>> . . defendants which mukasey said ; hamdi case, the habeas petitions were created as

a legal venue but not all the other rights treaties as you are pushing the administration of granting a blanket -- >> that is what attorney general mukasey and others in the bush administration suggested because the military commissions were not set up and somebody like richard reid, aggrandized five minutes after he is taken off the flight couldn't be all because we didn't of the military commissions. military commissions are not a venue for interrogation. military commissions or a venue for at adjudicating justice. attorney general mukasey says in his op-ed that the united states of america, the minute they walked and mirandized richard reid of the boston flight didn't have intention? it is a principle that has -- that we have had as long as this country has existed.

i don't know if he presumed that attention didn't exist on that day. >> on the location, how concerned is the president or the white house legislation team about what appears to be a growing number of the senate democrats signing on to the legislation on the funding and what degree is the president telephoning members to try to persuade them to hold off or change the wind? >> i don't know if the calls to the president have made. there may have been calls from the counsel's office or from legislative affairs to discuss people's opinion on legislation or potential upcoming votes. i will leave it at this -- >> it's an important consideration in this debate will not? >> there is no question about it and i think it is important aspect of this. it's an important aspect of the

broad efforts in dealing with terrorism and its something the administration is working actively. >> the president wouldn't be personally involved why? >> i'm just saying i do not believe that he has made phone calls. u.s. specifically about phone calls to democrats about the legislation. i would go back and look at the phone logs sent around, but nothing pops into my head but let me double check. >> i want to try the jobs bill again. on the debate coach at's point of time, senator reid changed course and challenged republicans to oppose the bill. that was a fairly significant change in tone and republicans feel they are set up politically to some degree. can they trust the president and the leadership in congress when they talk a lot of bipartisanship if this is the first and experience they are having since the state of the

union and a lot of this bipartisan talk? >> of course republicans can trust the president. they were in a room not far from where we are sitting discussing many elements that will be voted on at the end of february on a jobs bill. >> again i think that you will see a strong bipartisan vote. i think you will see a strong bipartisan vote on aspects that are not in this legislation but are part of what the democrats and republicans believe is important for stabilizing the economy. >> do they understand the frustration on this? it sounds like you're saying what is the big deal. >> if you're asking have we been frustrated on a bipartisan ship the better part of the last year? yeah. >> on this point the white house committee yesterday and was the process taking place, that changes.

republicans are angry and confused. do you understand that? >> the president didn't talk about bipartisanship on accident. the president has throughout his tenure as president been frustrated we haven't worked together more, not just about what we are doing economically now but what we had to do economically able more than a year rego when the times were even more dire. when we were facing job loss as we've discussed in the 700,000 range each month when we didn't know if we would wake up and the financial system that they would have collapsed. understand the frustration of democrats and republicans alike that regrettably the process of washington has overwhelmed a series of ideas the american people want to see work on

behalf of the cares and concerns they have. absolutely. >> to questions. >> maybe come back at the end. it's like a cherry on top of a sunday. [laughter] >> going back to the question on the public perception of tax cuts. is that a marketing problem? >> no, dan -- look it's hard to demonstrate to people that did get tax cut the federal level with a salles based on a budget shortfall in a state that we have to raise taxes and fees -- look, that's why -- i think that the american people look at a number of different factors that go into understanding and speaking to the frustration they have about this economy.

these things don't happen in silos. what happens at the federal level than the state level are felt by both of those are felt by individuals on the ground. i think what it demonstrates is whether there are four aspects of package is moving through the senate, the are going to have to be a series of things that happen in coordination with all levels of government in order to get this economy moving again. if the federal government ads money through recovery to stimulate the demand while states are having to pull back greatly, you will create is attrition that isn't quite ultimately be felt. that is why one of the big aspects of the recovery plan that was originally passed by

the congress was state and local fiscal relations through fmap funding that cushion the blow. >> it was all set was supposed to make a maximize the economic impact -- minimize the political impact? >> you know, what i'd like to hire somebody to knock on everybody's like the publisher clearinghouse guy and the big check and the balloon? sure. maybe it would have a grand affect. i think what the economic team found in the structure of the tax cut was that if i hand you $350 you know you are not likely to get and $350 every week or going to pocket and save that money because you are struggling economically. you are much more likely to put that into the economy and increased consumer spending and demand if you understand it is

going to be something that you feel maybe not all at once but a little bit over a series of time that you can increase demand by that much. that is the way the tax cut was structured. donner marketers got kicked out of that. >> you guys have been very critical of republicans on the filibuster's so what message does the white house think it sends on the jobs bill senator reid is practically forcing the filibuster by filing cloture before there has been even a minute of debate including the chance for amendments. sprick this is not going to be the last bite of the apple the senate has. these are for a very bipartisan ideas. one of them is named by the name involves a democratic senator and republican senator by definition a bipartisan idea for

elements that individual week garner support and as a whole will garner bipartisan support. again this is not the last time that the senate is going to take up measures that involve economic stability. >> but you are not bothered by the way he is not allowing for any amendments? >> again we will have plenty of time to go back and do -- we need to extend a i'm plan benefits. we need to extend small-business lending. all of that will be part of this. >> there are reports china asked the white house canceled its meeting with the dalai lama. do you know if that is true? >> obviously we discussed the fact this meeting would have been on the trip to beijing. before i announced we talked to them and said we are going to announce this meeting. i do not know if this be added to the to specific reaction was to cancel. that was their specific reaction the meeting will take place as

planned next thursday. islamic the president discussed this with the dalai lama? >> we will have a readout of what they do talk about as a result of that. sprick and the position on the tibetan independence? >> i will get that information to you after that meeting. nice try though. >> a question on the don't ask don't tell. there was a report in the politico saying the white house hasn't provided a clear path for on this issue following the union announcement. what kind of guidance is the president giving the lawmakers undertaking to review and has the president expected the legislation on his desk this year? >> the last part again? >> is the president said expecting it on his desk this year? >> the president outlined on the state of the union, and you heard secretary gates and admiral mullen discuss a process that will take place if that process results in legislation by the year's end, the president would certainly sign at.

i think most importantly the president, the military and others feel like we have the best process structured moving forward to and don't ask don't tell. chris, obviously the president will discuss with the dalai lama his belief that he and the chinese continue to discuss the issues that they have relating to tibet and i assume we will have a read out after that. do you have anything? >> with the president's support eighth moratorium on the discharges of don't ask don't tell until the pentagon completes its review? >> i would point you to what the testimony from defense to date,

gates and mullen -- the process that will take place over the course of the next year. yes, ma'am. >> on tuesday at the news conference the president talked about the jobs bill. back then he mentioned to read this incrementally. he used the word -- >> i'm sorry. i can't hear you. >> the news conference tuesday the president talked about the jobs bill mentioned to be done incrementally so even back then was he talking about splitting it or doing it -- >> again, they were ideas that were outlined, there were ideas the president outlined, again, the speech in december and in the state of the union ideas that the house didn't pass partly because the jobs package happened before the speech in december. there were different ideas that the senate was considering, not all of which included the

president's ideas. we didn't think now and we still don't think now this is a one-shot deal, and i think that is what is most important to keep in mind. >> given what he called the frustration with the sheer amount of the cloture votes, has the president, the administration and through senator reid, ever thought about calling the republicans' bluff making them go to an actual filibuster, especially over one of the long controversy all nominees? >> look good again it is a process that takes an inordinate amount of time on something that shouldn't be controversial. i think instead of -- i think the best way to move forward is to go through each of the qualified nominees that are held for no reason other than in some cases last week because somebody didn't get a couple of earmarks and instead do this in a way

that takes qualified individuals that have been nominated and allow them to serve in government. i think that is the most important. >> robert, to questions. "the chicago tribune" reports that five days after scott lee cohen won the democratic nomination for lieutenant governor of illinois in the primary he withdrew after reports of beating his wife, using a knife to threaten a girlfriend prostitute, taxi evasion and use of anabolic steroids. and my question, did the president ever have any concern about the former lieutenant governor nominee cohen being supported by mayor+et daley? >> i don't know who made what endorsement during the primary. obviously the president and many staffers here concerned about exactly what you read and think

the right decision was made to leave the ticket. >> as the honorary president of the boy scouts of america what is the president's reaction to "the new york post" report that because the scouts have the policies similar to our armed forces, quote come in new york institutions are barring the scouts from meeting more recruiting all public schools. >> i have not seen "the new york post" report and can have somebody -- >> for them to cut the scouts out of this? does he disagree with the scouts or what? [laughter] >> where are you on this, lester? >> i support the scouts, do you support the scouts? >> my son -- we are constructing a derby car as we speak. >> your son is grave sites?

guest: it is a wonderful way to humanize and personalize the past. to take even this and movements that otherwise might seem impossibly remote. there is something universal about the fact that we're all going to one day be on our deathbed. we are all going to face growing old. we all have to wrestle with questions of immortality and mortality. i mean, those are some of the themes that run through all of this. but it is also, frankly, and entertaining book. there are a lot of stories and anecdotes and

hosted by the institute for korean-american studies. it's about one hour and ten minutes. >> thank you for breeding the portal whether to come out here and listen to us speak. i am also grateful i am sitting on the panel with so many people i admire so much truly. finally i would like to thank dr. kim and icas for giving me the onerous coming to speak here.

on the subject matter which i think is very serious also not talked about a lot. and finally, before i get into the meeting of the discussion i need to pass on the views i present are my own and do not necessarily represent the policy or the position of the marine corps university or the united states government. let's talk about the north korean military threat. i think that the movie that we had before all else took the panel today was very compelling. i would only say it becomes even more compelling if you tie a nuclear capability to the missile particularly something they are years away from achieving but still quite ominous. i'm not going to talk about that today because i think the movie did a very good job. what i'm going to talk about are two things. first, the north korean threat to the security and stability of of the korean peninsula, and as that follows the region as a whole, and i am also going to

talk more shortly but in some detail the north korean threat from preparation support of terrorism. let me talk about the military first if i may. many assume north korea's chief of military, like its people, has been starved by the regime's isolation but in fact the opposite is in many ways true. the keen reason why the populace is short on resources particularly fuel and food is because the majority of these have been directed at troops. as easy as it seems to dismiss the start country and it's often sick leader north korea's conventional military has adjusted to the dire economic times and is far more capable than many analysts realize. the armed forces is not just its nukes could wreak havoc on the region. there are two aspects of today's north korean military that warrant a careful look. the first is the mayor to decade-old bill of north korea's's asymmetrical forces, and what i mean by that in this

case is forces that carried out on conventional missions. the second matter is reorganization much of west pitched resulted in a conventional force being moved closer to the demilitarized zone so they were perpetually ways to attack the south. i had to practice that same two p-words together by the way. ..

and to exacerbate the prayer, between five and 20% of the systems are assessed to be equipped with kevin gold musicians. all this means that potential damage artillery alone according to estimates from both south korean and u.s. defense officials could reach 200,000 casualties and that's just on the first day of the attack. before c-span, north korea political and cultural center backed the 1980's in a matter of hours. charisse ballistic missiles are the second asymmetric component of north korea's arsenal. since the 1990's, pyongyang in numbers commander control and

doctrine to the north koreans now possess 200 missiles and more than 600 scads. the latter with range is between 30850 kilometers, not to target literally every inch of the south korean landmass. north korea has also added the ss 21 system, and also be a platform to its missile arsenal. known as the cayenne two. the vintage sleep version of the ss 21 uses solid fuel and can be moved very quickly, with a range of 120 to 160 kilometers in greater accuracy than most other missiles, it could easily target u.s. missiles south of seoul. interestingly, these first two components that i've just spoken out, artillery and missile, would be used in tandem if an attack to way spirit that mr. reader commiseration of north korea's military during the late 1990's. both types of courses are now

commanded by artillery officers who would in accordance with their training.turn consider missile systems to simply be art tillery systems with a longer range and would target them accordingly. in an attack many of north korea's artillery systems living for soul and much of the surrounding province while missile attacks at every keynote in south korea. as for north korea special operations forces, south korean estimates now place their numbers as high as 180,000 men. north korea special operations forces are probably among the best trained, best fed and most motivated of all forces in their military here they routinely undergo intense training that a good turn 50 of sand for a ten kilometers in one hour, hygiene and extreme cold weather, martial arts methodologies that include fighting with three to 15 opponents and even using spoons

and forks as weapons. troops also engage in intense marksmanship training and even daily life during training. they can attack quickly, reaching keynotes in south korea by aircraft for tunnels in the dmz or even maritime vessels. there's a very interesting call. there's a lot of sls and north korea in the latest iraq mystery national defense white paper appeared to please allow me to read a short quote from that document. this attack in the special operations forces straight. the troop thinks the special wherefore preaches approximate 100,000 by collecting light infantry divisions in the fort area not bending the light in which he battalions to resume class. the army is concentrating massively on enhancing the capabilities of special warfare as evidenced by the stepping up of nighttime mountaineering training and street warfare training. very interesting stuff. the combined use of north

korea's asymmetric north korea's asymmetric worthless would almost certainly incite panic during any attack on the south. in the confusion, it is possible, perhaps even likely, that enough cracks my doping south korea's united states offensive to a northern maneuver forces, infantry, are burned, mechanized forces to move forward and take down. it is no coincidence that over the past 15 years north korea has moved many of its conventional forces to forward positions, oscar your quarter is on the border. there are two primary invasion corridors along the border and you can see this on a map. one of the case on this on quarter. it's a very interesting stuff. if you put all this together, an attack would inflict casualties to the tune of hundreds of thousands, the majority of them probably civilians and many of them in fuel.

