing that i chaired on asia's maritime territorial disputes, the united states is indisputedly an importantly an asian nation. we've had a good deal of interaction over the past 30 years that has accentuated that reality. i've had the good fortune in my life to be able to spend a considerable amount of time in asia as a journalist, as a writer, a business consultant, and also as a marine. and the ambassadors that are being considered today kind of run the whole spectrum of that region. over the past 20 years our countries have confronted a series of problems such as

long-standing territorial disputes, contentious trade disputes, issues of nuclear proliferation, environmental destruction and a changing regional balance. that should concern us all. the region is transforming as a result of its economic integration. it is changing much of the historic focus that the united states has had on asia. because of the spread of islam of certain parts of the region. competition over natural resources and the emergence of china. despite these changes, we have continued to approach the region in many cases with a limited short-term scope which was the focus of the hearing that we held in our subcommittee last week, but nonetheless the strategic value of this region should never be underestimated. this hearing, with its many nominees underscored the call for a comprehensive strategy to guide american policy in asia. particularly, in devising a response, a proper response, a measured response of the growing

power of china in this region. maintaining a strategic balance in asia is essential to protecting all of our interests and the interests of some of our closest allies and partners. the countries in this region depend on the united states to remain proactively engaged and to adopt a long-term commitment in our engagement to the region and i would urge the nominees as they take up their prospective positions to engage this approach in their relations with the host countries. it should incorporate an awareness of regional trends and how bilateral relations can be leveraged to protect american interests and our influence on the region. this hearing, as i mentioned, demonstrates the geographical reach of american diplomacy in broader asia, north of china of japan, west of tajikistan, and west of papua new guinea.

it's important for the towns decorate consistency in our policy. i have argued that from bedrooma to mongolia, the united states should support free and fair elections and democratization and it's our interest to do so as it is in the interest of those countries seeking meaningful reforms. among these nominees, governor huntsman and mr. roos will lead american diplomacy to our two of the united states two trading partners. the governor will have no short critical issues on his plate such as the military modernization, economic restructuring, trade disputes, human rights, politician, and religious freedom since china'sd states has a key interest in ensuring the well-being of the region and the ability of states to develop any fair and unfettered way. other states. china's resource led investment practices threaten sustainable development and environmental conservation in many places

throughout asia. these practices should be properly addressed. the united states' relationship with china as chairman kerry mentioned, has always been, at least since world war ii, the end of world war ii, the linchpin of our relations in the region. our task is not simply to maintain positive relations with japan but to improve and deepen. this will depend on the internal changes occurring within japan's political system as well as the external challenges facing us both. with a rising china and a stronger russia, a broken process with the denuclearization of north korea, the united states/japan alliance has been and always will be central to the united states security in the region. that issue is not just the health of our respective economies and global leadership but the lives of the united states service men and women dedicated to peace in that region. i thank all of our nominees and their families for their

willingness to serve our country, and when testifying, i would ask that each nominee introduce their family members or their -- those other persons important to their lives who have come today. and as senator kerry mentioned, we will have two panels. and i will introduce the witnesses and those who have come to introduce them following senator inhofe's opening comments. senator inhofe, welcome. >> thank you, both mr. chairmen. first of all, let me thank you for accepting me on this committee. i've been wanting to be on this committee for a number of years. and the vacancy that i'm filling has given me the position of ranking member on your subcommittee, chairman webb, so i'll certainly be looking forward to that. mr. bowman came over and said since i was so new i didn't have a name tag yet, i said don't worry that because i'm a ranking

member because of the environment public works committee right across the hall so we can use the same name tag there. i'll look forward to this enthusiastically looking forward to serving on this committee. thank you, mr. chairman. >> thank you very much, senator inhofe. we have a number of our colleagues who have taken time out of their morning to be here today. senators mccain, hatch and bennett will be introducing governor huntsman and, senator mccain, welcome and the floor is yours. >> well, i thank you, mr. chairman. i apologize for having to leave after my remarks. as you know, the defense bill is on the floor of the senate and we continue to proceed in the most efficient and timely fashion. i want to thank you for welcoming governor huntsman. he's already made his mark as a leader and as a statesman. and i think americans are fortunate that he's agreed to re-enter the service of our nation.

chairman kerry described his many accomplishments and achievements already. i would also note that not only was he elected governor but reelected with a record percentage of vote as governor of the state of utah and was -- utah was named by the pew center as the best managed state in america. again, i will not review his record since it's already been reviewed, but i would point out that governor huntsman's great talents in industry is his commitment to america in my view. in accepting the president's nomination, one which required him to cross party lines in the greater interest of america, he made a statement that i think bears repeating. governor huntsman said, i grew up understanding that the most basic responsibility one has is service to country, he said.

when the president of the united states asks you to step up and serve in a capacity like this, that to me is the end of the conversation and the beginning of the obligation to rise to the challenge. i think america is honored by his service, and i'm sure that he will serve this nation and its interest in probably the most critical nation in the world today as the -- as china emerges as a superpower on the world's scene. i'm honored to introduce the committee -- the great governor of the state of utah, governor jon huntsman. >> thank you very much, senator mccain. senator hatch, welcome, sir. >> well, thank you. chairman kerry, ranking member lugar, senator webb, senator shaheen, senator barrasso, and senator inhofe, it's my distinct pleasure and honor today my good friend and our governor from our

state of utah, our home state, the honorable jon huntsman, jr. it goes without saying that governor huntsman whose service to the state of utah has been a great worth. what utah stands is to lose from this confirmation of his nomination is exactly what the united states and china stand to gain, a seasoned diplomat, an excellent manager, a qualified politician and a man who wants nothing but the very best for the country that he loves and has served for over 20 years. it takes great coverage from a governor from the reddest most state to serve under a democratic president yet this is the same courage governor huntsman has displayed throughout his entire career. from his time as a staff assistant in the reagan administration to his work in the trenches at the congress department, jon huntsman, jr. is an innovative leader and a progressive thinker and someone who comes to this position at a time when the united states needs an ambassador to china who will strive to do what is right,

workday and night on behalf of our country and forge the kind of relationships we need to move forward in the globally connected world of the 21st century. as the ambassador to the country of china, the challenges before governor huntsman will not be easy nor will they be few. however, i personally find it very interesting that governor huntsman has been here before, twice, in fact, for this is a man who has been unanimously confirmed by the u.s. senate for the u.s. ambassador first to singapore under president george h.w. bush and deputy trade representative under w. george bush. he has asked president obama's call to willingly serve to serve as ambassador to china to leave his post a governor and he was elected with over 70% of the vote as governor. to me this speaks volume to his ability to cross bridges, conquer divides, and put aside partisan politics when doing

what he believes to be best for his family, for our state, and for our country. and for this president. it is no secret that under governor huntsman's stewardman, utah has been named as the best managed state by the pew research center. and building on the excellent work of the state legislators as well i've worked governor huntsman lead our state in economic development initiatives and incentive programs that have shaped utah into one of the most dynamic states in the country. even in times of economic hardship when the leaders in our state legislature and governor huntsman have had to make some very difficult budgetary decisions, utah continues to be a leader in innovation, transportation, and conservation as governor huntsman has sought to maintain utah's high quality of life why transferring the best companies to our state. i cannot think of a more qualified nominee than governor huntsman. he speaks fluent chinese, mandarin.

he has been to china on numerous occasions. he has lived and worked in taiwan as a missionary for the lds church and in private business. and he excelled in his role as u.s. ambassador to singapore. president obama made a wise decision. we appreciate him for that in selecting governor huntsman for this post and because of that, utah will lose a great leader. however, governor huntsman has left the state in good hands. we all look forward to working with lieutenant governor gary herbert in his new role should governor huntsman be confirmed. i speak for all utahans that governor huntsman will be missed. we all know he is a very appropriate person for this job. his selection could not come at a more appropriate time. this is the time when a man like governor huntsman is needed on the world stage and it is a time when he leaves utah a better place having served our state so well. so i congratulate governor huntsman on his nomination.

