@ happening. how much does citi lend to u.s. enterprises for u.s. operations? >> our total loans outstanding for all u.s. businesses about $450 billion. >> can i shrink that up? it's not all u.s. businesses.

the question i at least wanted to ask about is u.s. enterprises for u.s. operations, jobs in america. >> i think the number is $450 billion lent in the u.s. >> can you divide that into how much do you lend to businesses that don't have any foreign operations? >> madame chair, i can't do that but i can get back to you. >> okay, that's fair. so can i ask one other thing about just the lending that you do. what will lending and other transactions has citi participated in involving the government of greece? >> we do business with a lot of sovereign countries who need our global expertise, including come together u.s. markets and so i know we've been doing business with greece but i don't have the details with me. >> do you know how much debt the government of greece, debt from the government of greece that citi holds? >> i don't know the exact number but i know it's not a large amount. not a meaningful amount in our

entire operation. >> okay. not a meaningful amount. that's fine. mr. atkins? >> thank you, madame chair. thank you very much, mr. pandit, for being here today. it's a pleasure to have you take time out from your busy schedule to be here. i asked this of assistant secretary allison last time. but so i want to explore it with you and this has to do with the offering back in december. it seems that the timing and experience that particular offering is something we'd like not to repeat and obviously the taxpayer now is the largest single shareholder of city bank. so as an executive with a background in equity markets and experience with the capital markets i was wondering if you could share with us your reflections on how the treasury department should think about monetizing its position in city bank common stock. going forward here. >> mr. atkins, of course, that's

the treasury's decision in terms of how they want to do it. we do know that they'll be able to sell stock after march 16th, and they've announced publicly they do want to sell stock over the next 12 months or so. and there are lots of different methodologists of doing it right from selling it in the market everyday but also we believe there's substantial demand for this stock. it is not a secret that the government wants to sell. it's not a secret that the stock price in the markets today are reflecting the fact that they're a seller in a large amount, and that we believe there are investors here in the u.s. who are getting ready for that offering as to how they do it, when they do it, with whom they do it, those are all the treasury's decisions. >> when you look back at the offering in december then, clearly it was a primary offer ang then trying to be coordinated with a potential large secondary offering there by the government. so as far as the interests goes

in the marketplace, was there a large cover ratio for that offering at the time, or what exactly was the problem that we saw in december? >> mr. atkins thanks the largest common stock offering ever done in the u.s. >> right. >> and particularly when you consider that as the percentage of citi's common stock outstanding, it was extremely large. don't forget, that was done in the face of the market knowing the government was going to sell its 27% in the not too distant future. so they had a choice, do i buy now, later. those are all the backgrounds. it was late in the year in doing that offering and by the way, when we did that offering, unfortunately, another bank decided they wanted to do a large offering right in the middle what have we were doing. but we got it done as the largest offer ang we were able to pay back the taxpayers and we were able to exit the guarantee program. i consider that to be a success. >> okay. well then now looking forward to you have a stock price of about

$3 a share or so, which of course, puts it in a special zone as far as some institutions and the way the market views it. what do you all have as far as plans to address that price of the stock in relation to the huge amount, i mean, are you now the, i guess have the largest number of shares outstanding of any new york stock exchange listed company. >> and therefore, we're also the most traded stock. on many days in the new york stock exchange. by the way, the stock last i came in was $3.44. >> sorry. >> and so, i think at the end of the day, stock prices are important. but what's really important is performance. what do you earn? sustained profitability, which is really what i'm focused on. my biggest job is to make sure we make money on a sustained basis and therefore, help the government make money. >> well, in your testimony, you mention that had you've sold out of citi holdings after having

restructured your firm viewing those as the noncore businesses, about 30-some odd businesses. i think it will said more than 20 in your 10 k. so i was wondering, how did you all decide as far as you know, what is core versus what's not core? >> and that was job number one for me coming into citi looking at the businesses trying to figure out what business are we in, what clients do we serve. what are we good at. you put all those things together, it turned out at the end of the day, we are a great bank that is basically in the business of helping people manage their accounts, providing them loans, providing them capital. providing them investment services and it became very clear that we were in a lot of businesses that were not directly related to being a bank. and so the fundamental decision that i made is that we're going to be a bank. we're going to be the global

bank for america's companies. serving them here but also wherever they want to go. but not only for companies but the same capability should be available to individuals, as well. so that's the decision we made. and on the basis of that, it became very clear what was not core. it was a large part of the company and that's what i've been selling very systematically over the last two years. >> my time's up. thank you. >> mr. silvers? >> yes, thank you, chair. again, mr. pandit, i want to commend you for being here and express my appreciation both for your presence and your testimony. you said a moment or so ago that in trying to focus on what citigroup is good at, that you viewed sort of a return to core banking as the primary direction you were headed. and you mentioned some numbers about loans. i have here the report i'm sure

you're familiar with from standard & poors from last month that shows, and the numbers don't match so i wondered if you coax plain it to me, that shows that commercial and corporate loans by citigroup have fallen dramatically over the last two years. from a level of according to s&p $206 billion at the year end 2007 t$2007 to $127 billion tod. or end of third quarter i believe, 2009. i don't think they had the fourth quarter numbers at that time. in view of the of my understanding that your divestitures have largely been unrelated to commercial loans, can you explain to me what's happening here? >> sure, mr. silvers. when we decide what was core, what's not, there were also assets that were part of what was not core to us, as well. there were either clients that we shouldn't be serving or they didn't need us or they were

businesses that were not core to us. they were assets that were gathered through core businesses. and so those numbers reflect selling businesses that are not core to us. selling assets that were not core to us. taking any marks on assets that were not core to us. let me reassure you, as well. >> mr. pandit, i don't understand how you can reconcile that will type -- the scale of that retreat from business lending which is after all in, my view, just absolutely central to whether or not t.a.r.p. is succeeding. the scale that have retreat from business lending with your characterization of a refocusing on core banking, because i look at other numbers, i don't see that type of retreat from other types of activity other than obviously things that you're totally divesting from. >> let me assure you, we will make any good loan that we see to a client. the regulators want us to make prudent loans. we are doing that.