so, speaking of those re-organized maneuver forces that have been moved closely to the attack orders. then he read another quote if i may from the iraq ministry white paper. recently the army reorganized into structures by reinforcing the firepower of the first echelon in this area thereby attaining a surprise effect with over while main combat power in the initial engagement. and for those of us who study north korea's military is important to point out the initial engagement is by all means the most important engagement, the engagement that will take place over the first hours and days of the attack. so very important stuff. well, what does the north korean army, military if you will, been doing thus far. for those of us have fallen north korean military know that december through march is what's called the winner in turn winter

training. they are not harvesting crops, they're not planting crops comes at the time of year when they train of life. training the share is far, only about halfway through the winter training cycle, it has evolved infantry, special operations forces, armor, an unusually large exercise involving the workers present red guard forces that also reportedly included acted duty troops. there's also some stuff is extremely interesting and in my view quite compelling. in addition, long-range artillery live fire drills occurred on the west coast, north of pyongyang. each of the 400 million rocket launcher is, multiple rocket launchers that he spoke of earlier. those systems capable of hitting seoul. those are some rather large exercise is compared to what they've done in the past. particularly given the fact that their live fire exercises. another unusual event that occurred than many of us who follow the path in south korea

have observed was quite a bit of interest is in highly unusual live fire drills on the west coast through the northern limit line. these events feature a variety of systems over three days i might add, very systems that fire more than 350 or 23 shelves, which is allowed. very close to the northern limit line. some of them as close as a kilometer and a half to the defect oc border separating the two koreas. the drills conducted by the northern limit line or the nml are target timing exercises. this involves simultaneously volumes around 90 minute single target. shells must be fired at different times with systems farther away firing first. it takes a lot of coordination and a lot of planning, especially considering the@@d" compelling

because is south korea's capabilities right now, which are lacking in many ways. please let me address this one by one. first of all, the s. rpm threats involved to take the ballistic missile system essentially. the first one is obviously the patriot missile system. well, the south koreans just recently, in the past year or so

has started deploying the antiquated largely back to retrieve missile system. this is a system that uses a shotgun type last to try and take out incoming ballistic missiles and is not very effective against attacks by north korea have after the effective missile system because that is the upgrade, the pack three, which they have none of them may have some in a few years but don't right now. the only pack three missiles is and from the korean peninsula are manned by united states over personnel and they u.s. bases. what is the problem here? south korean population centers from military bases that don't have american troops on them are very susceptible right now, this second, to attack from ballistic missiles by the north koreans. in addition, as i mentioned earlier in the paper, the north koreans have about 200 no downs. people tradition and talk about the no has been a threat to japan and that's true.

they would also likely be fired, specially the ones near the chinese border out of other areas in south korea. so just pusan entry judo. one would be using those systems we heard described earlier and that's the sm three missile package and is carried on an aegis-equipped ships with south koreans have in their class ships and it's very accurate for taking out at higher tiered missile like to know don. by the way, the japanese already had this two-tiered system. pack three for lower bubbles and sm three for higher levels. in the party got ships and protecting our population centers and military bases. >> this that's why the s. rpm threats is particularly compelling. let's talk about the special operations but if i may. the special operations forces have grown by about 50%,

although there's some disagreement with the americans on that. i would concur with the south koreans. a lot of that, most of that has been through what they call light infantry brigade, although no forces are exactly like u.s. forces and we shouldn't your image. they are very similar to u.s. ranger type units. a way to counter that, one of the ways to counter that is of course with south korea's own sos forces. south korea only have two left their own special operations forces time, ten c-130s. they are severely lacking in their own airlift. when i spoke of this at a conference a year and half ago at nyu, iraq scholar from the university came up and said, you know bruce, when i was in the iraq army as a special forces guy and i remember having to sit on the tarmac and waiting for them to fly from okinawa to pick us up because we didn't have enough of our own. this, folks, is the problem.

attack about as rpms, long-range artillery. when you talk about -- let me address that if i may. when it comes to long-range artillery, that is obviously as you guys know the north korea's artillery and as rpms in the same boat. those systems, which you can see pictures at if you would end a daily person very good pictures on there recently. those guns, the most important thing that we have to do with those guns bizarre counter battery fire. and that is a very big concern for the rocks. in early 2006, commission was traded from the united states second infantry division to the iraq infantry missions. that is the problem? and this is another issue that the south korean military has. the south korean military does not have the proper fee for i write not to do a good counter battery mission.

so if you're talking about the time to target mission that it takes from getting a shot fired at shooter firing back, according to recent reports, sometimes it take as long as an hour for them. that is unsatisfactory. you've made. you're also going to talk about another very important that is integrating it with air. in other words, the way the u.s. military operates we have the united states army colonel was spared when you get fired from artillery you coordinate with your own air so that not only is your artillery firing back at them as they are. the roc don't have that capability yet, but right now their best capability to report that is called americans before i and american united states air force aircraft. so problematic. why do i bring this up? why do i bring up the fact that these three key asymmetric threats, which where not even

talking about removal forces right now. what do i bring this up? the reason why is because a few days ago, about two weeks ago, admiral blair, the director of national intelligence testified before congress. let me read this quote. because the congressional military capabilities gap between north and south korea has become so overwhelmingly great and prospects for reversal of this gap so remote,. although there were other reasons for the north to pursue its nuclear program, redressing conventional weakness as a major factor and one that can and is likely festers will not easily dismissed. okay, admiral blair's remarks are particularly -- are particularly disturbing and misleading because they say specifically that conventional capabilities gap between north korea and south korea have become so great.

please allow me to point out that the military of the south koreans is really, really well equipped to take on the maneuver force dominated north korean army of 1990. of course, now it's 2010. they are not, however, where they should be when it comes to handling the asymmetric forces that i discussed earlier. nor had they been able to adjust to for the large-scale urbanization of the new workforce is that occurred in north korea since 2006. very important step because those maneuver forces can then be able to take over some place where cracks are developed because it would be the asymmetric forces have done. so specifically, when it comes to these three pillars of north korea's asymmetric capabilities, short-range ballistic missile or threat on the long-range artillery and special operations for threat, the south koreans have a lot of capabilities they have yet to develop and they are very weak in that area,

specifically those areas. the nonnuclear forces but north korea has taken shall much corrupt and from so many resources on in order to continue to threaten the south remain an ominous and compelling threat for a variety of reasons, many of which are in the paper that will be posted on the icas website if you want more details. some of which i discussed already. those who have carefully analyzed the correlation of forces, opposing firepower ratios or terrain dominated strategy on the korean peninsula and the order of battle and disposition of forces of the north and south korean militaries realize that the military alliance can and should take the north korean nonnuclear threat seriously. please allow me to take a sip. people keep telling me to quit smoking cigars. they're just wrong.

the second military thread i would like to discuss from north korea is that of proliferation and support to terrorism. and i'm going to do this country by country. and i'm going to take less time to discuss this. i think most of you are more knowledgeable on this anywhere and so the military as i discussed. so i'll probably hit on something super to hurt you alumni addressed theory a first. i think everyone knows about the nuclear reactor that syria had, which was essentially kim jong ii which we now know. thank you, israel. everyone knows now from the report that we've read that essentially the north koreans built a copy of pyongyang and then built a fake roof of her as so people wouldn't see it from the air. lots of great stuff on that. the bottom line is north korea proliferated their plutonium-based nuclear program

to syria. there's not a smoking gun on that. it's a smoking 155 solider. north korea also proliferates chemical weapons systems through syria, both for missiles and for artillery. in fact, the north koreans have actually helped the north korean -- have helped the syrians build their own chemical weapons factory. so speaking of artillery and missiles, the north koreans have proliferated every single type of study that they built, scud b., scsi, and the extended range scud. in fact, if you tie that chemical weapons thing in the missile thing together, about two years ago a bunch of syrian thickness range and engineers were killed as were a bunch of iranian technicians and engineers when they were trying to test a missile that had a warhead on it, a scud d. that was fair and gas and reportedly there was also north koreans

present at that firing. the north koreans also proliferates a conventional weapons to the syrians. well, the biggest proliferation -- the biggest customer north korea has is iran. we're going to talk about proliferation of nuclear technology, plutonium for syria or iran bats a tu collaboration. there's more than what i know about because i don't sit in a skiff all day. but the one thing is for sure is that dozens of north korean technician, scientists, engineers have gone back and forth to iran for a period of several years now, going back to at least 2002. in 2002 should be important for many of us when you think back what happened in 2002? yeah, that's when north korea and pakistan were forced to break off their nuclear collaboration. so really this collaboration is been going on since at least then. probably more intensified because of what happened with

pakistan. we also know that the north koreans and iranians are collaborating on a 500-kilogram warhead for a missile, presumably to nodong known as the job free in iran. speaking of missiles, there is no one that north korea sells more missiles do then i ran. every scad i mentioned about serious and the hu nodong. and in 2005 they sold 18 systems that were devised from the old soviet ss and sixth system, which was a submarine-based missiles, ms obm. the north koreans converted that to a land-based missile and then they sold 18 of them to iran. it is a range of about 4000 kilometers. suggest using that missile the

iranians can hit europe. of course it could already hit and they call that a shop for her. from artillery, they sold the long-range guns, some of them attacked that it sold some of those to iran. they sold on small arms. they've even pulled the naval craft, including submarines. there's also more to this picture they're not, but i get to that in a second. they also proliferates from weapons and missiles to a number of countries in the middle east, south asia and africa. which leaves me to terrorism. when it comes to supporting terrorism in very recent years, very recent year since 2005, north korea has provided weapons and training to both hezbollah and the tamil tigers. in fact, north korea was providing everything from small arms to artillery to naval craft for the jamel tigers almost right up until the time they

were destroyed by the sri lankan army. and then of course comes the north koreans lost a customer. north korea is now well documented as having built a tunnel for hezbollah that made it so difficult for the idf to get after the 2006 war. they also provided small into hezbollah includingb)(i

two documented terrorist or terrorist supporting groups. hezbollah and the ir gc. this is well-known and continues today. so it is rather disturbing at least to me that north korea has not been put back on the list of nations supporting terrorism. dealing with hezbollah and the irgc is not a minor infraction and the dealings with these two organizations have not been minor. nor have they been sure. both relationships have been ongoing for a number of years. north korea's proliferation both to rogue nations into terrorist organizations is both disturbing and a threat. not only to the u.s., but two allies in the regions where weapons and training are being proliferated. so, those are my comments into very serious threat that i see emanating from north korea.

not even talking about the long-range missile threat, not even talking about the nuclear threat. i see proliferation and support to terrorism as a very important threat. i also see the often not talked about proactive north korea's conventional forces against the south korean military is a very important and compelling threat. and that concludes my presentation. >> well, thank you very much, bruce. now the floor is open. at first, we want the army colonel. >> by mccaughey at this as a serving soldier. these are my personal opinion but not those of the department of defense or u.s. government. bruce, you make a compelling argument. north korea is a complex, very, very difficult threat. and still a threat to security in the peninsula.

editing has evaporated as a global threat. he points out that in the phase of their economic problems in the military is still transforming. you know, dealing with their problems but they are coming and remaining a formidable military. the problems -- the challenges in the north are multiple. the missile, nuclear, conventional threat, the asymmetric threats and nonproliferation, terrorism and when you didn't mention, one thread near and dear to my heart is potential for regime collapse and what happens after. one of the things that i'm concerned about is what i would call the dual use of those asymmetric threat particular. what happens when there is regime collapse, many of those threats, particularly the softer, but nuclear and what

happens to those missiles and weapons of mass distraction when there is no longer central control by the regime and military coherence and what happens. given that north korea has enough called age renders the a guerrilla dynasty in their business on their operations forces. i would ask, what do you foresee in when the regime collapses, the kind of security challenges in the south korea and the international community will face in the north with those threats. and not to discount the conventional attack him and you know, the decision to go to war, which i think first and foremost we have to deter prepared for. but the long-term threats i think will exist. and i think those same threats

that exist in post-conflict will post collapse. i'd be interested to hear about that. i'd like to take exceptional one point you made about south korean special operations forces and c-130s. if they are going to conduct counter stopped operations in south korea, the most effective air platform is not c-130, but as a helicopter, just like in counterinsurgency today is a helicopter force, the mobile capability to counter south koreans. i think those c-130s are important for infiltration into the north, but it is a helicopter capability that is most important for mobility in the south. and lastly, i'd ask you given were in the winter training cycle and looking at it over time and you've outlined the fact that they seem to be doing some very sophisticated time on target, seen those at santa barbara range of dare, the messiah doing it very difficult

to do and something that takes a lot of training, a lot of capability. so when this winter training cycle, they seem to be doing more and more than i have in the past and they know going in cycle of the time you assess this as being more in usual, especially given their economic challenges that they have. you know, they are still able to commit the resources in the training to be able to execute a fairly high level of training by any standard. and that you foresee that has continued what was called over the years, creeping normalcy, as they've shifted forces south and developed those capabilities to be ready for some kind of an eventual attack. >> okay. why don't you take it then.

we'll go. not excellent comment, dave. and for those of you who don't know about colonel david maxwell, is a very respected analyst on north korean issues in particular soft tissues. so i would yield to him and a lot of those issues. in fact evaporated question i would like to ask him. the threat from soft after the attack. well, we don't know for sure but i think there's an interesting corollary that we can look at. and that's what happened with the romanians after the attack. the romanian army, when the communist government collapsed, essentially, you know, they turned over to the people with notable affection and that is their equivalent forces, their special forces guys. and as some of you probably know, they studied the collapse because it bothered them. so that's a very good question

about the soft, what they will do. those soft guys are not only well-trained, they they are more brainwashed and the remainder of the north korean army, especially most of it. they want us to look at past president. it's very interesting in that submarine, that song go class submarine was captured and when it washed up on south korean shores. a lot of the members of the crew killed themselves instead of being captured, you know, rather than be captured they killed themselves. so these guys are pretty serious. i think that the majority of the north korean army, should we fight a war and i hope that doesn't happen as much or more so than anyone else. but should we have to ever having forbid i do war. if they're going to be defeated and that's the case, most render or give in. i don't think that's going to be the case with the soft.