i applaud his wife mary kay and her decision to continue to allow the world to share him, and i know his wonderful family will be blessed by his contribution to our country in this position. i want to thank the committee for moving so quickly once they received this nomination from the white house. again, mr. chairman, i certainly appreciate your efforts in this regard. you also, mr. chairman webb, and we stand willing and able to help in any way we possibly can. we're grateful to you and grateful for this hearing and i'm very grateful to be here. >> thank you very much, senator hatch for being here and for that fine introduction. and senator bennett, you're recognized. >> thank you very much, mr. chairman. you've heard all of the formal things about governor huntsman. i would like to tell you a story. many may not know that he was on the short list to be ambassador to china when president george w. bush became president.

i called some high administration officials on his behalf and can testify to the fact that he came very, very close to receiving this assignment at that time. so this is the story. after realizing that he had indeed been in consideration to be ambassador to china, i had a conversation with the president with the university of utah and by this time he was our governor and as people do when they get together, you talk about the governor and what's happening and the latest gossip with respect to politics. the president of the university of utah -- i made mention of the proposition that he had just missed being appointed ambassador to china. and the president of the university of utah then said to me, you know, i was with the governor and a group of scholars

who had come to the university and their particular area of expertise was china. and because i knew he had an interest in china, i invited the governor to come to that dinner. he said he captivated every one of these scholars with his knowledge of china, its culture, its history and its background and he blew them away with his ability to speak every single dialect with which they were familiar. he said i had no idea he had that much depth in china and then he paid the governor the ultimate compliment. he said he could teach a class. [laughter] >> on china and chinese culture at the university of level. the president could not have chosen a more qualified individual to go to china with that kind of background, that kind of understanding, that kind

of commitment in dealing with the people of that great nation at a level that they can identify with. i heartily endorse his nomination and urge the committee to act as expeditiously as possible. thank you, mr. chairman. >> thank you very much, senator bennett. i think we can safely say that the governor has at least three votes here in the senate. [laughter] >> maybe we should just get him to do healthcare before he leaves. [laughter] >> maybe adopting the chinese model. [laughter] >> we thank you very much for being with us today, senator hatch and senator bennett, and for giving those great words. and we have senator bill bradley, former senator bill bradley, who gave long service to our country here to introduce mr. roos. we also would like to rerecognize walter mondale, who

gave long service to our country in many different capacities, tom foley, both of whom were leaders in the congress and also ambassadors. if you would like to join mr. radios at the panel, you're certainly welcomed to. if you would care to say a word or two. >> i don't know what the protocol is that's used. senator bradley, we'll begin with you first. thank you for being here. >> thank you very much, mr. chairman and members -- this has changed since i was last here. [laughter] >> thank you very much, mr. chairman, and members of the

committee. it's a pleasure -- [inaudible] >> that's true. >> it's a pleasure to be here to say a few words on behalf of john roos. i've john for nearly 30 years. in that time, he has been a substantive advisor and political strategist for me. as well as a personal lawyer and most important, a friend. in fact, during my 18 years in the senate, on two occasions i offered him the position in my office as administrative assistant, and he turned me down which some people say recommend his intelligence. [laughter] >> but i'm so happy for the country that president obama has nominated john to be the u.s. ambassador to japan. if confirmed, john will be the first californian and the first representative of silicon valley to serve as u.s. ambassador to japan.

as senator kerry mentioned, he is the ceo of a 1500-person law firm, and i hope the committee is aware that law firm is at the apex of the technology industry on a global basis. representing such firms as google and apple and youtube and hewlett-packard and dell and telsa and lsi logic and it goes on and on. it means from my perspective, that john roos understands the dynamic of american innovation. and understands what it takes to extend america's competitive edge. and based on my own experience in this body for 18 years under four presidents, and two of each

party, and also based on five years of the head of the u.s./japan legislators conference, i think john's background will be impressive to the japanese and will help make him be an effective ambassador. like the president, i truly believe he represents a new generation of leadership. but beyond the business acumen and the experience, i think his certainly qualities will also make him an excellent ambassador. let me put it this way, if i had to make an important decision for the country or for myself, i'd like john roos to be in the room. primarily, because of his impeccable judgment. he has a steady hand when the pressurizes. he never panics. he never, you know, does anything other than follow his

own plan, and i think as well he not only sees what is admirable but also what is possible. second, i think he's a great member of a team, in this case, it will be the state department team. he gives loyalty, and he engenders it. he knows how to pay respect and does so naturally. he can manage up or manage down. and he's interested in results, not in the credit. third, john has an uncanny ability to achieve consensus among disputing parties. and the reason this is the case is because he really does know how to listen. asking all the right questions at the right time and showing the patience needed to close the deal. and after he finishes a

negotiation, the people on the other side retain their respect for him. in a way, i think he truly embodies the ideal of the old saying that there are four kinds of leaders. the leader that people hate, the leader the people fear, the leader that people love, the leader that people didn't even know he was the leader. in other words, a selfless leader. i think that describes john roos. finally, just to reiterate what senator kerry said, john has worked politically for vice president mondale, for senator kerry, for president obama, and for me. and i think the fact that three of us are here today and the

fourth nominated him to this position shows the respect that we hold for him, a respect that has been forged under very intense pressurized situations over a very long period of time. so, mr. chairman, i truly feel that john's nomination is an inspired nomination. and i am very pleased to be here today to introduce him to the committee. >> thank you very much, senator bradley, for those strong words of endorsement. mr. vice president, we certainly welcome you to the room today and to the contain. -- table. >> thank you, mr. chairman. i had not planned coming to make any remarks but i am strongly john roos' nomination to become our ambassador to japan. i've had a chance to talk to him about these issues. i think he's going to be a very

strong ambassador, and i wanted to come personally, as did tom foley, to underscore the importance of this assignment in the firment of u.s. diplomatic relations. it's crucial to u.s. aspirations in asia and in the world. when relations with japan are solid, our alliance is functioning effectively, everything in the world, almost, is better. in my years in japan, almost every day i became more and more convinced of the crucial importance -- the most possible, solid, productive relationship with japan. and i am really glad that john's going there. i think he will be a superb ambassador, and we all look forward to working with him. >> thank you very much, mr. vice

president. i would have to reiterate what senator bradley said. it does speak volumes about this nominee that all three of you would be at the table this morning and ambassador foley, welcome. if there's anything you would be interested in? >> thank you very much, mr. chairman, members of the subcommittee, as a fritz mondale have said, we both intended to come today not to put spoken words in the record but we're delighted to have a brief opportunity to do that. this is an important relationship as everybody knows. senator mansfield, one of the great ambassadors of the united states to japan said it was the most important bilateral relationship in the world. and certainly there is no other more important. this week, the prime time in

japan has said national elections for the end of august. so this is a critical time, and i don't think the president could have forged a more capable experienced in private business and -- in every way a distinguished nominee as he has with the nomination of john roos. so i join the vice president, former vice president, and all the others here who have publicly congratulated both john roos and congratulate the president on making the extraordinary nomination that he has made today, governor huntsman and others but particularly we want to say our strong approval of john roos. thank you very much. >> thank you very much, ambassador foley, and vice president mondale, senator bradley, for coming forward to introduce our nominee.

i believe chairman -- >> i need to go to the floor. you guys haven't lost your touch for unprepared, that was pretty good. thank you. [laughter] >> and senator bradley, that's one of the most thoughtful sort of out of the box no surprise introductions and we appreciate it very much. >> thank you, senators. and mr. vice president. we'll now hear the testimony of our two nominees and governor huntsman will go first. for those asian hands in the room this is not the countries we put first in our interests and priorities but in the protocol of the senate, those who've held government positions outranked ceos, this may be the only room -- [laughter] >> in the country where that's

the case. governor, welcome. we're anxious to hear your testimony. >> thank you, mr. chairman. and to members of the committee, it is indeed an honor to be here this morning. i'd like to thank senator mccain, along with senator hatch and senator bennett, and just say that i'm grateful for their words and i hope i do as well at my funeral. i'm not sure i will. i appear before you as president obama's nominee to the ambassador to the peoples republic of china. i would like to take this opportunity to thank and introduce those closest to me, members of my family who are here with me today. my wife, mary kay, my children mary ann, abby, liddy, john, will, and gracie. stand up gracie, and gracie may. her sister is not here today. when she heard that it was a