some of those were leveraged loans part of practices we shouldn't have been part of. they're not part of the banking mission. so it's very easy to look at those numbers and thing that they actually represent our lending appetite or our appetite to serve client but that isn't so. that many reflects the narrowing and focusing of our businesses to what we should be as a bank. >> well, second question about this type of issue. in the area of commercial real estate, which has been a concern of this panel, again, my survey of the data suggests a kind of flat line in terms of the total assets in commercial real estate in the -- at the holding company level portfolio of around $75 billion, $80 billion. my question about that is that i wonder, have you taken any write-downs in commercial real estate and how do i understand this flat level in the -- and are we -- are write-downs

coming? >> number of things. one, a lot of that portfolio is mark to market. we have taken write-downs. much of that portfolio is community lending, and that's money good, as well. there are some accrual loans that we've made, and those loans are well reviewed against. let me also say that most of our loans are for office buildings against leases and some of the major metropolitan areas so that's a very well-scrubbed over portfolio. i'll make one more point on this, which is that that's less of an issue for citi. >> uh-huh. can i then turn to another question about your core strategy and i think my time will then expire. as i understand it, correct me if i'm wrong, you've been telling the world that are you going to be focused in addition to what might be described as really old fashioned banking in two other areas that you're going to continue to have a significant capital markets desk with a broad exposure to global markets, derivatives currentscies and the like and

that you're going to be continuing to focus on your global transaction services business. which has been the sort of consistent profit driver over the last year. am i reading back to you correctly? >> that's correct, mr. silvers. >> okay. we've heard, i think, a fair amount about the extent to which the gts business makes citi particularly systemically significant. it's my understanding from press accounts that this was a core argument citi made to the government during november of 2008, that citi could not be allowed to fail because of the importance that have business to the global capital markets. my question to you is, can you justify having that business connected to the type of capital markets desk you intend to keep connecting it to in light of what appears to be taking something so systematically important and then tying it to something so relatively risky? >> let me start by saying i don't recall making that statement to anybody, nor do i recall anybody who directly

works for me making that statement. >> well, which statement, sir? >> the statement you said about sorry, about the fact that this was the argument we made to the government about systemic safety. >> okay, let me ask you this. would you commit here that as long as you're at citigroup, that you will not come to the government in the future and make the argument that the gts business requires being bailed out? should your other businesses go south? >> yes. >> let me commend you for giving me a straight answer. it's a rare experience in my role. >> i think that's why we're here, mr. silvers for straight answers. i want you to hear from me what you're doing at citi and why we're doing the right things both for the country but also for our shareholder. >> but if my colleagues will indulge me, please explain nonetheless how those two businesses are compatible in your view. >> we do business for coke and pepsi. coke is in 250 countries around

the world. they need to manage their operations. we do everything for them from cash management to custody, to clearing settling for them. they need foreign exchange management. they need liability management. they need interest rate management. so we have to have those operations to be them in that particular way. the shift that i made was to make sure that our trading operations and our cash management operations and all our banking operations are geared towards doing those things that our clients need. and, by the way, if you do that correctly, having been in the business for as long as i have, those are the kind of businesses that generate good value for clients without creating the risk that has been created in the system historically. >> my time is way over. thank you. >> my goodness. i apologize. mr. mcwaters? >> thank you. and thank you mr. pandit for

appearing today. do you have any reason to anticipate citi group will need additional t.a.r.p. funds? >> no. >> on a fair market basiss@@@@@$

what happened? what went wrong? >> mr. mcwaters, we came into this market -- city came into this market with assets on which it took substantial losses in 2008. now, we addressed that by raising $48 billion of capital in the market in early 2008. we sold another set of businesses, raised $10 billion in capital and we got $25 billion from the government in the first t.a.r.p. round. the result of all that was we had 10.7% tier one, and at the same time we had reduced our assets, reduced risks. fundamentally we were in the right place, and in any rational market that would be a solid balance sheet for the future. but we. >> reporter: not in a rational market. post lehman brothers, post

wachovia breakup, the capital markets froze. there was a general sechx of concern about where the employees might go, where unemployment might go and different stocks at different banks started reacting to that. our stocks started going down in late 2008. so on that friday in late november, our stock was at $3.37. now, in a market of that sort, unfortunately sometimes stock prices can have an impact on confidence on all sorts of stakeholders that are out there. and rather than taking the risk, as we talked to the federal reserve, as we talked to the treasury, the view was let's take that issue off the table. that's what happened. >> okay. what actions have you taken to negate your status as too big to fail? can we get to a point realistically where, if this happens again, citi is simply

broken up, sold off or recan'tized by the private sector without government intervention? >> we have taken a number of steps, mr. mcwatters. first, it starts with capital. we have a strong capital base, very strong liquidity, very strong reserves. that's the starting point. the second part is create earnings which is why we took $13 billion of cost out of there. the third part of that is change your risk profile. we've done that. we still have legacy assets. citi came in with a group of as sets into this virlt. we have changed that as well. liquidity on the ground, we work with our global regulators. so we made significant changes in the financial health of the company. we've made significant changes in the risk management of the company. but we've also targeted the company towards those businesses that help clients and really don't necessarily create the risk that has been created in