a challenge for the rocks reticular lee. i would say another challenge is missile. they didn't bring up missiles, but if there is a collapse of the south korean regime and their forces that are competing and perhaps one of them is getting past powers involved, one of the most frightening scenarios would be they decided to shoot a nodong off at some place like japan. that's really very frightening and something that i think folks that are still on active duty and civilians in dod who work in planning circles are planning for. at least one would hope so. the word i get is that they are. i would also ask how capable is the helicopter lift for the south korean military. i guess we could talk about this offline. but that was a very interesting point you brought up. if you ask me something that was very good about the wtc, the

winter training cycle. was it more unusual than normal? and that's a very good question. i have an answer for you on that one. the north koreans, then watching the north korean winter training cycle for those of lance corporal in 1978, before some of you were born. i know i'm an old man. but you know, it's always been -- what is going to be the geewhiz thing that the cancer does this winter to make us go say, that's interesting. and the cancer used to be transfixed. but there's been stuff like in 1990 make for example they took a bunch of armor out and they ran it around and we're talking hundreds and hundreds of tanks. sometimes things we didn't even know were in the order of battle. in some of them so close to the dmv can look down from ten to john and say they had winter training cycles where they have large, huge mechanized forces

training exercises which have been unusual. they have this winter training exercises, lots of stuff. that this winter's training exercise where they actually did a very, very, very clever thing, in my view in the nl live artillery. up to four been fired so far. that's a lot of shells. that's a lot of artillery fire and spirit they've been trying to find a way for the past two or three years that they could intimidate south korea over the now out, they cannot import them in the political scheme and not ending but taken a lot of casualties. they did a pretty good job doing it. and some people think, i haven't seen it in the press, i think it has to do with the fact that general kim come shake on the general staff was put in an

position for some people thought were the motion, that i think he was made the corps commander of fourth court. fourth-quarter as the court that borders on the northern limit line. this is a smart guy. he's one of kim jong bills. they planned this intimidating exercise with their firing shells up to a kilometer away from this and ordered to not only show us that they have this great art tillery capability but japan to bring up the issue of the northern limit line again. didn't take any casualties. the first is that it rocked were inspired up to 100 cells basically into the air and after that didn't do anything. so very interesting stuff. was this unusual to share what's happening so far? gas. is it unprecedented? now. next are they will try to do something else unusual to catch her attention. the point is connected to set up very well, dave.

the north korean army conventional forces come in the nuclear forces is something they continue to work on to spend a very big amount of resources on in the capability that continues to evolve in order to threaten the south. that's their specific intent. i think it is something we should take seriously. great comments, thank you. >> thank you, dave. larry, do you want to chip in? does the button, push it. >> let me say couple of words about bruce's comments on proliferation. and basically this is to supplement what he said about what north korea is doing. president obama came out with the statement just a few days

ago, stating that there was no statutory reasons, no reserves in u.s. statue to bring north korea back on the u.s. list of state sponsors of terrorism. in a high ranking administration official was quoted as saying that north korea has not supported terrorism or terrorist groups since the 1980's. now, the reason for this decision really is to try to sustain a nuclear talks of that administration is trying to reside at north korea tried to get north korea back into some kind of participation in the six party talks. that was the rationale for the bush administration removing north korea from the terrorism

in 2008. and that is the same rationale for the president's statement that there no statutory@@@) hezbollah. and we need to look no further than these north korean

shipments to iran, which have been intercepted this year in the last six months. the big shipment that was seized in dubai in july, the shipment that was seized in the aleutian 76 aircraft in bangkok, huge shipment of rocket, rocket launchers, short range shoulder fired surface to air missiles, tons of this stuff. where does -- what does iran use such large quantities of these kinds of weapons for? this is what the iranian revolutionary guards sense to hezbollah. this is what hezbollah is armed with. and these north korean rockets and rocket launchers in short range surface to air missiles

are exactly those kinds of weapons. and to try to argue that such large quantities of these weapons are not ultimately bound for hezbollah and also possibly even,. i think frankly, crosses the line into the ludicrous realm at this point of time. the israelis know all about this. the israeli press talks about this all the time. and the only reason it seems to me these israeli government does not come out publicly and lay out what it knows about all of this is that it doesn't want to embarrass the u.s. government and its policies of keeping north korea off the u.s. list of state sponsors of terrorism. not embarrassing the bush

administration and not embarrassing the obama administration. now, remember looking back at the bush administration, that it was only after, and dennis knows all about this, it was only after some very strong threats from congress that the bush administration revealed any information at all about north korean involvement in that serious nuclear reactor that persists for this about. and even then, i would argue that the bush administration didn't tell the whole story. because the whole story is also about iran's involvement in that react her. but the israelis have photographs of iranian nuclear officials visiting the react to

her. and according to reports in the german press, citing german intelligence sources, iran was the financier for that fury and react to her. so there is really an issue of what i would call truth telling here in terms of the real reasons why north korea is not on the u.s. list of state sponsors of terrorism. now on the north korean military, here i'm going to take a little bit of a contrary view. seems to me we need to say a little bit more about their weaknesses. the weaknesses of north korean conventional forces and those weaknesses are severe and they have deep into year after year since the collapse of the soviet union at the end of the 1980's. and i'll just briefly go over three points. north korean conventional forces have no sustainability.

they could not wage a major war after just a few days. yes, the army got more food as bruce pointed out that the masses of north korean do. at the caloric intake of north korean rank-and-file infantrymen is only 600, 700 calories a day compared to 200 or 300 to the masses of north korea. this is not a sustainable diet in the war fighting situation. and part of the reason why the north korean rank-and-file troops were getting more food over the last few years than the north korean population as a whole was getting was that south korea was providing much of this food. and we saw the photographs in march 2008 of those north korean

tracks delivering south korean red cross marked bags of rice to their troops on the dmz. this is an example of what poor shape they are in. another related element in sustainability as but i think our greater limits, frankly, on their ability to insert the special operations forces into south korea. the information that i have is that for the last two years, those eight and two infiltration aircraft, which our military leaders use to stress so much in their testimonies to congress as part of the north korean conventional threats have been shut down for lack of fuel. and they are no longer able to operate and train with these aircraft on a sustained basis.

but perhaps their greatest weakness lies i think in their armor and mass infantry. here i have a different view of roost, in terms of their ability to penetrate, to any degree, south korean territory across the dmz. i believe they have lost much of this capability. their armor is extremely old, vintage 1950's, 1960's for the most part. their infantry is made up of those 16-year-old draftees who wept, through years and years of malnutrition. four years ago, they reduced the minimum height requirement for their draftees from four feet 11 to four feet two inches. there's only one explanation for this and that is malnutrition of these troops.

food and fuel requirements go way up for a force like the north korean military and a war fighting capability, compared to their requirements for food and fuel in a peacetime capability. they do not have the fuel and the food to boost their resources in a war fighting situation and they know what. moreover, reuss mentioned u.s. air power, a very good point. the combination of hundreds of tactical fighters that we could deploy into south korea, within two to three days in the outbreak of a conflict plus squadrons of mass heavy bombers would bring over there within two to three days again would

obliterate their mass armor and their mass infantry before they would have a chance to make any kind of significant penetration into south korea. we need to accurately assess the north korean military threat, all of its components. for no other reason than the requirement on our military globally are so expensive now on the streams of our military are so great, be it afghanistan, iraq, possibly iran in the future, gehman. that we need to accurately access exactly what we need to contribute to south korea's defense. i do believe that in the past there have been a tendency to exaggerate the north korean threat of an all-out invasion of

south korea. and i think for too long, the pentagon ignored the evidence of deterioration of north korean conventional military. now the pentagon i think is beginning to talk more about those and is beginning to make more judgments on that basis. so there is another side to i think what bruce said. certainly south korea needs to take many of the steps that bruce laid out. the united states needs to keep a very robust naval and air presence in south korea and offshore of south korea. send the right kind of message to the north koreans. resident obama promised south korea discussions on enhanced deterrence last june. i don't know whether those discussions are underway or not. we need to get them underway

because it seems to me there are some things the united states could do to enhance our deterrence capability, especially with regard to our naval and air power and in doing so send a stronger message to the north koreans that if they should ever contemplate attacking south korea, they will be obliterated. and i think that the message we need to keep sending to them. and again, i think there are some things we could be doing that we are doing now to some perhaps a stronger message in their direction. >> and now, catherine. let katherine respond. and then you can sum up. >> okay. thank you. it's a great pleasure to be here. thank you too transfixed for organizing a very worthwhile

seminar. thank you particularly to bruce for answering a question i've had for a long time which is what is the current state of conventional armed forces? that's what i really appreciate your good work on that. i would like to add first of all, just one short of recomment to what larry said about the weaknesses of the soldiers. i was struck when i was in north korea the summer of 08, a year and a half ago at the appearance of soldiers. i saw quite a number of units of soldiers in the southern part of the country around several different areas all the way down to the dmz in southwest to change on. and all the groups of soldiers that i saw on the road, at the dmz, wherever, at checkpoint

were considerably thinner and more obviously non-nourished than ordinary people i saw in thin young or walking along the roads in the southwestern part of the country. i was surprised at that. i mean, the soldiers faces were drawn. their bodies were extremely thin. they were small. so i think when we think about diverting food to the military, something else is going on other than soldiers are being well fed. that's what i observe. my other comments are about the issue of intent. i tried to say this briefly. we're running out of time i

think. it is well known when we talk about a threat, a threat is the combination of capability and intent. not simply capability. and that's where i think we need to focus a bit more attention as we discussed the north korean threat. my field is history. what i've done is studied the history of communist countries, particularly with the soviet union, china, all still eastern europe. and so i look at them over there holter jack three and teach about it this way. and so i see it in terms of evolution. in these countries always of course has evolved as all countries do. we have a tendency in the case of north korea to treat it as some sort of static phenomenon off partly because we don't know enough about it.

then, with the collapse of the soviet union and 91, the

overwhelming reality was extreme economic on their ability with the loss of soviet subsidies. extreme vulnerability and extreme security vulnerability with the loss of the soviet union and soviet bloc countries had the reaction to put it simply was naturally to enhance their own security by means of the kinds of steps that bruce is outlined. they are various very effectively to enhance their economic saturation by marines of proliferation. bruce outlined very effectively. but as we seek to counter the very real negative consequences from their proliferation in particular and also the very real potential threat that

exists by potential of their remaining economic military capability. if we're going to do that skillfully and effectively we've got to understand what's actually happening inside the country among the elite because were going to strike an effective bargain with them we have to understand what their motivations are, what the driving is. there is ample evidence today that the elite has lost confidence in ideology i would say quite absolutely that the ideology is dead. that their system is not working and they are very really seeking to gain the skills, the contacts and the resources needed to survive in the larger world as

individuals and as a country, primarily as individuals however. and so they are very actively engaging with people in china, india down, and a number of european countries and attempting also to enlarge their engagement with individuals in the united states in order to survive, in order to have the kinds of skills that will enable them to cope with the larger globalized economy. as an individual and also for their country as long as it remains to be able to cope. and again, it's really essential to understand that this process is already happening in north korea. and so, what we have is an

opportunity to harness that, to make it more profitable for them to expound this kind of learning that they are doing and collaborating on all kinds of peaceful enterprises, agriculture, energy, all sorts of things. and make the cost of the negative and threatening behaviors, such as proliferation increase. what if we attempt to simply stop things such as proliferation without providing an effective alternative for them economically, that's unlikely to succeed. i'll stop with that. >> ruse. >> yeah, i'll keep this reef. well, larry and i have a lot of

respect for each other's analysis, but we disagree and north korean military and have argued about it frequently including i recall over the last time and up with a lot of beers and atlanta. great city by the way. but let me address some of his comments if i may which were very good comments that were well thought out. specifically north korea and the assist. the ones i talk to as a few days is what they're talking about and at a minimum they can take sole under the right conditions and that's all she wrote. they take sole, wipeout congee province. it is no longer your country with the largest gdp. they're now back back being a third world country again. as the food coming from south korea, absolutely i concur because the north koreans take food that they get from everybody, no matter who it is and give it to the army, including south korea. certainly they got a flood of

money from south korea particularly during the sunshine policy on steroids that existed during the saturday platform. and how that affects training for the north korean special operations forces. certainly i've heard the same rumors that they have not flown in. by the way, in a end to flies off chairs and. so if they are short and kerosene or were short and kerosene recently certainly the pilots may not have had a lot of training although i'm not sure how much actual training pilots to fly a plane that's essentially cropduster the curious truth because that's what it is. it's about playing. that is not affect did the jump capability of the special operations forces because they, like their south korean counterparts jump out of balloons or off towers. they do not almost every job out of aircraft.

so fuel, understood, got it. pilot proficiency doesn't affect the proficiency of the special operations forces true peace themselves. they're jumping out of tires. just thought i'd pass that on. much of the roc armor, too. i agree the difference between a roc armor in the north korean armor is the north koreans have more but the south koreans have more modern armor. ..

so, you know, interesting stuff. well, and you know, what we said -- what you said about the pentagon mix of jogging that it decline of the north korean threat, i agree. during the 1990's it was a constant fight. i was an analyst back then at the nation's to fill a defeat could intelligence agency and we said look they are evil thing, changing.