hearing, to her she thought she needed to be heard too and we thought that would take too much time so she's left behind. for part of our family, this is really an opportunity to return home. my son, will, was born in singapore when i served as ambassador there. and our two adopted daughters were born in china and india. happily, no border disputes yet surrounding their bedrooms. it was a difficult decision for our family to make to leave a state and a job that we love for this new challenge that will take us half the world away. i want to thank the good citizens of utah for their support and understanding as my family and i embark on this important assignment for our country. with the support of the senate, mr. chairman, we are committed to this new responsibility. if confirmed, i will be in an enviable position in representing the united states during an exceptionally exciting

time in our 30-year bilateral relationship with china. we have reached a point in history where a positive contribution from china can substantially improve our chances of addressing some of the world's most pressing problems. first, one of our highest priorities is repairing the international economy. it is critical that our two countries maintain thorough and close financial and economic coordination at this critical time for the health of the world economy. second, china's influence û and one of the key objectives of our engagement is to maintain peace and stability in northeast asia. in recent years, chinese officials have demonstrated an unprecedented and, quite frankly, unexpected degree of constructive leadership in regional affairs by chairing the six-party talks. and working closely with the united states in the united nations security council to respond to north korea's provocations. we need to continue working

closely with china to convince north korea to abandon its nuclear weapons program. third, we hope to work increasingly in tandem with china on other issues in which we share a common interest. such as advancing counterterrorism efforts, pursuing arms control, stemming the spread of weapons of mass destruction and their delivery systems and combating extremism and promoting stability in afghanistan and pakistan. we would also like to see china work with us to address governance and development concerns in places like sudan, burma and zimbabwe. fourth, in military affairs, the challenge before us is to maximize the space for cooperation. in that pursuit of common interests while working to narrow our differences and prevent misunderstandings or accidents that could lead to confrontation. if confirmed i will work closely with the defense department and the representatives of our

military services to improve the military-to-military relationship and build a framework for increased strategic trust between our two nations. fifth and finally, collaboration on clean energy and greater energy efficiency. both offer a real opportunity to deepen the overall u.s./china relationship. as utah governor, i have been deeply involved in exploring clean energy options for the western united states. if confirmed i will continue my personal interest in working with china to identify and take action in areas that are mushly beneficial to promote low carbon economic growth. of course, there are areas where we have differences with china including taiwan, human rights, tibet, to name is view. the promotion of human rights is an essential element of american global foreign policy, and if confirmed, i will forward -- i look forward to robust engagement with china on human rights. having spent time living on

taiwan, i feel personally invested in the peaceful resolution of cross-strait differences in a way that respects the wishes of the people on both taiwan and the mainland. i believe the one-china policy based on the three-joint communiques and the taiwan relations act supports this objective, and i have been encouraged by the recent relaxing of cross-strait tensions. finally, i'm honored to have been selected by president obama as his candidate to represent the united states and american values in china. if confirmed, mr. chairman, i will do all in my power to promote u.s. interests faithfully while working to further strengthen our ties with this complex and important country. mr. chairman, to you and to members of this great committee, thank you for this opportunity to address you and i look forward to your questions, comments and guidance. thank you. >> we'll now hear from mr. roos.

welcome, sir. >> thank you, mr. chairman. if i may first introduce my family back there, a couple rows back, my wife, suzy, my son, david and my daughter lauren and my parents are also here from california, betty and jack roos. and somewhere in the audience is our wonderful congresswoman from the silicon valley. mr. chairman and distinguished members of the committee -- >> we welcome your family. if they would all stand up so we could recognize them, that would be great. welcome. nice that you all are here. >> i'm honored to appear before you today as president obama's nominee to be the united states ambassador to the great nation of japan. i would first like to express my deep gratitude to the president and secretary of state clinton for their faith in me and to

senator bradley for his incredibly warm and generous remarks. in addition, i would like to express my deep appreciation to two eminent american statesmen and previous ambassadors to japan who were formally introduced and said wonderful statements. former vice president walter mondale and former speaker of the house, tom foley. their presence demonstrates the importance of united states/japanese relations and the special bond between our two countries. if fortunate enough to be confirmed, i will devote myself to strengthening and expanding that bond as we confront today's global challenges side-by-side. although separated by many miles, our nations have enumerable interests in common including promoting security and stability throughout asia and

indeed the rest of the world, fostering global economic recovery and advancing democratic values and human rights. we also share respect with the spirit of innovation and a passion for resourcefulness and problem-solving. i've always had tremendous admiration for japan's people, government, and culture. and i believe that my background has prepared me well to serve as an effective representative of our country. my law firm played a pivotal role in helping to shape what has come to be known as silicon valley. i joined the firm in 1985 and have been privileged to serve in a number of senior leadership positions including as ceo since 2005. during my tenure, the firm was intimately involved with the various ways of innovation

sweeping the world from the growth of software and communications to the internet age. from the emergence of biotechnology to the current focus on one of president obama's top priorities, renewable energy. as ceo, i've had the opportunity to develop vital management and leadership skills including dealing effectively with crises and running day-to-day operations of a large complex organization. perhaps most important, i have learned the value of listening, keeping an open mind and consulting with the experts before making important decisions. program in his recent speech in cairo spoke of innovation and education in the currency of the 21st century. i can think of no greater honor than to put the experiences and skills i gained in the most

innovative place on earth to work on behalf of our country. if confirmed, i will strive to help strengthen the u.s./japan security alliance which remains the cornerstone of our mutual security in the asia pacific region. i also will work with japan to address critical global challenges including the security of iraq, afghanistan, and pakistan as well as climate change and energy security. i will continue close consultations on the developments on the korean peninsula and in our relations with other pacific powers such as australia, the republic of korea, china, and russia. in addition, i will seek to strengthen bilateral cooperation on the global economic crisis and support efforts to increase investment and trade between the united states and japan.

i also will further our mutual goal of promoting democratic values and human rights throughout the world. last, but certainly not least, if confirmed, i pledge that i will do everything within my power to protect and enhance the well-being of the talented u.s. government employees stationed in japan as well as the many american citizens living in or living in japan. in closing, while i've been privileged to contribute to the economic growth of this nation through my work in the private sector, ever since i served as an intern in the white house during law school, i've dreamed of one day reentering public service and giving back to my country. if confirmed, i will be honored to represent the united states of america in one of the most vibrant places in the world at

this critical point in history. and i pledge to work closely with president obama, this committee, and the other members of congress to address the issues that lie ahead. thank you again, mr. chairman, and members of the committee, for the opportunity to appear before you. i'll look forward to answering your questions. >> thank you, very much, mr. roos. and senator inhofe, i would propose -- first, i would like to ask a question of each of them for the record and then i would propose we could use 8-minute rounds between you and me and anyone else who would show up and again, welcome, sir, to the committee. >> both of you have -- this is a question for the record for our committee, a question of

clarification. both of you have extensive business interests and financial holdings, and you've been through the ethics process from the department of state. could you each tell us for the record what practices you're putting in place in order to separate your business interests from the responsibilities that you will undertake and, governor, you can go first. >> thank you, mr. chairman. we've gone through a rigorous accounting of any ties or connections to private sector entities, through investments or otherwise. and much like i did as i prepared to serve in singapore or as deputy trade representative which was a rigorous screening and very strong recusals which were put in place and then once again as i ran for governor and had to ensure that there were no

conflicts at all, realizing that even the appearance from an ethical standpoint can raise real questions in terms of your ability to ably serve the public. so we've gone to great lengths to make sure that we have covered all bases. recusals are in place where appropriate and i believe, senator, that we are serve without any questions of conflicts. >> thank you very much. mr. roos. >> senator, as with governor huntsman, i've gone through a thorough vetting process and worked very closely with the office of government ethics and the legal counsel at the state department, have signed a very rigorous ethics agreement and divesting myself of anything that either directly or indirectly could pose the appearance of conflict of interest. i have signed a very rigorous

ethics agreement and i believe my history and going forward i pledge to abide by the strictest ethics obligation. >> thank you also, mr. roos. governor huntsman, you were with former president reagan on his initial visit to china many, many years ago. i've read a speech that you made in '06, recounting a good part of that visit. would you give us your thoughts about how this relationship has evolved in terms of what many people believe is the strategic vulnerability of the united states given our -- what a lot of people perceive an economic imbalance and also the expansion of china in military terms. >> well, let me just say that it was an extraordinary opportunity

to be in china in early 1984 with president ronald reagan, who spoke to the chinese people live on television and spoke to the emerging generation at the university and as such was able to articulate and convey, i think, some of our best traditions here in the united states. articulating and representing those values we hold near and dear and that was quite remarkable to witness as a young white house staffer. as i've watched the relationship of evolve, i've seen in many areas a greater sense of openness. i've seen the challenges present in the relationship that continue to be challenging from time to time both political and economic. but all the while i've seen two countries that have done their best to try to identify areas of common ground challenging as that might have been in the early years of the relationship.