the past. let me also say i do think we need regulation which is what -- why i said in my opening statement let's get to that resolution authority so that this never happens again. >> okay. one more quick question. you are a veteran of the capital purchase program. what advice can you give for how that program can be improved? it's on going. i mean there's money out the door, not every institution has repaid t.a.r.p. funds. how can it be improved? >> the t.a.r.p. funds were, from what i understand, put in place. a lot of the reason was to inject capital into the banks, not only so they could lend and they could do the right things for the american people. but it was to create a sense of confidence, so we took the confidence in the financial system off the table. that was the point on that. for those people who still have

t.a.r.p. funds, i don't have any other advice but to say that step in and make sure that you manage your business to take the costs out that you need to manage it as of efficiently as possible and start creating a story and a business model that can translate into earnings, because that's the best way in which the capital markets can give you equity which you can then use to repay the government. >> thank you. >> thank you mr. mcwattes. superintendent niemann? >> thank you. if you were here and i believe you were in the back when i was questioning mr. allison, i highlighted that the mortgage crisis really gave rise to the financial crisis. for that reason i was very pleased to see in your written testimony as well as in your oral testimony, you referenced your efforts toward foreclosure mitigation and in your written testimony highlighted the fact that citi has the highest percentage of eligible loans in

active modification, mortgage modifications, at 50% trial and permanent as a percentage of eligible mortgages. though you can be applauded for that outreach effort, i think a more important metric is the actual conversion of trial mods to permanent, sustainable mortgages. i believe the last report from treasury has 110,000 of mortgages that are in active trial mods. with the extension of treasury through january 31, we are now awaiting results from all institutions, but i think anxiously awaiting your results as well as to how those individuals were treated. i think the important part is these are individuals who had been willing and able to make these reduced payments and are awaiting final determination. we know that there have been problems at servicers. we know that there are problems

in the appeal process. so can you give us any information about what we may expect to see in the decisioning with respect to those trial mod sns. >> mr. newman, i completely agree with you that attacking the issue of housing is important for the economy, but particularly for our customers and clients as well. we, as the assistant secretary one, we're number one in active modification right now. right now the ratio of completions is about 18% of that. we think that number is going to go up do 40% maybe pretty soon. that's where we think it's going to go. not everybody who has gotten into that program is necessarily going to qualify because they may not have the documentation, they may not have the information that's necessary to do that which is why what we've done is create a citi modification plan on the other side f. you don't qualify and don't have any standard, we still have modification programs and plans available for these

people who are going through this particular change. >> do you see documentation? this has been an issue i've heard from other servicers. partly it's concerns on the resources and process of the servi servicers losing documentation. we've heard instances of borrowers reluctant or producing wrong documentation. i'm also very concerned that the treasury has not given enough discretion to servicers and lenders to make that decision. have you found that or would make any recommendations in changes in the ham documentation process. >> let me say the treasury has made changes, positive changes that will have a positive impact on modifications as well. let me also say we have 4,000 people that are doing this for us. i've hired 1400 people in the last year to make sure we can help people get through these documentation issues. these are case by case issues. >> do you -- in your modification process are you

utilizing principle reductions? could you share the percentage of modification that is use principle reductions? >> so the number one goal to us to keep people in their homes is to make those homes affordable. we've got to do that. >> you can do that through a combination of interest and extensions or principle reductions. >> absolutely. interest rates, extensions of mortgages, delaying amortizizations of mortgages. >> would you agree decreasing the principle would reduce the default rate, keeping more skin in the game for the borrower? have you experienced that coming down to the same affordable payment but include principle reduction, and not just interest reduction has long-term benefit. >> what we've found is the most important thing that's driving redefault is unemployment rates. >> i agree with you on that. >> last year is not necessarily an indicator of redefault going

forward. >> one more question before my time expires on this subject is the issue of second liens. this has been a real disincentive we're hearing from lenders on making particularly principle reductions. only one institution, and it was not yours, has signed on for the treasury's second lien program. can you share with us whether you intend to join that program. >> first let me tell you we're modifying second liens actively. we've been part of the fdic program, part of our own programs to do exactly what you want. we said to the treasury that we're willing to work with them as to what this program is, we have just seen the details. i think it's prudent for us to go through that before we sign on. >> it's been out for a while. i hope it is a positive response and we'll keep track of that, thank you. my time has expired. >> mr. pandit, you started your testimony by saying citi is a fundamentally different company from the company of two years ago. but nonetheless, citi continues

to pose significant systemic risk. in fact, citi is often cited as the poster child for too big to fail. citi is this combination of commercial bank, investment bank and insurance bank for which glass steagall had to be repealed so you could follow your business model. i understand your response to mr. mcwatters was that we are dealing with the problem of systemic risk in too big to fail by making citi a stronger company. there may be those who agree. there may be those who disagree. i want to focus on a different part. instead of that, why don't you concentrate on breaking citi into more pieces so that no one piece is too big to fail? why not break it up? the markets are calm. this can be done in an orderly fashion, not in ice sis. your shareholders won't get all the value. you won't have as big a company to run. you will at least reduce systemic risk.

>> we have the same objective. shareholder value is very important. we are doing that. we're selling 40% of the company. we're breaking it up. that's a huge piece. we're not an insurance bank anymore at all. we are primarily in the commercial, corporate banking, individual banking businesses and the businesses of providing those account management and trading services our clients need. we're only as big as what is required to serve our clients in a competitive market. that's really important. but i completely agree with you that we -- no other institution should be in a place where we get to a too big to fail situation, and there are two ways of going at it. one, make sure these banks are strong. because there are going to be a handful of systemically important institutions. sometimes size is important, sometimes just what they do is important. for that you need a strong risk regulator that prescribes

capital requirements, stress tests, liquidity requirements. let's make sure we game out every scenario and make sure we put these institutions through that test. that's really important. by the way, sometimes things do go wrong. so let's have a resolution authority. and we urge the congress to act fast on these. >> thank you, mr. pandit. i want to make sure i understand your response. when john reid who built citi says he now believes it should be broken up, you're saying yes, that's what i'm doing? >> what i'm saying -- first of all, i've got to go back and see what i said. i've been busy managing the company. i've been managing the company with the same objective which is what is the company that best serves our clients, what business am i in? i have been selling pieces of the company and breaking it up to say this is my core business. that core business is the busy think is going to create the maximum value for our shareholders and, therefore, the government. >> thank you very much.