the focus isn't on the forces and nobody wanted to admit that. and that was wrong. but the forces have a golf and i think it is also wrong to go in the other direction and say welcoming you know, they have had food and fuel problems and some guys with malnutrition problem therefore they can't fight anymore, they are not capable. it's not the case. they know their resource problems. they know the issues they face, and they have made a concerted effort to adjust. so, i just think we should keep that in mind. and also, i agree with a strong response. i would just ask we all keep in mind of the fight a war and the north koreans know this as we do, if the fight a war like the north koreans don't need to take the whole peninsula. they just need to wipe out large areas of the province, and having that threat -- having that threat means we have mutually assured destruction in miniature on the korean peninsula with the face-off between north and south korean

militaries and when it comes to the asymmetrical forces, south koreans are at a disadvantage. we are talking about traditional resources. great stuff and just felt erythromycin on this. katherine bald of i would like to point out one thing and that is intent. i believe from talking to many people, north and south korean obviously north koreans have become self and are now south korean citizens, the north koreans know they cannot beat a combined rok u.s. force, there for the intent of one is to talk about that is to get the u.s. off the korean peninsula. when any of this happens the paradigm changes significantly. north korea has not given up its dream of defeating were dominating self korea. this is why the north koreans took to the south koreans and every time -- particularly when they talk to us it's like we

really need to ask the americans to leave. when the americans are not there, when we don't have a commitment to south korea, a real commitment with forces, the paradigm change is considerable and that is why i think it's a little dangerous to downplay what the capabilities of our of the north korean a a a a a army. they have many weaknesses and also strengths they have gone after because of those weaknesses. something to keep in mind. that's it. [applause] >> thank you. at the end of the day there are the risks particularly on a friday standing between everybody and their dinner and going home and also having a degree of built in redundancy to a presentation. so many of the issues bruce spoke to and some of the panelists addressed. i will touch on what i will be presenting, but i hope that it will help you understand as i preface this by stating first of all of course i'm not a policymaker so i am not here to

reflect the policy of the united states or necessarily here speaking for the intelligence community her say although certainly most of my comments at least a tracked pretty much with some of the ways we tend to see this country. so hopefully we can gain a little bit more insight into what people often called in the intelligence black hole. i will be very kind of informal in my presentation working some firm brief notes. first of all the black hole analogy on north korea is quite unfortunate when you think about it because it implies two things: first of all, it implies that our policy towards the democratic people's republic of korea is somehow based on lack of information or less information necessary and to make a wise policy. and i will argue as we go through some of these key issues that our policy makers have to deal with that we do have a good

amount of insight into north korea's capabilities and intentions. second, it really underestimates the efforts of the 16 agencies that work against the number three target within the intelligence community that our office within the director of national intelligence has been established to kind of coordinate and integrate their efforts, and rather than the black hole i personally tend to see north korea as a puzzle. north korea is a puzzle for which we have enough pieces to see a picture, a picture that is comprehensible, a picture that speaks adequately to the two elements of threat kathryn spoke of, the capability and intent and truth be told we don't have all the pieces to the puzzle and what happens is we don't like the picture we often see of north korea so we sit and cursed the absence of the pieces

missing when in essence we have most of the big picture pieces necessary. unlike the historic perspective what people often need to understand in order to understand the north korean issue from the strategic perspective is the fact that we are dealing with a nuclear capability. the pursuit of the wmd capabilities in the nuclear and missile programs that track that as you mentioned back to the 1980's actually you could say the 1960's when north korea first centered the nuclear field clearly by the mid 1980's onward north korea had made a decision that the peak of the cold war some degree able to survive based on the large estimate of moscow of beijing playing off the soviet conflict but in the case in the middle of the cold war largely protected by security treaties and alliances

with both those countries not to reproduce capability intended to give that a degree of independence and a degree of self determination and ability to call the shots and to mitigate any external pressure on the state to change@@@ rb

be developed during what is arguably the golden years of the dprk u.s. relations often referred to as the agreed framework and what people often don't remember is we look at the events as they unfolded with a 2000 is that during these golden years, during the final years of the clinton administration when you had the advent of the sunshine policy under -- the visit of the number two man in north korea to washington was secretary albright visiting pyongyang, a visit i was fortunate to be on. during these very year's number

three already embarked on an alternative path to fissile materials with its highly enriched uranium from and north korea had already started cooperation with syria to support the production at elkus bar. during the cooperation when you could say the u.s. did not have its hostile policy. when we didn't have an administration that was not hesitant to use terms like axes of evil and other derogatory terms, even during those years, north korea demonstrated its strategic intent to pursue this nuclear capability. in the 2000's you had the public break out. the october, 2002, confrontation of north korea and its highly enriched uranium from by the assistant secretary jim kelly in the state department it really is a point of demarcation where

north korea initially confirms the existence of the program, and a possible decision hastily made overnight at mr. secretary kelly the have the program and shortly overturns this is a decision and decides to pursue the plutonium break out, so in 2003 we see the first three processing campaigns where north korea ads another couple of weapons worth of the plutonium to its arsenal in 2005 another reprocessing campaign you have this breakout where the intermingled with the dialogue, intermingled with the negotiating process the starts out with the three party talks and moves ultimately into six-party talks. even during this period, this negotiation when all the time is taken to improve technical capabilities, and then these

breakouts of nuclear tests and missile launches to demonstrate these capabilities will. let me read briefly from the dni assessment that bruce mentioned earlier which won't quote the conventional capabilities obviously for good reason. the north, october 2006 nuclear test was consistent with our long standing assessment that it produced the nuclear device. although we at test the judge at the status of to be partial fill your based on its list than 1 kiloton equivalent yield. the north probable nuclear test of may come to those in line support its claim that it has been seeking to develop weapons with a yield of roughly a few caltrans was apparently more successful in 2006. we judge north korea has tested to decisis and while we do not know north korea has produced nuclear weapons we assess it has the capability to do so. it remains our policy that we will not accept north korea as a nuclear weapon state.

after denying a highly enriched uranium programs since 2003, north korea announced in april, 2000 and that is developing uranium enrichment capability to produce fuel for a plan of light water reactor such reactor is used in the enriched uranium and as we see in the iran context you have a capability ostensibly for commercial capabilities but also proves the capabilities weapons application when taken to the highly enriched uranium level. in september to the semi north korea claimed it's a in richmond phase and the attempt of these announcements isn't clear, but the intelligence community continues to assess with the high confidence north korea pursued a uranium enrichment capability in the past which we assess for weapons. we judge he seeks recognition in north korea as a power by the united states in the international community.

pyongyang into and in pursuing dialogue at this time is to take it vantage of what it perceives as an enhanced negotiating position. having demonstrated its nuclear and missile capabilities. 2009 was truly a pivotal year as an analyst who followed in the north korean nuclear issue largely since it began to unfold. a lot of the critical questions we have, for a sample, was this simply a capability the was being developed as a negotiating card? was this a capability the ultimately north korea knew that it would have to give up to pursue the economic recovery and development that everybody surely in pyongyang must know they need, or was this a capability north korea intended to develop and keep? as a new administration interoffice with a demonstrated willingness to reach out and hand to those countries that would on clenched fists, north korea responded clipper quickly

to president obama and sell reach and with a series of steps that mall only to find a strategic intent but also designed to set the tone for the alana administration. three days before the inauguration of president obama, the dprk foreign ministry spokesman issued a statement that made these issues quite clear. and his best to use pyongyang's own words to understand the intent. the u.s. -- the statement said -- is miscalculating if it considers a normalization of the dprk u.s. relations as a reward for the dprk's nuclear abandonment. the dprk has made the nuclear weapons to defend itself from a north korean nuclear threat, not the anticipation of such things as a normalization of things with assistance. it is a real live in the korean peninsula but that we can live, although at a very low rate editorial comment, we can live

without normalize its relations with the u.s. but we cannot live without our nuclear deterrent. we've lived for decades of normalizing relations with the u.s. and we live on still with dignity. if there is anything we desire it is not to normalize relations between the dprk and the u.s., but to boost our nuclear deterrent in every way to more firmly defend the security of our nation. that is what we have witnessed in 2009. not as khator steps perce, not provocations perce although we could argue they are provocative in fact in the launch which rather in a satellite launch demonstrates the same capabilities that apply to the system north korea checked the box is like a sovereign state we have a sovereign right in spite of the united nations security council resolution, 1718 which states all missile activities

are prohibited, north korea's as we are a sovereign state, you launch the satellites, we launch the satellites and one month later conducted the second nuclear test. as it declared a nuclear state, you declare -- you test your nuclear weapons we test our nuclear weapons. so 2009 largely ended a lot of the analytical debate i think even by many of those people who otherwise were optimistic. i will not call them apologists but otherwise we would be optimistic about the potentiality for some type of denuclearization under the september 2005 statement with north korea. clearly kim jong il through these steps and then through the subsequent steps following the united nations security council resolution 1874 and the sanctions that we placed on north korea has clearly stated that it rejects the legitimacy of the united nations security council resolutions.

it rejects the legitimacy of the nuclear nonproliferation treaty as a monopoly of the superpowers for justifying their capabilities while denying countries such as number three of the right to there's. it has reportedly did the september 2005 statement as referring to the denuclearization of the korean peninsula and has reintegrated the commitment to the denuclearization of the world. on the one hand, encouraging statements, like world peace. you can be against world peace. on the other hand, it clearly demonstrates north korea's position that we will denuclearize when you, the united states, when you, china, one of the world powers denuclearized, when the united states finally does something about israel, when india and pakistan get rid of their nuclear weapons. this is north korea's clearly articulated position.

but is the position sustainable? of that is the question and that is what makes 2010 a definitive year for the world. if it was the year for pyongyang to meet its steegmans, 2010 is the key year for of a nuclear north korea. kathryn touched briefly on the domestic context and that is where we need to focus. we assisted kim jong il having had a stroke in august of 2008, a diminished physical capability has more or less recovered after initial rush to move fourth with a succession process by designating his third son as a successor in some activities that appear to demonstrate an expedited process with him having questions about his mortality. since then his recovery has not overturned the decision for kim jong il to take power but clearly has slowed down the

process. now, as you have a succession process, nevertheless it is being carried out at a faster pace when he took over from, you have a lot of room for discontent, uncertainties, clarity's and perhaps even something we have not seen traditionally and until north korea policy debate. it is a very dire situation that the succession process is unfolding under. you have every year north korea fails to meet its domestic population food requirements by roughly 20% amid differ take five or six millennia year nessus' to become formally produced. every year 20% short of feeding the people. in a system that depends upon the state being able to monopolize the production and distribution to its public distribution system maintain loyalty to maintain control the

state not able to feed its people is not a highly sustainable model. less than one-quarter of its industry functions, and we can speak on and on about the fuel shortages, the basic supply shortages, even the difficulties of exploiting the one thing that north korea is known to have which is mineral resources because the completely broken down infrastructure. there is no way of going in and extracting the resources. rampant inflation resulting from the currency revaluation demonstrates a degree of desperate miss on the number three as part to try to do something to rein in all of the capitalist activities to the entrepreneurial activity that has begun to unfold in north korea but also demonstrate the state's inability to bring it under control. in fact as we read and the story is still out on the whole impact of this currency revaluation what is becoming clearer are two

things, the state can't bring buddy, and under its control. it is just no way. the economy would become too monetized coping mechanisms that allowed north korea to survive since the famine years of the mid-1990s and onward for the local farmers using the household plots selling those on the markets. when you do an action like currency revaluation you cut off all of the entrepreneurial activity at the knees, and also in the near term north korea may be successful in containing this, the long-term implications particularly again of the elite and their confidence not so much kim jong il fighting kim jong il has established a degree of legitimacy based on his pursuit of a nuclear program. if you look at the propaganda, the propaganda throughout the whole 1990's and certainly in

2000 were based on we know we have to sacrifice. we know that we will not have all of the necessities we need. we know that will not be an economic superpower but it's not being an economic superpower that will prevent us from the scenario that will prevent us fáog á )

about its nuclear weapons capability that omar khaddafi did in libya, south africa did in a abandoning its people become for north korea to come to the same strategic calculus, they're has to be a revaluation of priorities on the elite. they have to see that ultimately this is a matter of a trade-off that they can have their cake and eat it, too. they cannot remain a power that is not denuclearized and gain acceptance into the international community to gain the full acceptance of support

to for the republic of korea and the degree of normalization relations with united states mrs. reed to gain that international credibility to restore its financial image etc. let me close briefly than by looking at the north korea issue within three contexts to kind of see what the home work is. what can we do about north korea? what are the options that we may face, the united states and the six-party talks partners? within three broad context first book peninsula context and more regional context and then third what the international context with an emphasis on proliferation. the earlier animated debate on the conventional capability barry much mirrors it takes place within your behind the green door and have access to all of the secrets or whether you don't this is a very robust

debate but i think if we agree that it is not just nuclear weapons but the entirety of the asymmetrical capabilities, the ability to inflict damage upon seóul in on conventional ways long-range artillery deployed forward in a way that in essence is a terror weapon by its ability to threaten seóul and unleash shalls on populations at any moment. the special operations forces, the chemical, bio weapons all provide a capability to unleash incredible damage on our allies and the republic of korea. in the zeros some competition for legitimacy remains in spite of the fact both korea have entered the united nations i notice they will enter the olympics might under different flags for the first time in

about two or three olympics. it still is a zero sum game and bruce was well to point out that north korea hasn't abandoned its goal of having the capability to affect the unification process in a way favorable. i use that language deliberately because i think it may be kind anachronism to say that north korea still has as its goal a unifying the peninsula to force that implies capabilities to come all the way down south and occupy the peninsula. i think larry spoke to the difficulties of that but they certainly want a military capabilities asymmetrical conventional, on conventional that allows to determine the end of the out game however the game might plea of. there is uncertainty associated with the process that makes it highly unstable, and in that case dave mentioned the collapse scenario and how we prepare for that.

and in this regard i think the key to the peninsula context across the board with the conventional threat associated with traditional plan of 5720 invasion of the south or 5029 scenario collapse of the north. the key to this is close cooperation and allianz management between the united states and the republic of korea and in this regard i would have to say from an analytical perspective we are on some of the most solid ground we have been in a good number of years. we look at the cooperation and look toward a nation that takes place between seoul and washington both within the six-party talks context and in the bilateral context. the key to deter north korea's adventuresome of course is a strong blue house and engaged committed white house and i would say again if i can hold that for my own position and look at this objectively i think

if anybody looks at this objectively we are at a very good pogo in iraq u.s. relations. the regional context is the newly emerging threat. for years we look to the peninsula obviously the war on the peninsula would have been regional the destabilizing but clearly north korea's chief of development of a nuclear capability together with the short-range ballistic missiles to intermediate ballistic missiles and of course the potential icbm mix north korea very destabilizing from a regional perspective. that is one of the earlier presentation by heritage was key as well because it's the to the capabilities of the ballistic missile defense brings to the united states and our own defense as well as partnership with japan and other countries in deploying these capabilities. the ballistic missile threat but ultimately the key is diplomacy

and how the united states is able to cooperate with the other six party partners particularly the people's republic of china and its role in the six-party talks process, the country with a historic relationship with the dprk, the country with a demonstrated commitment to seeking a non-nuclear korean peninsula and a country that is critical to work with in the future, and secondly it is clearly as importantly relationship with japan, and i think here again in spite of some difficulties with the transaction of governments on both sides and anytime you have a transition you have a period of getting to know each other on this issue, on the north korean nuclear issue has been a solid partnerships throughout the whole period of the six-party talks. japan has its own critical interests in relation to the issue.