we celebrate this year, senator, the 30th year of our formal diplomatic relationship and as you look at the trade flows 30 years ago, they were minuscule. when you look at the trade flows today, they are substantial. we have an imbalance that needs to be worked on. and gladly we're beginning to see more exports into the china market than imports from the china market which is a very encouraging sign. but more needs to be done. i think we can honestly and fairly stand here at the 30-year mark and say there have been some outstanding professionals who have committed their lives and their careers to getting the relationship to where it is today. they're now in a sense handing it off to the next generation and i feel an enormous responsibility in being part of this relationship going forward. and part of it will get to the issue that you just mentioned on the military. where we have seen double-digit

defense spending for many years running now adding to their $70 billion defense budget. and we are just now, as i discussed with admiral mullen yesterday and secretary gates the day before -- beginning to revitalize the military-to-military relationship. and why is that important? well, it was, i think, an important stabilizer until october of last year when things kind of got a little rocky. but it is important to the united states because through it, we get a better understanding of intentions of budgetary priorities in allowing us to promote greater transparency where chinese military spending is being directed and how together we can build confidence longer term. so i can commit to you, senator, that i will do my best as i reflect upon not just the period from 1984 on but indeed the total 30 years of our diplomatic

relationship having studied it and reviewed it thoroughly. i hope to draw from the best traditions but i also am a hard-headed realist about what it's going to take to manage this relationship or being part of that team in circumnavigating the challenges ahead. and it's in everyone's interest in the world to ensure that we have a good, stable, positive, constructive and comprehensive bilateral relationship. and i pledge to you that i will do my best to contribute to that end and part of it will be through enhancing our military-to-military ties. kicked off, i might add earlier this year, by the visit by admiral roughead and undersecretary florino to better understand some of the issues we have and some of the concerns that are very real here in the united states regarding aspirations and defense priorities.

>> i thank you for that. i will come back to it in a later question. i wanted to ask mr. roos a question before senator inhofe has his round. one of the concerns with respect to japanese-american relations has stemmed off the stagnation -- long-term stagnation of the japanese economy followed by the situation that we've experienced since last autumn. what are your thoughts about ways that we might be able to work on the relationship between our two countries? >> thank you, senator. a couple of thoughts in that regard. first of all, japan and the united states are the two biggest economies in the world. so it's critical that the two of

us play leading roles in the recovery of the global economy. japan has done quite a bit already, as has the united states. both countries have passed major stimulus plans, operating adjustments to monetary policy, et cetera. i think there is a lot of continuing consultation and synergy that the two countries can do with respect to the recovery of the global economy. one of the things that i think is very important for both countries to be -- to continue to focus on is free and fair trade. and one of the areas that i want to spend a lot of time focused on is opening up markets, leveling the playing field and making sure that we have the free flow of trade as the global economy recovers. >> thank you, mr. roos. senator inhofe? >> thank you, mr. chairman. and after this as you know i have an amendment to the floor in the defense authorization bill so i have to excuse myself.

first of all, since this is my first hearing, it's such an honor to be facing two people i strongly supported long before this meeting was held. was called. and i look forward to supporting your nominations. i'd like to start, governor huntsman, with you. as we said back in the anteroom the only area where you and i do not agree is the relationship between c02 methane and climate change. and while i'm relatively certain that nothing close to the house-passed cap-and-trade bill is going to pass the senate, it's not going to happen. one of the main reasons is -- is the discussion about china and what they might or might not do. and in your opening remarks, you talked about encouraging low carbon energy in china. the reason i say that is that

two weeks ago we had the -- the new director of the environmental protection agency before our hearing right across the hall here in environment and public works. i asked you the question about the -- if we were to pass the -- anything close to the house-passed bill, would have it any affect on reducing carbon. and the answer was no. and the reason is because india, china and several of these other countries -- but primarily china, they're cranking out two coal-fired plants each week. they are a major contributor -- in fact, they passed up the united states in terms of their contribution to the atmosphere of carbons. and the reason, since they're not included in this and the statements that they have made -- and i will go ahead and quote from the submission to the post-kyoto treaty, they said, quote, the right to development is a basic human right that is

undeprivable. economic and social development and poverty eradication are the first and overriding priorities of developing countries. and i think that's most developing countries would chime in on that. so that being the case, you could argue, and others have, studies have shown if we do anything with our manufacturing jobs going over to countries like china, that it could have a net increase, not a reduction, so i'd like to ask you what would be your ideas since you stated you were going to be encouraging low carbon energy in your new relationship and new position. how would you go about doing it and what specifically would you try to do? >> thank you, senator. well, first of all, i think we all have to recognize that when you get the united states and china at the same table they do represent about half global emissions. >> that's true. >> and if together they can't address this initial some sort of sensible and thoughtful fashion, no one else is going to

do it for us. i see it as much as a quality of life, health and export promotion opportunity as anything else. and part of my task as governor as a great state was to assist local industries in finding market opportunities abroad. now, when many of our export opportunities increasingly become clean energy, renewable energy, carbon capture and sequestration -- areas that create jobs, realizing that every billion dollars in exports from our state creates 22,500 jobs, this is not only an area that deals with emissions from a health and environmental quality standpoint but in a very real sense is about economic vitality. and when i look -- and we in the western u.s. we talked about targets and we talked about working -- we have worked with industry, and i think we made a lot of progress in the western states in terms of realistically dealing with renewable portfolio

issues and dealing with cleaner buildings, in dealing with emission standards generally, i'm going to take a very realistic and hard-headed approach when it comes to looking at this issue first and foremost from a health and environmental quality standpoint but also from an export promotion and economic vitality standpoint for the united states. because i know what a market opportunity this is going to be for us. innovation in our universities, job creation by our entrepreneurs and when i think of entrepreneurs, i can't help think of my own father, john huntsman, sr., who's here is the greatest entrepreneur i know and the way for the next 20 or 30 years is going to be an area of great focus by investors and innovators and university experts, and those who are trying to promote a cleaner future between the united states and china.

so we fully expect that we will work out of embassy beijing in identifying first of all the science that brings us together in a harmonizing and comprehensible fashion. that's not necessarily there so the idea we can work with universities, think tanks, groups like noaa and figuring out common benchmarks, common frames of reference just as it relates to the science of climate is going to be very, very important. but also working with the foreign commercial service office there on export opportunities that we will have for our firms in china. >> well, i thank you very much. mr. roos, i noticed that the elections are coming up for -- i don't know, it's been quite a number of years. the ldp party has dominated the scene and it's, i guess, at least, from what i have read, the chances of the dpj party coming in are pretty great at this time. the elections are coming up.

some statements have been made -- i'll read one of them -- that is pretty -- dpj promises a more independent stance and has accused the ldp of bowing down to the demands of the united states. sperling earlier this year, the head of the dpj party said, quote, we want to move away from u.s. dependency to a more equal alliance. how do you see this -- if that becomes a reality in terms of their becoming the dominant party, how do you think that's going to affect our relationship? >> well, senator, first of all, i learned a long time)3ñ ago noo try to predict how elections are going to come out. with respect to the dpj versus the current government, i have read those statements. i've seen them and everything, but i do believe a couple of things. number one, that the

relationships with the united states government are deep on both sides of the aisle over there. and we continue to have those relationships and will continue no matter what government is in power. second of all, i have every reason to believe that there will be no fundamental change with respect to the bilateral relationship and the alliance with the united states. and if i'm fortunate enough to be confirmed, i will work very hard to keep the lines of communication open and make sure that happens. third, with respect to those particular statements that you're talking about, i have also noticed that in the last couple days, the dpj has tempered some of those remarks. ..

>> and you mentioned in your opening statement, governor, that you recognize a problem that we in terms of the way we look at china's attitude in africa whether it's with mugabe in zimbabwe, sudan and other places where we have had opposing views, do you have any ideas on what you might be able to do that would be, bring china a little closer to our way of thinking in terms of some of the problems that exist right now in africa, specifically zimbabwe and sudan?