if i could ask another question taking you back to september of 2008. you wrote a letter to your colleaguesality city group in which you said our capital and liquidity positions are strong and we have tremendous capacity to make commitments to our clients. we all know that within a matter of weeks that citi and eight other large financial institutions were taking tens of billions of dollars under t.a.r.p. but the question i have -- i understand markets reverse. i understand there are those who believe that this crisis was not obvious in advance. the part i'm still trying to understand is the second hard bump for citi. when the secretary of the treasury announced on october 15th, in effect, you were healthy, mr. allison says he doesn't know if you were healthy or not. but by the time we come out four

weeks, it's clear@@@@ additional $20 billion after having been pronounced healthy. >> madam chair, the capital markets looked at every financial insitution and for a period of time went after the stock prices of every financial institution.

that happened to us, too. our stock price started dropping. on that friday when it hit $3.37, the issue was not the fundamentals as much as would that create an issue of confidence not only in citi but all the other financial markets. >> but why citi? citi was the target and the only one that took the money? >> and we weren't the last one necessarily either. so the -- we weren't the fast. we weren't the last. different banks, different institutions got their own some. some broker dealers became bank holding companies overnight. >> but none of the original nine needed money within weeks of the original t.a.r.p. infusion. you got $25 billion. someone said -- the treasury -- secretary of the treasury said you were financially healthy, and within weeks you needed another $20 billion. i just want to understand why citi is special. >> again, what i would say to you is that you're right, this

was not a fundamental situation. it was not about the capital we had, not about the funding we had at that time. with the stock price where it was -- by the way, a lot of that was driven by short sellers. short sellers started selling stocks, the stocks started going down. when it gets to that point, perception becomes reality. that's exactly why it was important for all of us to take that issue off the table and the package that we got was a package that the federal reserve and the treasury and all the regulators thought was the right package to ensure that confidence. >> this is a not citi was special, just citi had bad luck? >> you know, i don't mind being special and i think we were in the sense that we came in -- sit ti came into this market with assets on which we took a lot of losses. in this particular case the market dynamics were really important and that caused us to get to this point. >> thank you, mr. pandit, i

apologize to my fellow panelists for running over. mr. atkins? >> thank you. i wanted to explore a little bit citi group's relationships with the government and with its major shareholder. to what extent -- we ex-plord this a little bit with assistant secretary allison. to what extent is treasury in contact with either your office or other parts of citigroup on a daily, weekly, monthly, periodic basis? >> treasury is a very critical shareholder, a very important share older for us. we do what we can to reach out to them like we reach out to a number of our shareholders as well. and we have those conversations with them at a variety of different levels in the company. they as a shareholder have every right to call us and ask for the same public information every other shareholders gets. we do that all the time. >> do they get any special information? >> mr. atkins, as you know,

under secures laws, given the fact that they have to sell stocks, there are limitations on what we could tell them. >> you know where i was going. all right. so as far as the levels within treasury, you're saying it's at various levels within that -- >> we are completely open on whatever information they want whenever they want, the same information that would be available to any other shareholders. >> now, it's been reported that citi bank or citi group has the largest lobbying budget of any financial services firm in washington. so i was wondering, as far as your activities on the hill and with the white house and your obvious support for, it sounds like, a number of the administration's proposals, how are you spending your lobbying dollars in washington? >> i can't comment on where that budget is or not versus anybody

else. let me just tell you that we do have points of view on financial reform. we have points of view on global markets, and we believe it's important to get those points of view across to lawmakers and congressmen and/or people who are interested in our perspective as well, and we do it. but this is an effort that's driven by what we think is right for the financial system. i think it's the right thing for us to express our points of view. >> well, do you agree with the so-called fol kerr rules where apparently they've sent formal language up to the hill today? >> i haven't seen the language, so i can't comment on the details. but as a company we've sold a lot of proprietary trading businesses, sold a lot of hedge funds, sold a lot of private equity funds and we're completely focused on clients.

i do think banks should be banks. so now we're moving in that direction. >> i made this point a little bit earlier. when it comes to system risks, the fol kerr rule, mortgage, contractual forbearance, how do you protect them against a sort of sit fan tick appearance where we have government motors and allied bank and now maybe government banked. i mentioned when i was in a citi bank branch at every television station there was a barack obama authored book and they were giving it away to new accounts, people who opened new accounts. how do you protect against that? >> first of all, i can't speak for my branch manager who wanted to do that. that's their decision. that's not my decision. i don't make those decisions. but let me say, this is a tough position for me. if i say what happened i believe and it happens to be in line

with what somebody else believes in the administration, it looks like i'm doing this because the trez i have a 27% shareholder. there's no a no win situation. i believe these things. why i'm telling you these are the right things to do. by the way, who better to share with you a systemic perspective other than a ceo who has gone through a very interesting two years. >> i agree. going back to your experience in the capital markets, what is now your strategy with respect to your brokerage operations, if you think an ideal like the fol kerr rule is good, gotten rid of smith barney now. you have compensation that might really harm your investment banking business. going forward, how do you perceive that? >> what do we do? we commit capital on behalf of our clients. that's number one. number twro, we make markets and provide liquidity to the