i think it has been a faithful partner in the six-party talks and has clearly shown as much concern as the target perhaps even more so than other countries in the region because the ballistic missile capabilities but the real target of the north capability as my japanese colleagues like to remind me a missile with a nuclear warhead is really the most serious and real threat we face from a nuclear north korea. and that is not only the taepodong threat. and north korea wanted to break the alliance as a goal of getting u.s. forces of the peninsula they certainly would

like u.s. forces out of japan to get pyongyang's constant goal has been to drive a wedge between washington and seoul on the one hand washington and tokyo on the other and certainly any trilateral cooperation between the countries, and in this regard again, not to throw optimism where optimism isn't due but clearly we have a strong trilateral cooperative relationship on this issue. finally let me go let me move on to the international context because people are correct in pointing to the proliferations concern as real. north korea demonstrated a willingness and the capability to proliferate nuclear technology and it's important to syria and its construction of the rea dirt to how the war. its history of exporting will stick missiles to iran, syria and other countries. it's long roster of activities,

counterfeiting of the u.s. currency from international narcotrafficking. it's clear north korea place by a difference in the international norms of behavior than other countries do and while we want to provide for north korea and opportunity to normalize its behavior and opportunity to pursue a path that doesn't require the proliferation of these types of weapons, these types of arms, these types of illicit activities, and while we continue to pursue that within the six-party talks context, as we keep for north korea all the benefits it would have by pursuing the road it has yet demonstrated unwillingness take over denuclearization. in addition to all of those benefits we have a very strong set of monitoring sanctions right now that have proven successful as we have seen in

the turn of the boat which was headed to south asia the detention of their plant in thailand that was headed to the middle east. we've seen it samples where the united nations security council resolution 1874 print please with close cooperation with the six-party talks partners with russia and china where putting the sanctions in to the police have had an affect of deterring the likelihood of not only conventional arms proliferation, not only making it more difficult to prove with trade ballistic missiles, but helping ensure our capabilities and make it that much more difficult for the sum of all fears scenario that is the number three of the wood to a desperate act which would be certainly an act of desperation i think even with treen as the cost of this of proliferation beyond what has done to date. and this is life in this regard

within the international context the sanctions put in place on these companies that are associated with north korea's weapons of mass destruction program, the companies in the so-called second economy coming your omnocons and companies that sell for entry lot of people here, these are the companies selling the missiles they are attempting to sell the arms and likely would be the ones the would sell even beyond that. and it's better that we cooperate internationally the greater likelihood we have of reducing the type of proliferation which obviously would be unacceptable. in summary we've seen in north korea of lead, we could reiterate its commitment to the multilateral dialogue toward the

denuclearization carefully chosen words, a bit of assistance to return to the six-party talks which it had probably seen consensus that grew into those in line among the other parties of an intolerance of the nuclear north korea and unwillingness to give in to their traditional negotiating behavior to his of the commitment to the multilateral dialogue towards the denuclearization and a broad sense however. denuclearization of the peninsula. removal of the nuclear umbrella from the republic of korea, removal of real and imagined threats in reality. it's a difficult road ahead but it's good north korea continues to be articulate its commitment to the articulation. we need to build upon that in order to help lead north korea

down the road leads to head. unfortunately there isn't appeared to be a strategic decision by pyongyang however at this point and that is why the intelligence community as reflected in director blair's comments doesn't place a high probability that kim jong il will give up his nuclear weapons which he personally sees as crucial to his security. and that's why we move on to the third point which is why we need strategic patients. strategic patience is the key to reach out to the elite. strategic patients engagement a reiteration of our commitment to the six-party talks partners' commitment to number one move north korea towards the road of denuclearization of also to show where all the benefits that can have by that denuclearization.

kathryn, i think you're right, you've got an elite that many of them have lived overseas return to pyongyang. they are younger. information penetration of north korea is greater than it's ever been in history. they know what the outside@@@

capabilities as well as the benefits that it would gain should it choose the right of the denuclearization. now i will wrap up their and open for questions and comments. >> thank you very much. one by one. okay claudia, you raised your hand first. clotting. would you please come up here. we have several microphones here. i believe they are -- you can just turn on. sure. very for all. on c-span, push the button. yes.

>> [inaudible] -- was the only boy joint venture [inaudible] >> there's absolutely no reason to think that north korea having crossed the line wouldn't do it again as course -- >> [inaudible] >> possible signs. >> we watch these activities on a global scale and obviously i think everybody in this room knows a lot of the stuff that is in the media, possible potential cooperation with burma and other countries. the difficulty with north korea of course is it is a fascinating topic given all the amount of disinformation and speak to that of reporting that's all there it's really difficult to sort through the full array of information and disinformation that's available and i am not meaning to outright discount all of that information because

clearly what we are seeing the thing is unprecedented for you of third country open source invitation it was mentioned earlier. other countries reporting -- i just assure you because of this precedent we watch very closely. >> just to follow up on a quick follow-up on that. could you name, understanding that you are not going to make spectacular news this afternoon by telling us you actually spotted one summer else but could you name five places that bear closer looking? you know about burma that north korea is extremely busy in many parts of the world. we just heard larry niksch tallest the bush administration never came clean about their guerini in connection. i personally have wondered because there's all sorts of evidence that there was brokering going on between syria and north korea and iraq over

syria at the same time the reactor was being built. so could you take us further afield from a latin america, africa, elsewhere in southeast asia, some places where you keep an eye even if you are not seeing anything yet. >> not in an effort to dodge the question, but to artfully dodge -- you know, there are two dimensions to and issues such as this. first is to forget the third countries' intentions. what type of countries would be willing to pursue this capability? one distinguishing mark about north korea's wmd experts particularly the dismissals is it is countries that can't acquire police anywhere else that turn to north korea. north korea is not the provider of preference if you are a legitimate country looking to build a decent system or this is not diminished some of the

quality of their exports, but when you were dealing with north korea, you are risking the isolation, you are making a strategic and that meant you are willing to be labeled the paray of that comes with dealing with north korea. so we look at those countries that would be like that and we do also follow closely where north korea, and the jewels are troubling enough businesses. i would also say those in another reason why i definitely don't want to speak too much on this question is our ultimate success in detecting this is ultimately based upon an ability to track this without a large amount of attention coming to. i think clearly with the syria case, and i know i will probably take a large number of zeros for this one but on the syria case it was an intelligence success story of how we identify get and

how we worked through that issue and i will leave it at that but it is an issue that we are extremely focused on within the larger context of any probe state wanting to pursue either the plutonium route within all the bar reactor oracle for uranium enrichment programs. >> thank you. very artful. gordon? >> we heard a fascinating discussion about the capabilities and frailty of the north korean military. but of course when we talk about this shouldn't we also talk about the north koreans friends? for instance, north korea and china are each other's only military ally. china is north korea's primary diplomatic backer and certainly provides a lot of material assistance. i know that sounds inconceivable the people's liberation army but held the north koreans, but of

course in the last couple of weeks we have seen these statements by chinese generals in the age of media about taking on the united states as willing to fight and even prepare for it. so i guess the question is can somebody on the panel talk about how the people's liberation army might interact and help the korean people's army after all this is something that has happened before in the 1950's and so it would seem to me that this would be an important part of the discussion in terms of thinking about conflict on the korean peninsula. >> thank you, gordon. anyone else? >> i would say from an intelligence committee perspective or actually when you look at china first of all but squier china isn't a monolith if you scour the open source writings and various voices out there i think you get a diversity of opinion but what is clear is that beijing and

washington have an important relationship and that one would find it difficult -- and the prc has led the six-party talks process to legacy the commitment to maintain stability in the region. both by pursuing the difficult task of the denuclearization and also dealing with north korea that times to throw temper tantrums and make everybody's life difficult. in that regard would be difficult for me to conceive of any type of cooperation between the two countries the was designed either to destabilize the region or shift the balance of power on the peninsula. >> you have a followup, gordon?

>> all right, mike. >> [inaudible] first, i'm not a military specialist. i work on the affairs of the commerce the part of commesso for professor behtol, an dittman that irg ze refers to the iranian revolutionary guard. second, for both professor bechtol and syd, what impact has had on the north korea's position on its nuclear program? because it seems to have pretty dramatic effect on the arms trade trafficking, and last for syd you mentioned succession and

i was at a wilson center even a couple weeks ago on curry and there was a lot of discussion about which regime to negotiate with or you know, which would be more effective to negotiate with the current one, the kim jong il regime or the successor regime and i would like to get your thoughts on that. thanks. >> thank you, mike. but bruce take that first and then syd. >> command control computers, communications and intelligence. how am i doing? that is the sea for life. if you really want to complicate things like the military commanders like to, usually on the advice of guys like dave used early in the audience our command, control, computers come intelligence -- >> [inaudible] >> right. essentially what it means is let's go back to before we had

the modern communications. the reason -- i live in fredericksburg virginia the cultural center of the universe, about 10 kilometers from my home in the county is chancellorsville where he defeated an army twice his size. he was able to do so because he was able to control his troops better than the union commander was, and that hasn't changed. he or she was able to control their troops the best, move them the quickest to the most effective spot has the best c4i and in today's technology c4i has become the aspect of winning the war not shorter in duration lummis you are counting counterinsurgency. does that make sense? i didn't articulate very well. i saw this world peace, syd might have seen this contract, from a think-tank in stockholm ten days ago that said the

weapon sales for north korea had gone down by 90%. please allow me to say i doubt that. i think the two things come 1874 is very important. that is what you're asking about and i think that psi is very important as well because we are never going to stop but we can certainly hurt them. i think you've seen that 1824 has done something i think is very important and we have gotten nation's, we haven't traditionally played a big role in things like the psi or the united arab 35 tons of military equipment is a lot to lose. so i think it has has some of fact. i have no idea how much effect but it's certainly at the very least force to the north koreans to look at using the new tactics, techniques and procedures when they run these

types of programs and something that is fascinating to me as i am sure you've been reading the press about what happened at thailand, how the shipment was supposed to go from north korea to thailand, sri lanka to somewhere else eventually to torian they were using front companies in five different come trees to discuss the six countries. it boggles the mind. the plane built by the russians, ansar, georgia. very interesting stuff. the north koreans are very smart at doing this stuff. so we are going to -- obra government and folks like syd he works with have to continue to be very smart to come out how they run these operations because they're very sophisticated. >> [inaudible] >> part and me? >> is it impacting korea's nuclear position? >> i think that larry can answer that one.

>> larry? >> you talked about whether it would be more difficult or less difficult between negotiating with kim jong il and negotiating with a successor regime. it seems to me the position that north korean government has laid out in the last few months including what syd talked about, this denigration of the importance of diplomatic relations also the revival of the peace treaty agenda, the attempt to roll the nuclear issue and to a peace treaty negotiation rather than a sixth party negotiating, demand that sanctions be lifted, we saw the development of some of these positions actually early in

2009, january and february. there were a number of important north korea policy statements related to their negotiating positions. it began to leave these things out. now,@@ the agenda that the

what you might call successor collective leadership began to put forth early 2009. that tells me that the influence and power that these leaders and one expression that has been described to group has been for generals, now there may be a few more officials added to the group of five that have been

described to. it seems to me that even though kim jong il seems to be back in charge of the policy formulation process the power that this group accumulated during this seven or eight month period in which they were running the policy formulation process their power has not reseated all that much and he has to listen to them now more than he did perhaps before the pre-stroke period, and again i think the negotiating agenda on the nuclear issue that they are laying out which is a very difficult one especially the peace agreement i think reflects the influence of the group and influence which i think remains at a high level. >> thank you. mike?

>> michael marshall. i must of rolls-royce for getting here rather late. i simply couldn't get away before. a question but a couple of observations first by the publishers for being late again. these are my observations. it seems to me that the internal situation of north korea is extremely volatile at the present and a lot of the policies we see are an effort to keep a lid on that volatility. as mr. seiler mentioned, north korea is much more open to information from the other side than it was under kim l. sung and people know that south korea as much better off than north korea. they know that china, people went into china during the famine in the late nineties and saw that the life there was better than north korea so there

is an awareness that north korea is not what people were told it was in the past. and i think that is then reflected not so much in the popular -- yes, popular attitudes. not a political process movement, but in people's attitude toward the country and work. some years ago i spoke to a mollyann senior legislator ogle leah has a fairly open relations with north korea as well as close to the u.s., which is very useful and he said that he also was a private businessman and he implied north korean laborers. they come to mongolia and get work there. and he said these people have no work ethic. they simply are -- they don't understand what it is to turn up on time to work hard to read he said after about a year in

mongolia they start to catch on. and i've heard similar things from the members of the south korean unification ministry about the north korean workers in the complex that people do not have anything like the worst and thick to the acoustics work ethic and what it reminded me of is the eastern workers under the soviet union where people said we pretend to work and they pretend to pay. in the level of the population, the working population there's clearly extensive demoralization when it comes to the elite interest, mr. seiler is, who stands where among the elite is not a monolithic body. if there is probably mostly a younger generation who are looking to the future and realizing that the present situation is not sustainable.

and perhaps an older generation particularly of the military leaders who want to hold on to the legacy of kim ill sung and protected and the nuclear capability is a sort of assurance of that. but just to wind up my mongolian legislator said that he and the legislature frequently receives parties officials from north korea and he said one of the first questions they asked in a private conversation is what happened to your communist party? what happened to the members of the mongolian communist party? you know, did they get shot, or they put in prison? no the continued in the political process and got elected back into the government at one stage in the post communist history so there is

clearly concerned among officials that the sort of mid level of what is the future going to be like we for sea change is there hope to hold onto what we've got. in terms of a question i would particularly like mr. seiler to answer, the dni does a lot of work on the military intelligence. how much do you know about different attitudes and different groups within the elite, so the social and political attitudes within north korea? thank you. ..