>> you, you mentioned a couple of difficult, challenging and troubling cases. >> yeah. >> and adhering to a more rigorous export control regime would be a pretty good place to start because it is the flow of arms that create so much of the destabilized environment in both those countries. but i also like to think of africa where china now has by some estimations 750,000 people and tens of billions of dollars invested. a much different level of investment than what we have seen in earlier generations from, like, russia or the soviet soviet union. the raw materials needed to fuel the thriving chinese economy which has grown at 8, 9, 10 percent for 28, 29 years running

now. i think there's an opportunity here as one who's always looking for an appropriate balance sheet with china. we have on one side of the balance sheet the issues we bring up that are challenging and difficult, but we bring them up because we are who we are. and we represent the united states of america. on the other side of the balance sheet, we've got to find areas of collaboration, and i do think africa could be one such opportunity. if you take export controls aside and the work that we must do more of in terms of the flow of arms, i think looking at something similar to an africa growth and opportunity act having been involved when i was trade ambassador with africa many years ago, it is an opportunity where the two of us can actually focus on a continent that is in need of economic growth, it's in need of seed capital, it's in need of the right kind of peaceful

infrastructure investment that will bring stawbility longer -- stability longer term to the continent, and that is an area i'd very much like to explore with chinese counterparts. >> good. i'd like to be working with you in that area. my time has expired, but for the record if you would give us your opinion of how to dispose of the uighur problem that is there, you might, just for the record, respond as to how we might be able to handle that situation. thank you, mr. chairman. >> thank you, senator inof and, again, welcome to the committee. look forward to working with you on all of the issues with respect to east asia and eau san that in the future. governor luntzman, i'd like to -- huntsman i'd like to ask you two follow-on questions. one is not follow-on, but it is on point. you were a mormon missionary in

taiwan, is that correct? >> that's correct. >> it's my understanding that mormon missionaries are not allowed in china. is that correct? >> they that's correct. >> you mentioned in your statement human rights issues, one of the things that i have been concerned about for many years in which i have been attempting to bring to the table in the senate since i've been here is the reality that these aren't simply human rights issues when you look at the variance in policies that the united states applies particularly in places like east asia. it goes to our consistency in our foreign policy. "the washington post" this morning has a long article on initial outreaches of this administration to burma. basically saying that burma should release political

prisoners, suki is a major focus but something beyond that that they should implement a constitution that has multiparty participation in the political process, they should commit themselves to elections and then we would move forward. how would you differentiate that policy of the united states government from the approach that we take in china. >> well, let me just say broadly on human rights that it has been an on again/off again discussion with the chinese from the beginning of our relationship. it must be a central part of our ongoing discussions, but what i think we need to do and i'd like to come back and report on progress once i'm over there and on the ground, is to somehow

regularize and systemize the way in which we talk about human rights, the way in which we talk about religious freedom, rule of law, speech, assembly, the flow of information which will be critical to china in the 21st century. so many of these issues are coming at us so rapidly because of the growth in china, the fact that you've got 300 million internet users and 60 million bloggers all of whom are anxious to be part of the world and access the outside world. the human rights dialogue between the united states and china will take place later this year which is a good thing. it happened last year after a long, long hiatus of no real interaction, and i hope, senator, that i can come back and report on ways in which we've been able to standardize, regularize our interaction on human rights issues generally.

so that it isn't a once-per-year discussion where the talking points are pulled out and then they're dispensed with, but rather something we're able to engage in ongoing discussion on. and i hope that i'll have something report to you next time we meet. >> i thank you for that. i would, i would point out this has been -- i like the way you just characterized it. you know, we have a once-a-year discussion, and we do our book on human rights around the world, but again, to reiterate what i said at the beginning, my difficulty with this is that we should be looking at an american approach to governmental systems and have some uniformity in our approach. and what we have now appears more to be akin to situational ethics. we apply different standards to different countries depending on

other, other matters. so it's very difficult for people in the region, as you know from having travel inside the region extensively, to figure out exactly what it is the united states is attempting to articulate in this area. mr. roos, i'd like to follow up on senator inhofe's question about not the elections so much as the fact that for the first time in a very, very long time there really does seem to be major challenge in the governmental system of japan in terms of party structure. would you give us some, some thoughts on the dynamic of that and how it would impact american/japanese relations? >> senator, i think that's an

important question that really remains to be played out in many ways. the system in japan, as you know, right now you have the liberal democratic party and the democratic party of japan that is formed of various coalitions that depending upon how the election plays out could, could be adjusted. and i don't think anyone at this point in time really knows either how the election's going to come out or how the post-election parties are going to, what they're going to look like. i think fundamentally what's important from the ambassador's point of view is to insure that the relations are across the board with all the different parties and factions. and i look forward to working with you and the committee as the process plays out post-august 30th with respect to that election. >> well, i certainly respect

your hesitance to comment on the election itself, and i wouldn't be suggesting that you do that. my, my real curiousty is as to the dynamic between the two parties that could affect a different approach to relations with the united states, just the actual political chemistry of that. do you have any thoughts on that? >> well, when you talk about the political chemistry or how it's playing out, i think, you know, at the general level, the 50,000-foot level right now you have the ldp, the current government that is, obviously, strong behind the alliance, the bilateral relationship. as senator inhofe talked about statements coming from the dpj talking about more of a level playing field in different areas

such as host nation support, the refueling operations, etc. i think that from what i've seen in the discussions and briefings i have had i believe the dpj will be equally committed to the strength of the alliance and the bilateral relationships and that those policies will evolve as we get closer and post the election. >> thank you very much. senator izaakson. >> thank you, mr. chairman, i apologize for being late. mr. roos, i have the highest of regard for senator bradley, and if you're good enough for him, you're good enough for me, and in particular it's fortuitous that you're here today because north korea said they're not about to lose their plutonium. we need somebody who can bring folks together over there, so i'm looking forward to you doing that as quickly as possible.

congratulations on your nomination. governor huntsman, i appreciate your time and i have only two questions for you. the first one is you have been a promoter of tourism in china. as ambassador what plans do you have to enrich tourism between our country and the country of china? >> it's an interesting question because i've been on the other end of this conversation having led a trade mission a couple of years ago to china. specifically as it relates to travel and tourism, and i had a chance to speak to a number of representatives of travel groups and agencies while in china. and interestingly enough now utah has its first-ever direct flight to asia, something i don't think we ever thought we'd have anytime soon. i would hope that by working my contacts in the governor's corps knowing that travel and tourism is a huge industry for most states in america that i could somehow get across the point

that traveling to china, helping to promote travel and tourism, a better understanding of key destinations here in the united states now that you've got a generation in china that is more mobile, has more disposable income and will increasingly be looking for places to go it's an important time to begin that educational process. so i hope, senator, that i'm able to work with my gubernatorial colleagues across the country in maybe raising a little bit of awareness in this regard. >> thank you for that. second question deals with currency and intellectual property, one of the two issues businesses in america have had vis-a-vis china has been currency manipulation, one, and second is the protection of intellectual property developed in the united states. i had the occasion to meet with madam ma who at the time was the finance minister about two years

ago in china and raised the question about currency, and she assured me at the time that they were in the process of passing a number of laws in china to reform that. do you know if that has, in fact, taken place, or do you know what the situation is with the currency manipulation now? >> i can point you to a speech given, i think, in 2007 by, by president tao where he discussed the desire to begin looking at a more flexible approach. it is our hope and desire and, indeed, intent at the negotiating table to insure that progress is made in this particular area. if you follow historically at least back to the early 1990s when it was pegged at the dollar, and it was relatively stable at 8.3, roughly, to the dollar. as the u.s. dollar fell

vis-a-vis other major currencies of the world, so did theirs. as it was undervalued, there was enormous global demand then in the global economy which china was providing for which resulted in enormous sur 34russ for them -- surpluses for them, deficits for a lot of other people. since then it has continued its, its change, its revaluation, if you will, to where today it sits at about 6.7, 6.8-1. so that is progress over this last couple of year period, and that must continue, and, indeed, this will be part of the discussions during the strategic and economic dialogue which is right around the corner next week at the highest level. so our government and theirs. >> well, i appreciate very much your knowledge of the issue and your obvious focus on it because it is critically important to