markets. number three, we use capital markets instruments to hedge our risk occasionally. number four, we do use our capital occasionally to create new ideas and new products and test them before we take them to our clients. those are the activities we're involved in in our brokerage businesses. again, when you look at that time full gamut of them, the maximum value to our clients comes from performing those functions which, by the way, translates into maximum value for our shareholder. >> would you take a short position contrary to one of your client's positions? >> this is a hypothetical question. >> just in general. >> mr. adkins, you know what it means to make markets, you to be a principal agent to make markets. i would do what is the right way to manage a book on that basis, but i'm not -- if the question is am i going to use some information, the answer is no. >> okay. i was just getting to -- so

proprietary trading and other things are still an integral part of your view of how you think your business should be run on the institutional side. >> let me be very clear. we have to commit capital on behalf of clients. that's what banks do. we have to make markets. that's really -- that's what banks do and credit as an example. we have to do these things. proprietary trading is when you have people who actually don't interact with clients and they are actually covered as a client by other people on the street. they treat treat them as a client when you're using the company's capital. i don't believe banks should use capital to speculate that way. >> i agree. thank you. that's the rub that is the definitional aspect of that. perfect. thank you very much. >> mr. silvers? >> mr. pandit, this may seem repetitive. i'm afraid i can't resist this. in october of 2008, say october 1st, was citi group a healthy

financial institution? yes or no? >> yes. >> on november 21st, 2008, was citigroup a healthy financial institution? yes or no? >> yes. >> why do you think that mr. allison was so unable to answer those questions? >> you'll have to ask mr. allison. >> you know, clarity is one thing, mr. pandit. credibility is something entirely different. i think you've given clear answers, but i don't believe you've given credible ones, frankly. i think it's easy to give those answers having weathered the storm with the public's money. now, let me ask you this: did you speak to anyone in the treasury department during the week from november 18th to november 25th, 2008? >> mr. silvers, let me first say

that i appreciate -- >> i'm asking you to answer that question. did you speak to anyone in the treasury department during that week? >> i don't recall if i did. >> you don't recall? >> i don't recall if i did. >> did anyone in citi group to your knowledge speak to anyone in the treasury department during that week? i remind you a few moments ago that you stated, quote, we, some we agreed it would be a good idea to back up citi group during that week. who is we? >> that was over the weekend, the federal reserve and the regulators talked to us, and we also had conversations with the treasury and other regulators. >> who is the we? what human being spoke to what human being? >> at that point in time there were numerous conversations between the people at the new york fed, people in the washington fed. >> did you open that conversation by saying we're a healthy bank and we're calling you because we would just enjoy having another $20 billion of

government money are and a $300 billion asset guarantee. how did the conversation go? >> the conversation was very simple. the stock price was at $3.37 which was an exceptionally low level of stock at that point. it was as a result of short selling, and it was at a point in time where the stock itself could have caused an issue of confidence and, therefore, the conversations were around how do you restore confidence. >> what did you represent would have occurred had treasury and the fed declined to act? did you represent anything in particular might happen? >> you know, i did not -- i do not recall any conversations where i represented anything. these were issues about what would happen -- what other risks would happen. >> did anyone who was representing citi group speak to anyone, to your knowledge speak to anyone in the treasury or the fed about what would happen if there wasn't additional aid forth come sng. >> not to my recollection.

>> what is your knowledge as to who spoke to either treasury or the fed on behalf of citigroup during that period? >> i can get back to you. >> mr. pandit, do i recall correctly that you were the chief executive officer of citigroup during that week? >> yes, i was. >> i find it rather difficult to believe that someone in your position cannot recall who you spoke to or who spoke on your behalf to the government of the united states about the extraordinary aid that the government provided to citigroup during that period? your memory seems pretty good otherwise. >> i want to give you a very complete answer. you asked specific questions. >> i don't mind getting an incomplete answer. share with me your fragmentary members of that? >> a number of people at citi talked to a number of people at regulators, the treasury, the fed, the new york fed, and the who could be a large list. let me come back to you with specifics. >> okay. let me turn to a different

matter before my time expires. mr. pandit, you were hired in early 2007, i don't recall the exact date -- to be the ceo of citigroup. at that time what were your performance goals. i wasn't hired in early 2007. i became ceo towards the middle of december 2007. i came in there when the board decided they needed to make a change and when we entered this market with the assets we entered this market. >> what were your goals at the time you were hired? >> my goals relatively simple, examine the strategy of citigroup, what is the right strategy for the company, examine the capitalization and the financials of citigroup, put the twoing together and transl that into the right culture for the company on a long-term basis. >> examine a few things? i mean i would ask you -- my

>> thank you. mr. mcwatters. >> thank you. mr. pandit, in your written testimony you say citigroup is no longer -- no longer has a goal of being a financial supermarket. i remember the merger with travelers and i guess it was citicorp a few years ago, sandy wild, it was a much touted goal.

it was the only way to really compete on a global stage. your goals are different now. why are they different? why has that business model failed or if it hasn't failed, why are you no longer interested in it? >> mr. mcwaters, markets are different, the environment is different. the way -- competition is happening is different. if we see what's happened over the last couple of years, a lot of the places where funding was received like securitizations and/or other areas are largely not there. so when you look at the changes have that occurred, that has had an influence on that strategy. but more fundamentally, as i looked at the company -- by the way, it was a complete dispassionate review, not examine, but a dispassionate review of what we needed to be. we did it with complete integrity as a company.

we concluded, by the way, that that was an interesting model but did not add sufficient value to our clients and did not necessarily create, therefore, sufficient value to our shareholders. the big guest part of the value came from the core businesses we had which was the banks, which is why we made the change. >> what aspects of your compensation structure, not yours personally, but of your managers, let's say, two years ago or so, when the securitization bubble was inflating do you think may have led to that? in other words, you have people who are compensated on closing deals, but then the deals leave their area. they rather become a problem of the institution itself if they're retained or they become a problem of third party investors. can you explain how your compensation structure has changed? and has it changed in a way where you can still encourage innovation? >> absolutely.