of a hardliner versus moderate debate as a negotiating tactic to read outside of see that type of diversity. there is bureaucratic competition. history of foreign affairs loves it when there's dialogue ongoing. that's their bailiwick. and certainly the science and technician is responsible for the rogue ram and like it when they get to launch a missile or when they get to make a nuclear device go boom in the hole in the cave. but all the sad that there is a good amount of consensus. i would actually say that the scenario that ics is that what we saw in early 2009 is really

planned toward the end of the bush administration when it became clear that we did at the six-party talks for a lot of the analysts thought we would deadlock which was on this issue of verification. in the sampling and access required in order to one cummock and from daschle plutonium production and also to gain insight into the highly enriched uranium position. and this is exactly where the agreed framework had stumbled when you look at the iaea is ability to get the inspection ready to clear the delta between what north korea had declared it actually produced in the way of plutonium and what the iaea and others thought they might have had, which was a few brands, a few dozen grams of plutonium versus kilograms, weapons worth. and so, the six-party talks process had run its course as far as they could go.

and north korea could spend to really listen going to get a lot of support for a liberal verification regime. and this is after the president in north korea from terrorism and then the whole issue of what type of action but we have on the ground becomes central. i would've prine at that time north korea makes a decision that it's going to embark on this path with the new administration bitterly on its nuclear power. to demonstrate early on-q have to pay attention to us, to demonstrate early on as the strategic capabilities and are probably thinking to as the new administration is so committed to dialogue, why not walk into such dialogue with the greatly enriched and? the question is what did they do to this plan? it may have impacted the timing. i'm not so certain what you saw

is the ascendancy of a collective leadership that taken in a difficult art direction. as early on in this whole cycle we were expecting that the possibility of a second tape it on much march diluted basically where we were after this escalatory cycle. north korea's behavior today is what i urge our analysts in particular to stop looking at the tactical question. we are often driven and this is no claim on the press because you guys are just running your story spared the winner of the north korea's coming to talks. one of the six-party talks come again? they were an objective in themselves. that's how it is her in so many questions just for coming back to the table. and this is where the interesting thing in a little ears with everybody calling for strategic patience now in telling north korea joined that going to be rewarded simply for

coming back to the talk. what is north korea's behavior at this point? will it continue, you know, will it so compelled to us again do some type of provocative action or will it actually fear from this and comply with it? and this goes back to the question, which regime do you negotiate? you negotiate with them all, not necessarily exclusive. you negotiate with the current regime because it's the reality at hand. it's the reality that we gained a lot of benefits of the six-party talks process. we do somewhat mitigate some of the more provocative behaviors that north korea. i think the consensus we have in the region helps us of the proliferation issue of concern and we keep putting that message on the table. peace treaty, normalization, all this other stuff, it's all there, just come back, beijing, back to value type.

and kim jong ii could care less about that, maybe he just wants the capability. the rest of the alito is saying where it is their future by? is this sustainable? particularly if the other six-party types remain firm in their position. and i would add to that tehran is watching. other potential proliferate there watching. the whole credibility of any post-cold war npt centric had the nonproliferation regime hinges on how well we handle this issue. other countries are watching a. so it's a multidimensional issue that sometimes week korea hands talk about anaheim third alliteration. there's a long rambling answer to a very simple question.

i apologize for but that's basically how we saw some of the leadership dynamics play out over the past year. >> larry. a >> i just want to make a brief comment about what we've seen in the last month or so. with north korea appeared in three things that seem very different in north korea since the beginning of the year. i don't know what the future will hold, what effect these three developments will have, but the first of these is the statement that is reported that kim jong ii made in january in which he admitted to failing to adequately feed his people. then you have the apology by the prime minister, kim jong ii, about a week ago before what is

reported to have been a very, very large meeting of local communist party officials in pyongyang and an apology about the economic@@"5 forth. all of this or at least the last

two elements in these three changes coming out of pressure public grassroots pressure on the regime. now, i've never seen anything like this in north korea before. i don't know what it means. but it's something i think we have to watch really carefully. and if something really develops from this comment it seems to me u.s. policy makers really need to examine the question of how do we incorporate a new trend along these lines in north korea into our diplomatic approach to north korea. i would watch this very closely now over the next few months in terms of whether this is just a momentary blip on the screen or

whether it's going to be something more fundamental in terms of real change in north korea. >> thank you very much, larry. leonard. >> okay, from the korean embassy -- [inaudible] i put the question toward dr. bechtol. dr. bechtol clearly explained the immediate threat to the area or so -- with the practical measures for determining the 15th u.s. in korea. the main issues to operational opportunists in 2012 april is just the two years away from

now. so my question is, what are the implementation for the suggestion. there are many people with suggestions and they are requesting reconsideration or more discretion -- thank you. >> let me address that question at two levels. the first level is just approaching this from a general look at unified command. and one of the principles of war is unity of command. so i think unity of command is a vital aspect of any coalition warfare. in nato we have a guy who's in charge. all of the nato forces answer to him. i believe that in a bilateral relationship as important as the one we have with our allies in

south korea, unity of command is very important and i don't think the combined forces command of the two separate commands as they will become in 2012 will function as well when they don't have unity of command, frankly. so that's the first level. the next level is just a more practical level at the operational level of war. when we're talking about warfare, were talking about the street level four, the operational level of work on the tactical level four. the operational level of war is typically the level at just about court, and echelon about court. and at the operational level of war, the south korean military simply is not ready should take over many of the functions that they're expected to by 2012. it onto the seafloor i think everybody now knows was before i heard they don't have the seafloor are that they made. it's very expensive and it's very necessary. they don't even have the joint

seafloor c4-i system. it's become so obvious that the south korean air force cannot function the way it needs to come in the way was originally intended to under 2012 change that they barta said okay, we're going to let the two air forces continue to function under combined command and that's going to be under a u.s. three starters the seventh air force commander. picard acknowledged that the roxbury and courtney b. cannot conduct or lead amphibious operations. i'm just talking large stuff here. there are many issues, many challenges at the roc military is not going to be able to meet by 2012. so i understand the politics of this comes at the unity of command, with take that off for a second and just talk sheer practicality of capabilities of systems that meet the threat. and south korean military simply

will not be there by 2012. that is a fact. and i wanted to talk about bridging capabilities as that word, those two words have been brought up over and over again, bridging capabilities. with the best bridging capabilities is to be the infrastructure as it is. combined forces command is a proven combined command that has deterred the north koreans to its existence. until the south korean military has the capabilities necessary to assume a separate command from the united states forces, my suggestion, my thought, my assessment would be leaving the structure in place, pushing back the date of 2012 until the roc military has those capabilities. >> thank you. dave. >> you know, i'd like to first point out something we see we talk about the outcome issue and say that korean forces are under the wartime upon the u.s.

it's not really true. the combined forces command answers to the military committee which is made up of the national command authorities of both countries. now there is a u.s. general in charge of combined forces command, but he answers to the military committee of both countries. and u.s. forces korea does not tap up compos korean forces. so i think that's important to remember. the other thing i think it's interesting to look at our linux over the last 60 years and our military, the development of our military capabilities has been very symbiotic. that is really what we have in how we have developed the combined command in the strengths of both countries taking place for the weaknesses there. and the symbiotic relationship has in many ways not allowed a south korean unique military culture to develop because the

standard by which south korea and the combined forces command judges military operations is the u.s. standard. and as process taught us, u.s. c4-i is very expensive. because the standard by which they've grown up with is the u.s. standard they have to invest a tremendous amount of resources to develop staff by a stand-alone capability separating the combined command. so it's a real challenge and it becomes a resource and time question. can they commit the resources developed a unilateral capability and do they have the time to do it. again i caveat that if, my personal comments, not official comments, but i would say my personal comments, i think it is correct and it is for the future

of particularly what happens in the regime collapse scenario that the korean military be in the lead. it is important for reunification of the peninsula and what happens in the north than it is the south korean military in the lead for legitimacy purposes and the only way to counter the 60 years of propaganda indoctrination of the north wind people. because of the u.s. forces to leave, it can have a live. but the challenges timing and how we're going to do this. and i think the symbiotic relationship that we have had is a difficult one to break and it's going to be a real challenge for us in the future. back thank you, david. speak up. >> i would just add to what david maxwell just said, over the last 60 years.

since the korean war, american troops have been in korea in that same mode, cooperating with republic of korea military. during this time, there was a transition from president singer read to 1989 into a democratic government. this was at least a 35 year transition with a lot of patience, a lot of development and cooperation. part of it was called military civic action. it was building roads and schoolhouses. it was what we call now infrastructure development and so forth. the status that has been

achieved during this military relationship accompanied in the air and enormous progress in industry and technology. in south korea today is one of the foremost advanced technological countries on the planet. it has a very your, which is accompanied by that democratic process. i find it somewhat surprising that the military has not progressed to the same extent and david maxwell just explained i think the reason why. but the potential is there. and i think the policies, goals, and object does which seemed to be clear, need a strategy in korea for the private sector to help support the development of the capability for the protection of the company.

>> thank you, leonard as always. and kathryn, you have something to add on? [inaudible] >> fine, it's open. push her back in. >> the question about china that she raised as a very good question. i would just say that i think the pretty solid consensus of opinion is that china is aimed with regard to north korea is to prevent instability in border regions, the region that borders korea because of the large korean minority that lives there. so there's a tremendous concern about the consequences of an implosion of the north korean estate on china's own internal stability, internal security. and so rather than supporting

north korean adventurism militarily, it would use whatever leverage it has by way of supplying north korea with significant resources to restrain and there's really no support for the idea that its alliance with north korea on paper would leave it to supporting any kind of military action. >> thank you, kathryn. [inaudible] >> i understand the chinese concern about korean population on the border area. what if there were an implosion in korea, north koreans would go north into china. they would go south into south korea. and we've already been mined three passengers to the dmz.

i think the chinese have much different motivations for what they're doing. they see some short-term advantage certainly in the dublin of south korea and japan and getting concessions out of the united states because they have been promoting dialogue in the six-party talks, not a solution. and so there's a lot going on there which i think that we are willing to talk about thomas certainly not in public and perhaps not even in private regarding the way china and north korea interact. i think it's very important that we let get this especially because fuji and how -- hu jintao has pointed out there've always been correct and therefore has an affinity towards the north korean solutions. i don't want to prolong this, but i think there's a lot more do we really need to look at in terms of north korea. because it's not just north korea. it china as well. >> thank you as always, gordon.

interesting insights and comments. with that, then >> good morning everyone.

i would like to call to order this subcommittee. good morning, i am pleased to call to order this subcommittee

for the hearing entitled " equiping financial regulators with the tools necessary to monitor systemic risk." a want to thank my ranking member, senator corker, and senator read my friend and colleague, and they're hard- working staff for requesting this hearing on an issue that may seem tackles to some but will prove critical as we were to modernize for the future. i would also like to welcome and thank our able witnesses who are here today and think our staff who have been instrumental with regard to technical aspects of this analysis. i am happy to continue the dialogue that we have already begun on how to equip our regulators to move beyond examining individual institutions and towards monitoring and managing systemic risk across our financial system. welcome to our witnesses and thank you for appearing before the subcommittee to give an outline on the current regulator capability to analyze financial

market data. most importantly, what additional resources and capabilities are necessary to provide effective systemic risk regulation. i understand very well that the weather in washington the last few days has not been ideal. some of our witnesses have been stranded here for several days so i appreciate the dedication you have some in making it here today. we promised to be most merciful and are questioning. before i turn to the governor trajllo, i would like to submit a few comments for the record for it by somewhat lengthy statement given the technical nature of the subject matterñi.i will submit it for the record but will not read it. before introducing the governor, senator reid, do you have some comments you'd like to share? >> very briefly, i would like my statement submitted to the record also.

i want to welcome the governor and thank you for holding this hearing at the suggestion of senator corker. this is a vital area and i think it could be overlooked. it is incredibly important. we all witnessed over the last several years is not only great market turmoil but great market uncertainty. my impression of a lot of the problem with lehman brothers, bear stearns, a.i.g., was the fact that regulators and other banking institutions had no idea where their liabilities or counterparty exposure blogger there was no systemic way to calculate this or agar get the information. as a result, the regulators were flying blind, essentially. they're doing the best they could, trying to work things out but a lot of it was sort of

flying with instruments that were not working in bad weather. it was more seeds of the past than systemic regulation. one thing i think we have to do is to create a repository of estimation -- of information available to the public. this is so that the system is much more understandable and that when there is a shock to the system, markets don't react out of fear. they should react with knowledge thank you. >> thank you, senator reid. we have come on this committee, become accustomed to apria rule, centre corporate is known for his brevity but since you requested the hearing today and this is a major priority for you, perhaps you would have some opening comments you would like

to share. >> i will be very brief. number one, thank you for having this hearing. it is friday afternoon and it has been snowing. >> we have been trying to have se. >> i want to thank the governor. for always being available and helping us think through these complex issues. our second panel -- and the governor has been holed up in hotels and been hanging around to give his testimony prior to recess. everybody knows we are hopefully working toward a regulatory reform bill. it is important to get this testimony into the public record so we can potentially act upon it. we thank you all for being here, for your ideas, and with that, mr. chairman, as you walk out the door, thank you so much for having this hearing. >> thank you and on behalf of senator bynes, let me introduce our first witness, the governor

of the federal reserve board. he is an expert international finance. he received his education beginning at walksbury latin school and went on to georgetown university, duke university, and graduated from university of michigan prior to resuming his responsibilities with a reserve. he was with the georgetown law school and prior to that, served in the clinton administration. thank you for your presence and we look forward to your statement. >> thank-you. thank you both for your attention to a subject as important to financial stability that is often overlooked in the broader debate about reform. good information is crucial to

the success of any form of regulation. as it is to the success of any form of market activity. many pages of financial activity make the quality and timeliness of information more significant for effective regulation. most important perhaps is the interconnectedness of financial- services firms. in few other industries,ñi do major players feel so regularly -- deals regularly with one another. major problems at one firm can quickly spread throughout the system. the financial crisis revealed gaps in the data available to government regulators and to private analysts. it also revealed the relatively undeveloped nature of systemic or macro prudential oversight of the financial system. with this experience in mind, i believe there are two goals toward which agency and congressional action to improve data collection and analysis should be directed.