businesses of the united states and the united states itself. i guess lastly senator inhofe mentioned my african subcommittee. it doesn't take a genius to figure out that africa's the continent of the 21st century for two countries, one's china and the other's the united states. the chinese presence is pervasive both in terms of people and investment as is our country in terms of the millennium challenge investment, the malaria program, things of that nature. i want to just thank you for acknowledging the understanding of the monitoring shipments of arms and trade into that volatile continue innocent because on the -- continent because on the horn of africa whether it's the sudan, somalia or any of the other countries, the wrong kind of equipment getting into the wrong kind of hands through any circuitous route is not helpful to stability on that continent. it's a great continent, a great people, and the united states

has invested an awful lot in their welfare and well being, so i hope you'll continue to watch that as you acknowledged in your comment earlier. >> thank you, senator. >> thank you very much. thank you, mr. chairman. >> thank you very much, senator izaakson. governor, i'd like to reiterate something that i said during our personal meeting when you came by my office. i think you are uniquely qualified in terms of experience for taking on this position in two very important ways. one is having actually worked on the ground in other than a government capacity in china. i remember we were discussing my different experiences in vietnam not as a military person, but having returned many, many times since that period and having done so, having been down at the

factory level there with the ability to entrait -- penetrate through the bureaucracy with the right sorts of questions, and i'm very, very appreciative of your having that experience and hopeful that we can come back with a lot of answers and discussions as you were just pointing out. and the second is you've had continuous contact with this country throughout the journey from having been with president reagan at the very beginning of it and where it is now. we've got a lot of challenges now that weren't, weren't there in the middle period. you mentioned the challenges in putting the relationship together. we now having a different set of challenges because of the expansion of china in different ways and having to work out and our own economic situations, but having to work out how this is going to fit together again.

i would like to get your thoughts on this notion, this brick relationship that seems to be evolving, the quadrilateral relationship between brazil which is doing amazing things, as you know, russia which is emergent, india and china and how that might impact the united states particularly with respect to china. as you know, in june the brick talked about a different global economic management system, different types of currency, denomination for world reserves and that sort of thing, so i would be interested in your thoughts on that. >> thank you, senator. the discussions with the brick countries and china and their

relationship-building in latin america and africa, i think, is a natural extension of where they are economically and having an economic engine, new aspirations and a sense of confidence that we have never seen before in china. it also may speak in a sense to how engaged we are in east asia. having been in and out regularly since the late '70s, i've always thought that we could do a better job as a country in engaging throughout asia. and if we are not there, and i think two things have been critically important historically at least since from 1953 on where relative peace has prevailed in northeast asia, and that is to have a benign yet stabilizing military presence in the area and also promoting trade as we have which, i think, speaks to peace and stability

those countries that trade together. when we're there, i think we do fine. when we're not there, there will be others who will step up and assume a new relationship. and as we scan the world whether it's the india/china relationship which is new and improved when you see the premier as he did a few years ago and shake hands and talk about their economic aspirations together, i think in a sense that happens when we're not as engaged as we other otherwise sd be as a country. so whether it's brazil, russia, indonesia, whether it's the other countries that are on the move, we're either there and engaged and collaborating economically, militarily, politically, or we're not. and when we're not, you're going to see talk of dealing with the united states differently as in currency bashing, for example,

or looking at alternative forms of investments. so i think if nothing else what you see emerging in the world should be a clarion call to u.s. policymakers and others that we must be engaged. when we are not, somebody else will fill that vacuum and void. >> thank you very much. and i thank both of you for your testimony this morning. i wish you the best. i believe we are very fortunate as a country to have people of this caliber who are willing to step forward and in many cases disrupt family patterns, move off to represent us in these vitally important countries, so, gentlemen, i thank you. there may be some follow-on questions for the record written. if so, you will receive them by close of business tomorrow night. i would like -- i know there's going to be some -- if i could make a comment here in the room, there's going to be some media

questions for you. i would ask that you exit the room before you start taking the questions because we're going to be bringing another panel in, but i thank you very much, and i wish you the best. >> thank you, senator. >> thank you. >> our second panel today -- ..

center. it opened to the public in december, 2008, at a cost of $621 million. debbie wasserman schultz of florida chairs the legislation committee. >> but y%uz i do that, madam chair, let me also echo your comments about dave moroni. it's been a pleasure to work with you and i do open hope our paths cross again in the near future so thank you, dave. since the doors were opened to the public for the first time on december 2nd, we've seen a remarkable and overwhelmingly positive response to the facility. we've recently marked a major milestone with 1.6 million visitors attracted to the cbc. not only are we accommodating this record number of visitors

but our facility operations and management team is doing an outstanding job maintaining the capitol visitor center and keeping it clean, well stocked and functioning atop efficiency. miss rouse will discuss the cbc operations in further detail in her testimony but i'd like to take a moment to thank this subcommittee, the chair and the ranking member in particular for your continued leadership and guidance on support of the capitol visitors center and the architects office in general. i'm pleased to report that all basic construction work is essentially complete. we're finishing with a few specific items and anticipate that most of our work will be done by the end of the september. this includes the ongoing paver repair work, landscaping, reinstalling the historic trolley stop on the senate side of the capitol building and completing the final phase of the fire alarm and security system acceptance testing. to better accommodate and assist

members and guests in navigating around the capitol center we're planning to install signage as well. you'll recall that our punch list started at nearly 16,000 items a few months ago and today we have less than 245 items remaining on that punch list. we continue to work closely with the office of compliance, the united states capitol police, and our fire marshal on those specialty items that remain open as well. at this time there are 92 open change orders that we're working on and we expect to have very few new potential change orders being submitted as our activities are clearly wrapping up in the next few months. most importantly, we're confident we have sufficient funds on hand to meet all of our remaining obligations on this project. madam chair, i'd like to conclude my testimony by noting that the cbc has continued to be

recognized with several awards for the professional workmanship involved in its construction, this spring our team responsible for relocating the model of the statute of freedom from the russell building to emancipation hall was recognized by the washington building congress in its specialty painting category, an award we're particularly proud of. as always we appreciate the continued support to this subcommittee and we'll continue to provide exceptional service to the congress and the visiting public. and this concludes my statement and i'm happy to answer any questions you may have. >> thank you. miss rouse? without objection, all of the statements will be entered into the record. >> good morning, and let me say i have a little laryngitis, if i crack, i apologize in advance. madam chairman, members of the subcommittee, thank you for your opportunity to testify. i also want to thank you for your support and guidance during this exciting period in the history of the capitol visitors center.

much of the success of the visitors center is from the guidance from you and your staff we thank dave moroni for his guidance. we have welcomed 1.6 million visitors to the capitol. we have already surpassed the number of visitors who came to the capitol during 2008 and we will likely double that number. despite this dramatic increase in visitation we have equally dramatic decreased the average time visitors wait entering the capitol. today, through our expanded screening zone and the tireless efforts of the capitol police, visitors may enter the visitors center through the front doors for an average wait of just 6 minutes. as you know, prior to the opening of the visitors center, visitors were told as early as 10:00 am that all passes have been distributed. since its opening, no constituent, no visitor, no family has been turned away by the capitol visitors center.