i think that is a critical part of how we change culture, how you manage risks going forward in the right way. compensation structure changes we made have been those that say you get more stock as compensation, you have to be around for a long time in order for them to vest as compensation. we have clawbacks so that if something does go wrong, we have an ability to recover compensation. we have stay-on pay as a company. as importantly, we take explicit risk-taking and risk management criteria into account when we pay compensation. we actually put some of that down on our 10k that we just filed. one of the entities that looks at these things, looked at it -- and i just saw something this morning, they call it sort of the cadillac version of how you take risk and compensation and blend theming to.

this is to me a very important cultural issue. and actually at the heart of how you change a company into a client-oriented company. >> thank you. last month we issued a report on the commercial real estate market. did not have a particularly favorable outlook. what's citigroup's exposure today? >> we do have exposure in the commercial real estate market. however, i will tell you that it is a smaller exposure than many of our peers who are in this business, and as well it is to a big portion mark to market. so we have taken the marks. as importantly, a lot of that exz pose your is in large cities, office buildings, leased buildings, et cetera. so when i look at the whole exposure we have, it is exposure on the balance sheet, but that is less of a concern to me as a ceo. >> okay.

thank you. could you comment on the activity of the short sellers in the last quarter of 2008? you know, again, as i was talking about this, there were a number of instances post the lehman brothers collapse and in our case post the wachovia breakup as well where the markets were not really functioning in a rational way. they were frozen. in those markets there's always this battle between fear and confidence. and there are ways in which fear overtakes it and particularly that's the tool that short sellers need to make money. so that was a very dominant activity. there were no real circuit breakers to stop the short selling. that's one of the things that took our stock down. >> thank you, my time is up.

>> thank you, mr. mcwaters. superintendent niemann. >> i'd like to come back to your comments regarding looking forward and financial ins tux reform. you were very clear in saying city believes banks should operate as banks, focus completely on servicing their clients. i could not agree with you more. i think if there's not one lesson learned from the american public, it's what do we want our banks to be. i think the lexicon of the federal safety net is a new term that very few americans have understood previously but are very focused on now, and it goes well beyond fdic insurance to the other implicit and explicit support that are provided to institutions and that can certainly subsidize bank and nonbank activities. can i read your statement to also imply support for the voelker rule as you understand it? >> mr. niemann, i haven't read the rule. so i don't know what it is. >> understanding that,

separating out proprietary trading, private equity an hedge fund trading. >> let me be very clear, proprietary trading is not a big part of our business at all. i don't think banks should be speculating using bank's capital. i completely believe that. >> so can i- this is important because city, as we all well know, really was the poster child and the impetus for grant ridge blyly and really dramatically changing the glass steagall act. so when we hear ceos say this is a step backward, it could never be implemented, it would have disastrous results for bank's business models, can you say that is unfounded and what is your prospective. >> my perspective is proprietary trading is not a part of what we do as a bank. i don't think banks should be using capital to speculate as

well. banks should be using capital committed on behalf of clients, should be using capital to provide liquid tid to markets and they should be doing what it takes to manage that risk. you know, that's fine. occasionally, if you want to use small amounts of capital to create new products, new ideas, you can do that. but outside of that, we don't see the rest of the activities as core to banking. >> do you think it is reasonable that rules, whether drafted by congress or by regulators to distinguish pure proprietary trading, using capital to support proprietary versus market making or hedging to support client oriented businesses is a practical solution? >> i think the regulators are our best position to look at what everybody is doing. we're in constant consultation with them. they are really quite equipped to say this is not necessarily related to core banking. >> well, i look forward to your -- i think this is extremely important, and not in the sense that proprietary

trading contributed to the crisis, but it really goes to the issue of the federal safety now r net and how do you prevent the next crisis? i'd like to know shift over to consumer protection because the scope of the foreclosure crisis painfully highlights we must do a better job on consumer protection. you make specific comments in your written testimony about the need, support of a consumer protection agency that would adopt standardized rules across the country and to provide a level playing field. national banks have often complained that complying with consumer protection laws is uniquely burdensome. i think another lesson that we all have learned from this crisis is that states were the first to sound the alarm on predator lending, and, in fact, had many of those laws been applied to national banks, we would not have been in the

crisis that we have today. >> mr. niemann, i think we should have a race to the top on these things, but we should have national standards. >> i think -- but that's always what we do here from national bank. i spend a lot of time working -- i started my career at the control of the currency and have worked for national bank. so i certainly understand that perspective. there also is clear, it's clear that there are thousands of state laws that banks comply with, whether it be enforcement of contracts, foreclosure process, zoning, debt collection processes. why is it when it comes to consumer protection that banks don't seem to be able to comply and assert that these are overly burdensome? >> we're living in a national market, whether we like it or not. we're a national business in what's actually a global market as well. for consumers we believe that if you go from one state to tore,

there should be some parity on how you are treated. we also believe, by the way, clearly that these kind of rules can increase the cost to us and that can, therefore, unfortunately translate into higher costs for consumers. more importantly, whenever you have different rules in different states, you create the possibility for regulatory arbitrage which is almost always a race to the bottom. weed rather have a race to the top with common standards. the highest standards. you pick them. >> my time has expired. maybe we'll come back to this. >> mr. pandit, bear with us a bit longer. we appreciate you being here. we're going to do short questions. we'll get through the last part quickly. i want to ask since it seemed to be a problem for mr. allison, does citi get a ratings bump from the market perception it is too big to fail? >> i didn't hear that. >> does citi get a ratings bump from the market perception that it is too big to fail? >> madam chair, the rating