first, to ensure that supervisory agencies have access to high-quality and timely data that are organized and standardized so as to enhance their regulatory missions including containment to stannic risk and second, to make such data available to other government agencies, to private analysts, two academics -- inappropriate usable form so that the public will have the benefit of multiple perspectives on potential threats to financial stability. my written testimony details some of the initiatives that the reserve, to enhance the type and quality of information available to us, in support of our exercise of consolidated supervision over the nation's largest financial holding companies. i would stress also the importance of using that information to regulate more effectively. the special capital suskind we conducted last year, the nation's old 19 largest

financial firms, demonstrated how quantitative horizontal methodologies built on consistent data across firms, could complement traditional supervision. it also showed the importance of having supervisory needs and knowledge determine data requirements. we're building on that experience and adding a more explicitly macro-provincial dimension in developing a quantitative surveillance mechanism as a permanent part of large firm oversight. while there is much that the federalñi reserve and other agencies such as the sec can do and are doing under existing authority, i believe we will need congressional action to achieve fully the two goals i stated a moment ago. there are a number of specific areas in which legislative changes would be helpful. let me briefly were mentioned three. first, it is very important that government agencies have the authority to collect information from firms not subject to provincial

supervision. they may nonetheless have the potential to contribute to systemic risk. without this ability, regulators will have a picture of the financial system that is incomplete and perhaps dangerous. second, it appears to me that greater standardization of important data streams will only be achieved with a congressional process. this objective of standardization has for years been elusive. most observers agree it is critical to identify risk in the financial system. third, there will need to be some modification to some of the constraints on information collection by government agencies. there might be a party to share that information with foreign regulators or release it in usable form to the public. privacy, proprietary information, intellectual property and other important interests will be implicated in any such modifications.

it is most appropriate that congress provide guidance how these interests should be accommodated in a more effective system of financial data collection. finally, as you consider possible legislative changes in this area, i would encourage you to consider the relationship between the authorities and é@qjt)páed h  collection and the substantive regulatory responsibilities entrusted to our financial agencies. generally speaking, regulators have the best perspective on the kind of data that will effectively advance their statutory missions. indeed, without the authority to shake information, their effectiveness in achieving these missions can be compromised. this is all the more important given the current state of the systemic risk in which there are as many questions asñi answers. in these circumstances in particular, the insights gained by supervisors for their ongoing

examination of large firms and the markets should be the keyçói but not the exclusive determinant of new data collection methods. this does not mean that agencies should collect only the information they believe they need. the aim of providing independent perspectives on financial stability means that other data may be important to collect through the use of private analysts and others. the agencies can certainly be asked to collect other forms of information that report or independent assessment to financial stability risks. i think this relationship does count for considerable symmetry between regulatory responsibility and data collection. thank you for your attention and again for having this hearing. i would be pleased to try and answer any questions you might have. >> thank you very much prid. this need for better information

is not exclusive to the united states. have you, -- can you comment on how other g-20 countries are dealing with this and the need for a national or international approach? >> a number of other regulators and overseers are around the world have already begun to address the issue of information. among them, the various workings of the european union and united kingdom, the bank of england. -- bge yes 20 -- the g-20 have after some questions salient to this. they have developed a template for reporting information of the large internationally-active firms. this is not an easy undertaking for any one nation, much less for the world as a whole. it is something that the

financial stability board has taken on as a task. there have been some preliminary discussions of trying to seek if we can't come to agreement on a $#' $d$)á)á

this. it is important we begin here. there is the issue of sovereign behavior. the greek government is now in a very serious crisis which is rattlingñi the markets. there is some indication thatçó derivatives and credit defaults swaps have come into it. apparently, there are reports that investment banking firms have helped them legally avoid a situation. the long and short of it is that we also have to include sovereign entities in terms of data collection. >> one of the lessons that the international community drew from some of the -- some of the sovereign debt crises of the late 1990's and a very early years of this century was that there need to be more transparency associated with a

lot of sovereign debt issuance. the international monetary fund undertook to create special data dissemination standards which would provide more such information. generally speaking, i would distinguish between the sovereign information and private financial firm information since we, as regulators, have a mandate over private firms rather than certainly over sovereign. it is relevant for us in thinking about systemic risk to the degree that our large institutions have significant exposures to sovereigns which might conceivably have difficulty in servicing their debt, that becomes a matter for concern for the private financial regulators, as well. çó>> one of the issues that repeatedly is made is that too

big to fail is the first chapter of the second chapter is too interconnected to fail. that raises the issue of a poco point of large institutions who might miss small institutions that could cause a problem. there's the possibility that multiple failures in small institutions could have a systemic problem. how do we deal with that in terms of these interconnections? traditionally, it is easier for us to go to a big national institution and report x, y, and z. had we do this in a data sense? >> let me address data collection and the regulatory supervisory side. with respect to data collection, there is little question in our minds that the data collection

of stories of u.s. government agencies need to extend beyond the universe of firms who are subject to provincial or market regulation. it is for the reasons you suggest, a large number of intermediate-sized firms have themselves a substantial amount of financial activity which, although not necessarily is associate with systemic risk and one firm, in the aggregate, they defied the trend in the economy as a whole. we do think there needs to be that kind of authority in our financial regulators to gather the necessary information to round out the picture. when it comes to supervisory or ñrregulatory authority, the thre of us have been in this room and a number of occasions, talking about the choices we have in front of us. one of those choices is going to be how broadly to cast -- to

draw the perimeter of regulation. will it be only four firms that own banks? will it be firms beyond that which are thought to be themselves systemically important or will it be some broader set of firms above a certain size? i think those issues will probably be more difficult to resolve than the data issues where i personally think there is little argument against the proposition that you need to gather this information. >> thank you. senator corker? >> thank you. i want to thank you for raising this opera we would not have met with our next panel without you having this brought up. thank you very much governor, i think you are familiar with the national institute of finance as it has been proposed for they have discussed it being done in

an independent way. i am wondering if you could talk to us a little bit about the pros and cons of what you know their proposal to be from the fed standpoint? >> this will not surprise you to hear that there are some advantages and disadvantages to each of the different organizational options that you would face. one such option would be the creation of a single, freestanding agency that would have overall responsibility for all the financial data collection and a good bit of the analysis. on the other end of the spectrum would be presumably giving more authority to a single u.s. government -- existing government agency. as i suggested in my written

testimony, there's probably an option in between. as you go forward with thinking about overall regulatory reform, to the degree that a council emerges, as i think it might, as an important center for coordinating the oversight systemic risk in the united states among all the various u.s. government agencies. we may want to lodge some of the data responsibilities in the council, as well the basic benefits, i think, is it is a single agency. you have a single group. they can't take an overview. they can say they can prioritize for the contract to figure out what the most important unknowns are. they can devote their activities in that direction and they will do so in a way they are not always stumbling over one another.

some of the cost associated with the single agency, apart from out of pocket costs, would include some risk that you could attached data collection from the process of regulation. i think it is important in our experience of the last couple of years has borne out the importance of having those with the line responsibility for supervising and regulating being able to shape the kinds of data collection that they feel are necessary in order to effectively to regulate or supervise. in the middle of the crisis, it became apparent to some of the people at the fed that getting information on the kind of hair

cuts that were being applied to some re-purchase agreement was a very important, near-term piece of information in trying to assess where the system was at that moment. if that capacity had been lodged an independent agency with some of its own priorities perhaps and having to go through a bit more of açó process, there may have been some delays in getting to that end. as with everything, there will be pluses and minuses. it will not surprise you to know that from the perspective the20 th and constitution, there are big concerns about acting quickly on information but i hasten to add that here as in a systemic risk in general, nobody at the fed believes that the fed

should be the sole or the principal collector and analyzer of data. this has got to be a government- wide priority. . .

[captions copyright national cable satellite corp. 2010] [captioning performed by national captioning institute] >> as you all know, true, real time data is very expensive. timely, meaning daily, or end of the day trading is very important forç making an assessment on a regular basis as to the stability of a firm that may be under stress. one of the things that became clear during theç crisis, and r me, became particularly evident during the stressed tests, was the substantial diversity rigid the substantial diversion in the capacity of firms to get a hold of their own data and know what their risk exposures were. one of the things we have been doing is placing particular emphasis on the management

information systems of the firms, requiring that day themselves be able to get a hold of the data on trades or counter-party exposures. if they can get a hold of it for their own internal purposes, we will be able to get a hold of it pretty quickly. it is not a question of our telling them a "send us something you haveç on a daily basis," it is making sure they have the capacity to derive that information and send it to us. >> may i ask another question? >> we all tend to try to find a solution that is unique and may be alleviates a lot of the daily

work that it takes to be good regulators. a lot of whatq happened this lat time could have been prevented with the tools that we had if we had been more effective in regulating the way that we should have. there were certainly a lot of issues that caused this last crisis to unfold. we had this wonderful presentation that we're going to hear. we envision having all of thisç real time, end of the day data, so that we know positions throughout our country so that regulators have the ability to know whether something is putting our country at systemic risk. what should we be concerned about from the standpoint of having this thing that sounds neat and costsw3 money -- how do

we prevent it from being something that is not that useful but is collecting a lot of data that id imagine takes place throughout the city that is not utilized. secondly, i would imagine that data out like that could be used for nefarious purposes if it got into the wrong hands. t(if we actually have it, what should be our concerns? >> with respect to your first question, i do think that the efforts of the group of academics and others who have been promoting the and i have -- nif have been very valuable in drawing attention to and moving the debate forward on the data

needs that we really do have. to underscore something that i said earlier, theç absence of data from the shadow banking system was certainly problematic system was certainly problematic in retrospect. some of the names that i saw on the list of participants in that

workshop were the names of scholars who have written on the substantive clauses of theok crisis -- causes of the crisis and the way in which adverse feedback groups began when things began to move into reverse. i think we need additional data sources. how to make suret( thatw3 every dollar ofç the governmental fus spent on this7s are spent most wisely and how to make sure that we do not demand private expenditures that are not going to useful purposes is the kind of question that we confront alç the timeç in any government regulatory or data collection effort. çi would say that that is where some of theç principles we suggested in my written testimony would be of some help.

keeping the regulatory and supervisoryç agencies closely çinvolved and as the prime movs of the data collection efforts will helpxd because we are goine first instance with achieving our statutory mission. forç us, that would be to consolidate the supervision of the largest financial holdings companies. that, i think, is one way to do it. the second way would be to make sure that there is some thought about new requirements coming forward. this is why we have the rules we have. maybe some of the paperwork reduction act features need to be changed. but there is a good reason why that act exists.

i think the council, if a council of regulators were created or the president's working group could formulize such an effort, i think it would be useful to have different agencies actually thinking about what new data sources may be important and having a debate to guard against any one going to far off field from its own regulatory mission. obviously, there are important interests -- prius sorry -- proprietary interests. we ought to continue to have those protections. it is also the case that our country wants to be protected from financial instability. my conclusion is that the efforts to identify potential

sources of financial stress and risk throughout the economy is not something that one or even a whole group of government agencies should be the sole actors. i think we'd do need to enable private analystsç and people wo have expertise but are not in the governmené uoçç lookçñriá is going on in the economy to offer it in their views to you, to us, and to the american people. çlet us filter through how much of that might be well-grounded and where we disagree. if we are going to do that, we have to get the death into a sufficiently at greatest form to protect proprietary information and to make sure that it is çuseful to someone out there wo is trying to do an analysis and

trying to have insight as to what is going on. >> thank you governor tarullo. iç also have to think the national academy of sciences. we had to convene that meeting. i am pleased it produced positive results. thank you very much. >> if i could just ask one more. >> why don't you go? >>i] a number of us have been lookingç at speed bumps -- ways for us not to be faced with resolution. if we had resolution, we want to insure that this whole notion of "too big toç fail" is not pt

of american's but vocabulary. w3xdw3the v2)sráy toç take unsd çdebt in an institution that is moving into problem areas and converting that immediately to common equity -- i know that is of little bit off topic. there is a lot happening. we are going on recess next week. i wondered if you might have some comments regarding that. >> actually, senator we have been paying a good deal of attention to that in the federal reserve. i got together a group to try to think through some of the potential options. let me first began with taxonomy. different people mean different things when they talk about convince -- contingent capital. there are a couple of different

concepts. one is a concept under which a firm would issue a specific kind of instrument, which wouldt( hae debt-like characteristics under normal circumstances, but by the terms of the instrument would itself have a conversion to equity when some traders event happens. the concept -- some trigger event happens. the concept behind that tends to be the following. there is a. behind -- there is a. where -- there is a time frame where the company appears to be healthy. if they go down to a certain level, there will be a lot of confidence with respect to that firm. if at that point, the trigger means that there areok certain

amounts of common equity in the firm, that might provide çreassurance and stop the slide down. i will come back to that in a moment. the second concept is really one that is as much about the insolvency of the firm. çsome have proposed that all forms of debt other than specified trudges of debt would at some moment, whicht( would hw would be the equivalent of being on the verge of solvency, convert to equity. thereby, it would help to move forward what would be a resolution process under another name. you have weigh less debt and more equity. -- you have way less debt and

more equity. the first has intrigued some bankers who see the opportunity to create new forms of investment the big issue there, and there are a number of other issues, but the biggest would be what is the trigger going to be? if the trigger is supervisory discretion, you probably have an issue because everyone will wonder whether the supervisor will pull a trigger or when he would pull the trigger. it would create a bit of uncertainty. a second option wouldç be that you have the trigger tied to the capital levels of a firm. that still has supervisory discretion,ç but it is in the context of(a!system. the problem there has been, as you know, capital tends to be a lagging indicator.