while there's been a bump in the road, the efficiency of operation is a testament to the guidance of this committee. and our authorizers and to the dedication and responsiveness of my team. responsiveness is critical as we demonstrated last spring when tours were booked solid, weeks in advance as the season approached, we began receiving close to 400 calls a day from members' office seeking to reserve staff-led or guide-led tours for constituents, many of whom were arriving at members' office at the last minute. we knew we needed to immediately review in consultation with the committee and other authorizing committees some of the procedures and that has been established -- they have been established prior to the opening of the capitol visitors center. and here are some of the adjustments we made. first, we established a separate line at our information desk in emancipation hall for handling congressional staff request. we assign staff to serve as congressional ambassadors on the floor of the emancipation hall

to facilitate staff tours and other member tour requests. additionally we added two tour slots weekday mornings and two slots in the afternoon specifically to accommodate tour requests from members' offices. we tripled our phone staff. with these and other measures in place every staff-led tour was accommodated. during a two week period, congressional staff-led tours were almost or approximately 11,000 people entering through tours. to facilitate access to the capitol we are replacing older shuttle vehicles with more modern units customized to accommodate persons with disabilities. while 1 half percent of our visitors use the shuttles. it will enhance our ability to transport visitors from the bus drop-off location in the southwest corner of capitol square to the visitors center. as we continue to refine our operations, we have made adjustments on the

administrative front in response from the requests from members of congress we've increased the number of congressional interpretive training program sessions otherwise known as chip. we have developed -- we are developing an online version of the training component. so far close to 4,000 congressional staff have completed the training. in order to continue to be responsive to members' office concerns, we have instituted monthly listening sessions by congressional staff where they may raise questions and concerns about any aspect of our operation. our two gift shops and restaurants are enjoying robust sales comparable to other venues in the district, the congressional auditorium and other congressional event spaces are being well used by members of congress. as of july, 900 events have been booked by members in these spaces. finally, we have a number of educational programs including events and series for constitution week in september. i am proud to be able to testify

to the success of the capitol visitor center. i'm especially proud of the many thank you notes we have received from the members' offices. here's what one staffer working from a member from arkansas wrote, i just wanted to thank you for an excellent job. lately we've been calling for the last minute constituents that want to visit the capitol in july. we were able to accommodate them. from the senator from maryland thank you for providing an excellent experience for my constituents. madam chair, this concludes my statement and i'll be happy to answer any questions. >> thank you. chief morse? >> good morning, madam chair and members of the committee, thank you for being here to discuss the capitol's police role in securing the cbc. i'd like to start by thanking the committee for its leadership in this process. i would also like to thank the architect of the capitol and his staff for their partnership in developing and implementing an overall program for operations of the capitol visitors center

that i believe balances security of the complex with the desire for visitor accessibility. together, we have processed more than 1.6 million visitors into the u.s. capitol and the capitol visitors center since it opened a very safe and controlled and monitored environment. we've made every effort to move visitors into the facility in an expeditious manner while maintaining the highest level of security. overall, we believe the security operations at the capitol visitors center and the capitol are working well. in order to better focus our sworn resources, we recently realigned the capitol division to provide greater flexibility for moving assets to meet the influxes and traffic into the various instances for the capitol and the capitol visitors center. likewise, we are continuing to work with our stakeholders to find ways to efficiently screen members, staff visitors and staff-led tours through the tunnels into the capitol and the cbc.

in addition, we are continuing to work with the architect's office to monitor the established transportation plan in order to balance the access of mobility and challenge visitors with the challenge of the complex. before i close, i would like to thank all the men and women of the united states capitol police for their work every day to maintain the security of the capitol complex in order to protect our legislative process. i'm extremely proud of each one of them. again, i would like to thank the members of the committee for inviting me here to testify before you today. and i'd be happy to answer any questions that you have. >> thank you very much. >> thank you, madam chair, members of the subcommittee, as predicted at the last subcommittee hearing the cbc did open on december 2nd. since then aoc has continued to work on remaining punch list

items and has reduced their number from about 3,000 at the time of the last hearing to about 300 today. we've also reduced the number of open change orders to about 100. i expect most of these items to be corrected by the end of september with only a few items with some signage and some work in the curator space to be complete by the end of september. while the remaining work is important to having a complete useable facility, operations have ]u been materially affected. current remain remains at 621 and we're also confident as aoc is that the project should complete it under that price. and also i'd just like to say we're thrilled that you're giving dave moroni back to us. i hope we can keep him for a little while. thank you very much. >> thank you all very much. i want to start off with staff-led tours.

since the meeting we had a couple months ago in my office, there have been a number of improvements made to staff-led tours and the complaints have dropped. i don't get as many members stopping me in the chamber and griping about how -- that they've been restricted. but that having been said, we did make sure we did put language on the fiscal year 2010 appropriations bill to ensure that you are prohibited from restricting staff-led tours except for security reasons. can you describe for us whether you are currently restricting staff-led tours and in what way? and have you made it clear to your staff, particularly, the guides, that it is only the capitol police not the cbc guys for making sure the staff-led tours follow security restrictions? >> i can safely say that we're not restricting staff-led tours.

we make it very clear to our guides and our visitors assistants and anybody who's hosting members of the public that we're not restricting them. we do have our learning -- our listening session so we can give feedback -- >> how often do you have those? >> we've had them about every month or so since the springtime and we take constant telephone calls from folks and i think it's greatly improved. >> i have seen memos from you to members offices to tour operations that are pretty directive.í i mean, the way you word those memos don't appear to be recommended guidelines. they appear to be mandates. for example, the current restriction that tours are to go in a clockwise motion around the capitol but staff-led tours that's not applicable -- it's

not applicable to the staff-led tours if they want to go counterclockwise, or diagonal or one floor up to another that's perfectly acceptable but your memos is far more directive and that's the feedback i'm getting from members and staff that they've been told to turn around and go the other way. so perhaps you could make your memos less directive -- or more specific as it relates to staff-led tours. and then with the old supreme court, i know it's opened everyday, but it's not officially on the nonstaff-led tour. but are you still making sure that the staff that give tours understand that during the training that they can bring our constituents into the old supreme court? >> staff-led tours can take their tours anywhere they want to go. >> right. >> and the two chambers, the old

senate chamber is where people can go. the routing for the regular tours is something that we look at everyday depending upon a number of reservations we have because it's sort of gently used building. >> you have to be careful in that room. >> yeah. >> but in the training -- in the chip training, is it made clear to staff that on a staff-led tour they do have the flexibility to go where they want and in the direction that they want? >> it should be the case and i'll make sure that it is the case going forward. >> that would be great. i did listen to you describe some of the things that you've been doing to improve -- to improve staff-led tours. i want to move over to shuttle buses and then my time will expire. we've received communication from the tour bus companies as well as from the professional tour guides that are very concerned about the difficulty

that frail elderly visitors are having getting up the hill from the west front. and i know we have the six golf carts, so to speak, shuttles, that are available. and i also know that they can be made available with advanced notice if they have a particular large group and basically all six can take 30 people at a time and, you know -- but 30 people at a time if you have 90 people then you've got 60 people who are waiting 20 or 30 minutes for you all to do the loop and come back to get them. so that's a concern. one of the main things i wanted to ask you is, has it been explored or would it make any sense to buy one of those mini buses like they use at the kennedy center so that we could -- i mean, we wouldn't use it evidence but we would use it for a large group and -- i mean,

if we did that, it could be screened, it would be our bus so we would probably need to screen it. i mean, representing a constituency in south florida that has a disproportionate number of frail elderly that is a hill for a healthy person or someone who is not physically frail is, you know, a -- a pretty good bit of exercise. for someone frail, it's extremely difficult. and i know that you've -- you've urged the tour companies to communicate with you in advance, and i absolutely think they need to do that. but i just -- if you have a big bus full -- you know, bus load of seniors, a good chunk of them are going to behçr frail. and i just don't know that the shuttle -- that those shuttles are an ongoing viable option. so can you share both of your thoughts about that. >> well, on the mini bus? >> uh-huh. >> you know, i think we can, of course, looking to any scenario,

it would be, of course, the privilege of the chief of police on what would be appropriate. we have so far been able to accommodate people who are coming in on that end when they give us enough notice and even when they don't have notice, we can always call for additional support. so thus far, we've been able to accommodate it but i think it could be -- we're at least exploring the idea of what could be used. >> i'm just a little concerned because the communication that you've gotten from the companies is that -- they're not fully -- there's not a regular-enough communication with them about you needing to know in advance. i mean, is it on the website for when they book a tour? >> it's in our website. >> is it in a prominent place. >> yes. we can take a look where it is. when they call us from the call center we do tell them. we also even in a couple of cases with the tour companies

who we actually work with quite a bit have had things in their newsletters so we made pretty strong appeal with the guides, tour companies, which have also stopped by the other day or two ago. we have made an effort with them. however, we can make additional effort. what we did do last year with some of the tour companies, we had them come through and walk them through the process and that made them feel better. >> on a regular basis -- >> i think it's absolutely incumbent that the tour guide association is here today and the bus companies might be here as well -- it is a two-way street and it is incumbent upon them to know the process and know the guidelines and they need to make sure that they let you know in advance and prepare you. i mean, we're never going to have a perfect system because dropping off at the west front for someone frail is going to be inconvenient and a little more difficult than the ideal situation in front of the east front would be. okay. and my time has expired. thank you.