agencies -- i heard you earlier. the rating agencies have put out reports where it's their opinion that there are different standards, not only for us but other banks out there. but it is their opinion, as we've seen over the last so many quarters. it is only their opinion -- >> only their opinion. is it valuable to have a higher credit rating? >> now, let me take you through where the markets are on this. the markets look at cap alization. the markets look at reserves, liquidity and core earnings power. in our own case, by the way, we've issued debt that is substantially longer in maturity than any presumption of necessarily government assistance or how long it might take to get -- >> mr. pandit, let me stop there. i think it would be hard to make the case that we can see some date in the immediate future

when citi will not be too big to fail. let me ask it differently because i really want to keep this in small pieces. is it valuable to have a higher credit rating? >> where is market is today is that it is presuming very clearly that the resolution authority is going to get passed. and despite that we're borrowing money at longer maturities based on our credit spreads. that's the market's reaction. >> but standard & poor's, the rating agency, is giving you a bump. the bump is valuable. do borrowing costs differ for companies rated a, for example as citi is and bb as standard & poor's says it would be if it didn't have this too big to fail guarantee? >> as we look through how the credit markets look at credits, ratings are one of the things they take into account. but in this particular case they've also taken into account the fact there will be a resolution authority. it is our view that we're

borrowing on us being around because of our capital base, because of our earnings. >> mr. pandit, it's your view despite your a credit rating you're borrowing at the same cost as all of the bb companies? >> we're borrowing at our spreads. the markets reflect spreads that are based on our prospects, our earnings, our capitalization. >> maybe i should ask it a different way. is there a competitive advantage for a company that has an a credit rating as opposed to a bb? >> in any normalized market, there can be a competitive advantage for a rated versus bb rated company in terms of cost of funds. >> but it's your view that citi isn't set that from its higher rating, it's not getting that benefit of being a rated? >> our view is we're borrowing on the basis of capital, on the basis of the market's understanding there's going to be resolution authority and we better manage our business correctly. >> unlikes other@@@@@@@@@ @ $)g

>> i have a few questions just looking forward the business because we all want citibank to

pay back the t.a.r.p. funds. when you look at the base it seems like some of the greatest opportunities may be abroad rather than the u.s. and you seeñr any potential problem vis-a-vis the. our full package as a company is we can help you in the u.s. but we can help you where you want to go to sell your products to whichever consumer basically you want to sell your product to. >> on a risk basis based not just in the u.s. but also in the

other kings. -- countries. >> i think sources of funding is really important and having diversified sources of funding is important too. >> and for an industries liabilities tax which would basically treat foreign source deposits as a tax liability in this case. and then thus be taxed. how do you view those sorts of proposals? >> i think each of those proposals have to be looked at[ in the context of what's the economic impact. economic impact and our ability to serve our clients and their ability to export. what does that mean for jobs? what does that mean for gdp? i mean, those are the things that have to be looked at. >> so it's the bigger view than just looking at individual small questions. it's the totality? >> absolutely. >> those organizational study that was done for you all. i guess, you know, you didn't necessarily implement all of the recommendations. did that have an affect in helping you decide which sorts

of things went into city holdings and what are part of your core business? >> we actually -- yes, we went through a very deep, very thoughtful process. markets had changed. funding markets have changed.my where u.s. growth is going to come from changed including by the way that foreign consumers are going to consume more. so we took all of that into account and that's how we came up with citicorp as our future.÷ >> so the rest of these ç recommendations, they still potentially on the table. are they -- you know, are you still reviewing those sorts of things or do you view it as a closed book? >> as you can imagined, i constantly look at what's right for citi. what's right for shareholders.ç what's right for clients. but i believe a large part of our thinking is reflected in what we already talked about. >> okay. super. well, again thank you very much for being here today. >> thank you. mr. silvers? >> yes, pandit.

we were talking the united states government is a large shareholder. i am concerned aboutç what i realize in the analysis report and the like about a reversion about the kind of dynamics that led your predecessor to come to treasury and beg them to tell them not to lever up so much. that effectively there are ways of generating shareholder value that are not sustainable. and if those -- if those ways are pursued once again it's the united states government that i believe will end up holding the bag again. in that regard can you tell me what you're doing to ensure that those types of short-term pressures are unsustainable things are releveraged? >> we have a completely nuclear strategy. it's about serving clients. why am i doing something? is it in the interest of clients? that's number one. number two i have a completely redone management team.

lots of people who know how to run businesses. we have a new board with a lot of financial services expertise. regulators on the board. people who are asset managers. people who have run banks. run businesses. they're on the board. in addition to that, we changed our risk management completely. the risk management structure looks at products. regents to understand what our exposures are and our risk appetite has changed. so this is a different company. that's been the goal i've been moving towards. i still have those assets that citi came into this market with and working down but it's a different company. >> i'm not so much talking about the assets as to the liability side. and the pressures that i'm sure you are reading about and hearing as i am on citi to relever. talk of the city being overcapitalized on the like. >> i'm glad to hear that we're overcapitalized.

>> well, it depends on who's saying it. if people who are staying who have a clear interest with short-term equity traders, you know -- if you listen to them we could easily endanger the -- we could easily essentially put the fist of the united states in play once again. >> you can count on he me. you can count my petting. -- management. you can count on the board to run this institution prudently in the ináresting not only of our shareholders but starting with our client and being systematically responsible. the biggest change that i'm making at citi is to develop a culture of responsible finance. that's the legacy that i want to leave behind. >> can i just ask you one more brief answer. in your written statement you alluded to citi group -- a consumer protectio that's a different word. and here i'm trying to protect you against my colleague paul

atkins authority. that's a different word than the administration use in its white paper. they talk about an haegs is there a meaning to that difference. >> i do believe we need a focal point for consumers. i do believe that this area needs to set national standards. has to promote clear, full disclosure. look at consumer markets, all of that. there are lots of different architectures that can actually create that. >> so i'm wrong. you do agree on the administration's problem with this. i understand -- >> my position is that there are a set of functions, this consumer authority must serve. my position is that this authority must have had ability and the authority to execute on its functions but that the architecture of this can be looked at in a lot of different ways. >> mr. mcwaters? -- mcwatters. >> i have no additional questions. thank you for appearing today.