many firms close to their solvency -- close to their insolvency looked to be at a that probably would not do the trick. a third proposal wouldç be to have a market-based trader, a trader market-based trader -- market-based trader. that would be lagging assets. that is something that gets the market in as a trigger so that no one can manipulate it in anyway. the concern about that approach is that it can induce a death spiral in the firm where people begin trading against the certain level. çómy personal view isç backed l

three of these approaches -- is that all three of these approaches have significant problems. i, personally, have excluded full supervisory discretion as a real auction. i think it is worth pursuing the technical challenges. that is what we have asked our staff to do. to see if there is something here, which can be, and this is qimportant, which can be a less expensive form of capital for the banks. i do not want to create anything that costs moreç than common equity for the banks. if we can figure out a way to have a capital instrument which is their, -- which is there, but çcosts less than a common equity,ç i think 9(.j5ñ worth

qpursuing we -- . it isñr long winded, but i think you can tell we have been analyzed the. >> just one comment. i think senator corker has raised an interesting point. when push came to shove, all the varieties of risk-based capital were forgotten. and by overstating or misstating? -- am i over-stating or miss stating? >> during the crisis itself, private analysts who were operating on the basis of less- than-full information, and regulators both found themselves focused on common equity. some of the market guys called

it tangible common equity. basically, it was common equity. i think that what all of us, if we did not already believe it, and some of us did, concluded from this exercise that common equity needed to be and even more important component of the equity of financial firms going forward. the stress tests were conducted with the assumptioni] or under a set of standards that looked to the common equity levels as well as the traditional levels. i think, senator,ç that regulators are aroundç the word that we have talked toç come up market analysts and the financial institutions themselves have all converged around the proposition that

common equity really and truly is far and away the most of important component of regulatory capital. why? if it is adequate, it allows the firm to continue as an ongoing institution. there are some forms of capital , which will be available to protect the deposit insurance fund, but it will not keep the firm going on and on going basis. i did not think any of us to relish the thought of another goal round ofççok majorçó cri. ççwhen i say all of us, i do t just mean regulators. i think that is a market is imperative. >> thank you. we have a sidebar.

we do not need to continue it, but i think we need to spend some time thinking about the rules of capital going forward. twoç quick comments -- i do not want to trivialize this, but essentially, thist#@@@@ fed can and will do, or how good

a job of market regulation the fcc can and will do, the uncertainty around financial stability are always going to be significant because of problems arise in in new ways. i think it is important for us to foster within the government and outside the government the ability of multiple agents to make a judgment on this. i guess i think that this is something within the government that would be best pursued in a collegial fashion. if we are doing our analyses and the fcc is doing it and the treasury is doing it, bringing those together in discussion and determining whether there needs to be another analysis or initiative, seems to make sense.

what also makes sense is having a council have at least a small staff of people who are dedicated to looking at all of this and doing some analysis. i am all in favor of that. i am not all in favor of it in a sense that we would not oppose it. i think it is an affirmative good. >> thank you very much. w3we need to move on with the subject at hand. çi would like you to respond in writing regarding how, going back to the capital we're talkingç about, using a quartey stress test. i know we do not have time for that today. we thank you so much. ifbçbçbçbçbçbçbçbçbçbçbçbñbñww >> thank you, a gentleman.

let me introduce a first, dr. mendelowitz. he is the co-founder of the committee to establish an institute of finance and a former chairman of federal housing. thank you for your assistance. çour next witness is professor

john liechty. çhe is the associate professor at the smeal college of business. çthank you very much, professo. we are also joined by professor robert engle. he is from the new york university stern school of business. he was awarded a nobel prize for economics in 2003. finally, our final witness is stephen horne. mr. horn is currently the vice- president for master data management for the dow jones business and relationship intelligence. he specializes in data integration from thousands of sources in the improvement of

market productivity. thank you, stephen. dr. mendelowitz, please. >> thank you, mr. chairman, thank you senator corker. i am pleased to be here today to bring the recommendations of my committee. the committee to establish a national institute of finance is an extraordinarily unique group based on my 2.5 decades of experience in washington. i have never actually seen anything like it. it is a committee that has raised no money. it is a committee that represents no vested interest. it is a committee where no single member has any personal financial interest in the outcome of all recommendations. it is a committee where we have

covered our expenses. we did not get the tax benefits of those expenditures. it is a group of extraordinarily talented, and in many cases, very distinguished members all brought together by the commonly shared view that the federal government lacks the data and research capabilities to effectively monitor and regulate systemic risk, and for that matter, to effectively monitor and regulate financial institutions and markets. we have come together to propose a solution to debt and equities -- inadequacy. the exhibition is the national institute of finance. -- that solution is the national institute of finance. i cannot stress the importance

of the research and analytical capability enough. a lot of time was spent with the earlier panel discussing data. there was far less mention of the analytical capability. the reality is we do not have a particularly good understanding of how financial markets work, because we have never had sustained research that would yield those insights. despite the fact that there are research departments at large financial institutions and talented researchers in academia,ç but at the end of te day, but never had access to do the kind of works that would provide the analytical tools needed by regulators given the challenges that we face today. that is why in our proposal we have two key components. one is a federal data center and the second is a data and

resource analysis center. we think the structure and institute should be set up in a way that ensures it can play a key role. it wouldt( be an independent agency, ideally. it would be an independent voice on issues of financial risk, regulation and policy. it would be independent for several reasons. one, hopefully it would be free from political influence. secondly, it would be free from having to investigate its own decisions and actions. as long as it is not a regulatory agency, it is untainted by the fact that if it was investigating itself it would be given an impossible task if you are looking for high quality assessments of what is going on. thirdly, it would be self- funded. that would be for fairness. it is our understanding based on the research that we've seen and the discussions that we have

held that adopting standards would produce a significant operating cost on the part of financial institutions because they would get this benefit. it is only fair that some such share -- is only fair that some such share would be used to fund the entity. given the burden on the tax payer, it is not appropriate that the taxpayer should be asked to pay for the monitoring of an industry that has already imposed a tremendous burden on taxpayers. there is a benefit to being able to attract staff that would make it more competitive. all of this is critical, and it would yield multiple benefits. it would yield substantial benefits in terms of improving the efficiency and effectiveness of a natural regulation. çit would reduce the likelihood

of a future systemic event. it would make markets safer and more competitive. it would reduce operating costs of financial institutions. the kind of data that would be required would go along addressing one of the problems that governor tarullo mentioned when he commented to find out that he was surprised that financial institutions did not have a good handle on what their exposures were. they did not have access to that kind of data. lastly, i want to say how pleased we are but senator reid introduced the national institute of finance act of 2010. that act is structured in a way that creates a system that would be effected. we are very appreciative to see that legislative measure. that concludes my oral comments, and i would be have to answer

any questions you might have. >> thank you. professor liechty. >> thank you, mr. chairman. i will proceed on the behalf of the committee to established the national institute of finance. we started one year ago. as an academic and professional statistician, i was very interested in a workshop that explored issues in financial risk and bank regulation. i consulted some of the big investment banks, specifically helping them with issues related to the value in credit derivative securities, which played a part in the crisis. i would --ç i was hoping the workshop will focus on systemic risk. it was primarily focused on assessing the safety and çsoundness of financial institutions. çthat focus is important, but

that in and of itself would not insure the safety of our financial system. rçin some ways, it is like insuring the groups of automobiles going around a racetrack are safe and sound, but ignoring things like whether or not the cars are bunched together. because there was a broad collection of regulators, academics and practitioners, i asked a very simple question in my mind. does anyone have the data necessary to monitor necessary suspect risk? the answer was the same that i heard over and over again. the irregulars to not have the correct data. in addition, to get the data they need it would require additional legislation i've spent the bulk of my professional career designing

systems to go from bad to information. collecting data is not enough. we need the couple it analytic tools if when to turn that data into useful information. we have to monitor a systemic risk. it would take more than data collection and more than just building models themselves. in my view, this is a fundamental scientific problem. we applaud for fundamental research efforts in order to understand the framework to be able to frame the methods, get the models in place, and what we need. i echo the sentiment that we do not know all of the data and we will not know until weçó have a process. it is fundamental. [8gñbut meç illustrate with an analysis from the weather. it is very appropriate given the last couple of days. this focuses on hurricanes. when the financial crisis of

2008 hit, the regulators and policy makers were taken by surprise. although there were some indications, this financial storm hit with the same xdunexpected suddenness of the w england hurricane of 1938. theç mark the vineyard gazette noted at that time that this ç was the[[ç destruction of summer for an entire generation. çearlier hurricanes have brougt such things to the government. even though the weather bureau is in place, it was not able to offer any warring -- any warning that had texas in 1900. it on the offered a few hours of warnings that hit -- for the hurricanes that hit miami. those that had better models

have better data, but as the " new york times" noted, they never saw it coming. i would ask our policy makers to be more equipped today. in@@éx gçb .

clearly, our financial markets are at least as important and complicated as the weather. if that is the case, why do we not have the equivalent of no law for the financial markets? -- of noah for the financial markets. this concludes my oral remarks. i would be open to any questions. >> thank you, professor. professor engle, please. >> thank you. it is a great pleasure to be here today. i appreciate the invitation from the committee. mr. chairman, mr. courter, mr. reed, it is a pleasure to be here. i recently co-authored a report that summarized a workshop of

technical capabilities needed. this research council is the operating arm of the national academy of sciences, the national academy of engineering, the institute of medicine, all chartered by congress to advise the government on matters of science and technology. the workshop and its report was sponsored by the sloan foundation and were actually in response to a letter from senator reid. before i summarize the report, i would like to give you some personal opinions on the national institute of finance and the questions that were in that call. our one-day workshop came to the following set of conclusions, i think. first of all, we're all convinced that with better data and analyticalu! tools, the problems of reducingñr systemic risk were actually solvable.

okthe research necessary to accomplish this goal is already underway in bothç academic and regulatory settings. it is now being carried out with purely market-based data, and therefore does not have access to the full range of information that would be needed to make these models as accurate as possible. additional data collection across asset classes with counter-party position collateral information would be extremely helpful. nevertheless, it was clear at the meeting and that many participants were unsure of exactly what data would ultimately be needed. there is an important question that keeps coming up -- çwhethr

the total range of everything that you can think of is required and how would you select the subset of data that is really needed? the first step in this process would be the standardization and classification, particularly of contracts, and this would be a substantial benefit to the industry as well as to the regulators if this could be accomplished. it is one of the goals. even more important, as dr. mendelowitz said just a moment ago, than the data, are the models. the debt alone will not tell us about risk, liquidity, bubbles, and other figures that are necessary in order to understand the risks that face our financial system. the analysis is extremely important as well.

that concludes my brief summary of the meeting the national research council had. the full summary i would ask to be attached to the record. let me say a few other things. data gathered by supervisory agencies is already being used in attempts to try to calculate and evaluate systemic risk. this data, however, is often available on an as-asked basis. in other words, it does not flow regularly. they need to request it from the agency's they supervise. -- agencies they supervise. this gives them a partial picture, in any case.

this is available to regulators, but again, they cannot get this on a regular basis and there is difficulty sharing it across regulators. the same is true about reports. they are reported by financial institutions on a daily basis, but these reports assess the risk of the firm, and not the risk of the system. thus, they do not have important kinds of counter-party information that we would really want to understand across the system. in summary, regulators do have a substantial amount of information available, but it is not on a systematic basis, and it cannot easily be shared across regulatory agencies. let mexd make just a couple of more points on more general

topics. it seems to me there is a question of the independence of the national institute of finance. i am a supporter of the proposal for the national institute of finance. the idea that it is an independent organization is important because it needs to be insulated from pressures from corporations and government, however this independence could also be achieved if it were house, i believe, within a regulatory agency that is already independent in that same sense. there could be substantial cross-savings from such a location. the international effects of this are extremely important. the location of the national institute of finance would necessarily -- it would be very

important that it be able to collaborate and share data and analytical tools with sister agencies around the globe. otherwise, we only see a partial picture of the financial system. one final comment -- the security of the debt is extremely important to preserve, but i think that an ultimate goal would be to make as much of this data in a delayed and aggravated form available to the public as quickly as possible. transparency is a great supplement to regulation. it is cheaper and it may be more effective in many ways than much of the regulation that we consider. an ultimate goal of the national

institute of finance would be to disseminate as much misinformation as possible and that would require congressional guidance. >> thank you, very muchç -- thk you very much, professor on go -- professor engle. >> thank you. my name is stephen horne. i spent over 30 years building complex databases and making data into usable information. i've testified on the impact of the financial meltdown and the needç for systems designed to capture the opera. real time information -- to capture appropriate real time information. legislation that would recruit -- legislation that would create such a data base has been

introduced by senator warner. it passed the house by a vote of 421 to nothing. using the same basic infrastructure of the data base that would be created under the legislationw3 that içó describe at dow jones have identified over 400 leading indicators that when used together identified a potential systemic risk. also, i want to add many other parts of the economy,ç whichç expands upon what our presenters have presented. they would be able to make are caused by a variety of factors. for example, in las vegas, a

huge influx sociologist of groups worked into thei+zç regin moved into the market. ççone of these groups is reti. these americans were living on fixed incomes, savings, and their social security. but retirement homes. they still incurred new debt. the income from retirement accounts went negative. it had to dip into principles. as foreclosuresç grew around them, the value of the homes decreased. those who have mortgages are now upside-down. those have see -- some have seen a lifetime ofç savings dwindle. with a major portion of their principal gone, they cannot afford to live on their fixed income and may have to go back to work.

they owned their own home. new mortgages are very difficult. reverse mortgages are not an option because of the reduced availability of these programs. the combination of these factors shows that the market of retirees yen las vegas is a systemic failure i am expanding on the concept of systemic failure to talk about the markets as well as the systems that supports those markets. the example of this process -- if we can indicate -- if we can implement this data into a data base, we can implement surgical solutions that would apply the appropriate solutions to the most serious problems. databases applied to the potential systemic failure of the real-estate market was issued just days ago. we are currently observing markets in north carolina and

tennessee that are at risk. if the proposed agency was in place, the government would be able to tackle these problems proactively. unfortunately, the data cannot talk to each other. the value and is in the ability to provide and analyze this data. the transformation of this data is neither easy nor expensive, however it will save significant taxpayer dollar. it will make more efficient the targeting of resources. it would serve the greatest need. it would enable the government to ensure that the appropriate actions were taken before systemic failure occurs. it would help prevent waste and fraud with taxpayer puts the money. -- with taxpayer money. the use of commercial data is sufficient to protect as a

commission. in addition, the language included in the legislation provides a greater protections. the system being proposed is designed to expand to cover global data. some of the debt overseas may not be acceptable -- accessible. other data is in better shape than our own and could be built into systems. in summary, the data technology exists to equip regulators with the tools necessary to monitor a systemic risk. the only thing lacking is government action to make it happen. i want to thank you again senator reid, senator corker. i have to answer any questions you might have. >> thank you. thank you all. let me begin with the comments he made, dr. mendelowitz. it is very difficult to review obiv