>> well, again, let me just echo as far as also about the the concerns for senior groups. and thank you for your paying attention to this issue because we are hearing things from the senior groups and, you know, certainly that is an obstacle to get up on the hill and trying to find a way to better facilitate visitors in any way, we know what you want to do and what we want to do and help you facilitate that. so we thank you for paying attention to that and just encourage you to continue to do what you can to make sure that message gets out. to the tour groups especially that cater to senior groups. one thing that i wanted to address is the issue about the

signage in the cvc. one of the concerns that after the cvc was opened was the lack of interior and exterior signage. and i just wanted to check what the status of the implementation of the signage is. and what -- what can we -- what needs to be done to improve that and what feedback you're getting from other people that have -- that work in -- that are in the cvc on a daily basis? >> we've certainly gotten feedback that it's difficult to navigate, difficult to find where you are and we've gotten that feedback from members, staff, our own employees and guides as well as the capitol police officers that staff that on a daily basis. and we have implemented a temporary signage program and we've gone in and put room

numbers and "you are here" signs and directional signs as an interim measure until the perfect signs are fabricated and installed. and we think that will be several months from now before they're actually installed. so that's why we went ahead with a temporary measure on the inside. on the outside, we're also looking at temporary signage as well and just last week i saw the design for that. and i would suspect within the next two to four weeks that exterior signage will be in place to help people navigate around capitol square to get to the appropriate entrance of the building. >> concerning the utility costs for running the cvc, what -- are they running higher than you expected, lower -- pretty much what was expected for the overall -- the overall utility cost of running the cvc.

can you give us a little status report on that. >> i can give you that for the record. i don't have that information with me. but i'd be happy to give you an update on electrical, steam and chilled water and domestic water. >> okay, very good. i think that's all i have, madam chair >> okay. great. >> let me just -- [inaudible] >> thank you for being here. i hear a lot of tourists come by and and the policemen where to go and i think the tourists about a year from now should be asking the same things and so many signs and guidance would be helpful. >> we believe -- it's really important that we put in a system that enables police officers to do police and security work versus way-finding

on a continual basis. and we've heard that loud and clear from the officers that work outside the capitol building. and we are working to address that with new exterior signage. >> mr. honda? oh, i'm sorry. >> that's okay, madam chairman. i was going to compliment you on continuing to be a trend setter. your footwear is some of your finest i've seen on capitol hill in a very long time. >> yeah, i like to blend into the background. [laughter] >> in ohio, we call those nice kicks. [laughter] >> i want to just echo the signage thing and it's not just the visitors. we had two republican conferences in some room over there and we were all wandering around for a very long time and we couldn't figure out where we were going. >> you do that in rayburn too.

>> not only way to help the members finding their way would be appreciated. and, you know, i was sort of marveling of the frail people living in florida and alabama. one place you don't want to do is a group of blue-haired ladies going through a casino and come through. i guess we're hearty of stock in my part. i do want to ask a coordination and i don't want to ask questions by anecdote but i got one and i think it illustrates the point and that's the coordination between your forces chief and miss rouse. and it was on art competition day and art competition day is a big day and there were two lines apparently to get into the tunnel. one for the tours and another one for the artists and our families and we apparently broke

a rule and we had artists and family and we had a couple of people who just wanted to see the capitol and asked the red coats which line to get in and the red coats said don't matter, get in. and i thought it was a good answer but when they got up to security, the security said, oh, no, you can't -- the artists and his family can look at the picture and leave but the other family have to go back in the other line and that's okay but because of the length of the line it was like half hour. and so we had half hour and  there. we cheated we took the all of the and the family into the capitol anyway and nobody caught us. but raises some concern just in terms of -- can you just sort of discuss for the subcommittee how you all are talking to each other to make sure the red coat answers the same as the checkpoint answer? >> well, i can -- i can say -- i don't know the total number, but miss rouse gave it to me the other day when we were down in

the cvc. there had been some 800 types of events that had taken place related to the cvc. and she had conveyed that to our division that handles the cvc and they were handled very well. so the communication between her office and the division office, i think, goes very well. instances like that, yes, poor communication but certainly we can, you know, prioritize or facilitate any special needs of the members related to any special events. and at the same time, still expeditiously, you know, move people into the cvc from the main entrance to the canon tunnels so we'll improve upon that and that communication, especially, since the canon tunnel is handled by our house

division and the capitol divisions primarily responsible for the cvc and all will improve upon that communication with miss rouse. but we do work very well together in that respect. >> you know, we actually do work very well. we have a weekly partners meeting with everyone who has anything to do with the cvc down to the attending physicians office and it's a great debriefing hour where everything that can be said and we work through the issues and, of course, every time something new happens then we debrief on that so that communication has led a lot to what often is a very smooth operation and when there are hiccups we acknowledge them. we don't brush them under the table. we go right after them. >> i want to commend all of you because my note is average time is two to three hours to 15 minutes that's amazing with all

the demands and securities and i've been ranking my brain where i lead my tours clockwise or counter-clockwise and i can't remember. thank you. >> thank you very much, and let me add my thanks to you all. i knew that name sounded familiar and i remember it was a song. do you remember that? i got a gal named bony moroni. [laughter] >> that shows you how old i am, i guess. and to our staff also thank you very much. it just happens my question has to do with lines also. when i enter the capitol visitors center, sometimes it's a very hot and humid day. others -- and i'm anticipating the cold winters. how are we going to be

shortening that line so that we can, one, make sure that if it is a long line, that the seniors and the elder folks -- those who need to be sheltered from the humid and -- the humidity and the cold are accommodated as quickly as possible? the lines are out there. i know that you had some fans out there that help, but it doesn't reach all the way down sometimes to the end of the line and i'm not sure how long the wait time is. but it seems to me that there might be other mechanisms like those little spray hoses which reduces the temperature and cools people off but still a lot of the folks are older and standing around really saps their strength. i'm getting to that age, too, so, you know, i'd like to know if there's any thoughts being put into that in terms of prior

to entering the building? >> well, let me -- i'll begin by answering that. one thing that i do is i go work the lines on occasion. i go over to the cvc and i've spent several weeks over there actually helping screening, seeing how screening is done, going outside. what i have noticed -- and it isn't a policy or a procedure or anything of that sort. it's just, you know, human nature, especially, with our officers who know that these types of things are occurring, we work very closely with the visitors services who stand out there with us and, you know, frankly, any time we see anyone who needs, you know, special care or can't -- you know, can't stand or sit, we simply expedite them into the facility and we hope and explain to everybody

who is still waiting that, you know, this is -- this is something good for people. and this is what we're going to do. i've never seen an issue or problem with it. as far as anything that we could do with regard to making the environment in that area better when it's hot or cold, we could certainly, you know, get together and look at that, whether it be fans or heaters or mist or water or whatever. but our officers know that when there's people in need and that things aren't working out very well for them in the environment that they're standing, they expedite them into the building. >> to follow up on what the chief is saying, the visitors assistants are out there. what we have done, thanks to our visitors service division is, we've put more people out there at the lines who can identify and help direct way-find and then they're able to identify

someone who's in need. we have umbrella that is we're now going to have out there that allow us to address need for not only rain but if someone can't deal with the heat, like you, i don't like the heat at this point in my life -- so we're trying to accommodate and we're trying to learn from our colleagues around the country what are they doing with the crowds that they have in the environments that they have? and then we'll take those best practices, run them through our partners and see what would make sense so as we approach this season next year, we have better solutions. >> i know that when 9/11 first happened and we closed down our airports and then the onslaught of long lines started to come up, they've contracted with disneyland 'cause some of the folks that are used to looking at how to configure lines and control lines and bring people through expeditiously, but it

seems to me that there would be issues of communication if you're having bus loads that you know who's going to be there, that could be accommodated. but those who just arrive through different tours -- it seems to me there should be some sort of a protocol that's followed rather than just, you know, leaving it up to individual officers and persons to check the lines and see if something is going on. that it should be a matter of course that we check that line and see if we can help people get through. i think that will go a long ways in terms of their affection for what's happened while they're visiting here. so if we could just pay a little bit more attention to that and see what we can do, then i think our goal to be the