>> i appreciate it, mr. m watters. >> superintendent? >> i would like to come back on our discussion on consumer protection because i very much liked your characterization of a race to the top. and, in fact, with your permission i'd like to use that in future speeches because i think that's really where we should be going and how it should be characterized. but i would believe that the best way of getting there is that rules at the federal level be a floor and not a ceiling if you want to have a race to the top. my question is, is on this issue of preemption. is it a authority or a preference? >> mr. neiman, i can clearly see the different points of view on this. different people can be there and rationally i can see both points. i can just tell you what i believe. i believe it's better for the country, better for the consumer that you take the best standards and make them national. >> you know, and we hear -- and

i agree with you and to the extent they are made national standards and they are the best, states, in fact, have been very reluctant to go further. one good example -- we always hear the fear from national banks is that there's going to be a patchwork. in the adoption of the privacy protection rules said we're going to have a national standard. however, states can go further to protect consumers and only a handful of states have done that. so i think that is the right model. and so i'd be interesting in your perspective on that. >> again, my perspectives are the same. i believe in the highest standards for consumers, absolutely. we think what's good for the consumers is good for the u.s. it's good for the banking system, et cetera. i also believe we're a national market. we are a national market. and that shouldn't we all just get together -- >> we should. and i think -- but we also have

to recognize that events change very quickly. one lesson that we've learned is that states had identified so early on issues around subprime lending and predatory practices. one issue that we haven't -- is often lost in this debate is around duty of care owed by financial institutions. there's been a lot of focus on cfpa on product terms.#k but what i think is at the core that is often overlooked is what is the duty of care owedç by financial institutions in offering up products. interest-only products may be certainly suitable for one level of customers but not in others. how would you address duty of care and issues around appropriateness in of products in your retail business in particular. >> by the way, that's one of the first things that i made sure of that we changed when i came in. we changed the underwriting standards. we made sure that our products

are those that we believe are suitable for the. the customers were selling these products, too.#jri >> i'm glad you raised that term. that is at the heart of that. >> yeah. but i also believe by the way that you can't be the lone ranger on some of these things and that you do need collective action occasionally and it's not going to happen by having just one bank stand up and say that's where i am. it needs a focusle point. -- focal point. >> and that's why we need a new federalism, a new level of cooperation to the states with regard to bank splfgs >> thank you. -- supervision. >> thank you. >> i wish assistant secretary allison had stayed to hear your testimony. and to participate in this oversight process. we appreciate you coming here today, mr. pandit, on behalf of the entire panel, thank you. the record will be held open so

that we may submit additional questions in writing. and you may submit additional answers. otherwise, this hearing is now ended. >> thank you. >> nato's secretary-general held his news conference in brussels. he updated the situation in marjah where nato troops have led a major offensive against the taliban. this is just over a half hour. >> ladies and gentlemen, the secretary-general will make an opening statement and then we'll

have time for questions. >> good afternoon, thank you for coming. i would like to focus on two major issues today. and then i'd be happy to take your questions. and let them start with afghanistan. late last year, the 44 isaf nations agreed a new strategy with three new elements. first, we would transition to afghan leaders as soon as possible. second, we would support and demand better governance and better delivery of services from our afghan partners.ç and third, we would step up our game as well by flowing in more forces and by holding areas we have cleared. the operation in marjah is the

first test of the new nato approach in afghanistan.ç and the first results show that it is the right strategy. and let me highlight three elements of this operation that i can promise you will be repeated in subsequent operations this year. first, from top to bottom, politically andwá6 are standinn their own feet. it was president karzai who decided when this operation would begin. the governor of helmand has directed the overall effort to help the locals with jobs and health services. and the afghans are leading the

local shuras which have helped to minimize the fighting. militarily internationalç and afghan forces are doing the work together.ñr of the almost u!10,000 troops i the operations, 40% are afghans. you might then ask, are they capable of operating fully independently?ç and the answer is, not yet.ñr but marjah is a clear sign that they are getting there. then a second element, the afghan government is showing that it can deliverç the leadership and the services its people need and want. and that is critical.ç the decisive face of this operation is starting now.

when the afghan government starts delivering governance. and we are off to a good start. cash for work programs are in place. and locals are signing up. mosques, schools, and markets are being opened and refurbished. roads are being repaired. the minister of public health is operating a full health clinic and two smaller ones in marjah already. and afghan police are moving in as well.ç of course, it takes time to create enduring security, jobs and education opportunities. it also takes time to win trust and confidence.

we now have the forces to stay in the areas we have cleared. and by "we," i mean, the afghan government and isaf. they partnered together. that is a key element of our new approach.ç as i çsaid, helmand is the fir demonstration. it won't be the last. i can guaranteed the afghan people will benefit from this new comprehensive approach in other areas this year.ç helmand is a clear demonstration of our determination to succeed in this mission. and there will be nuclear weapos

one which we can all embrace. and i've scheduled a discussion at our next foreign ministers meeting on how nato can contribute to arms control and

disarmament including with an eye to our new strategic concept. with that in mind, i think it's also important to be pragmatic. there are a lot of nuclear weapons in the world. and a number of countries that either have them would like to have them or could have them quickly if they decided they needed them, that is just the way it is. so whatever we do in support of arms control and disarmament should be balanced with deterrence. finally, it is important that anything that affects nato's nuclear policy be decided by the allies together.

without any unilateral moves. solidarity is very important when it comes to this issue. and i work hard to preserve it beginning with the discussion. that's what i wanted to open with and i'm happy to take your questions. >> i'm from radio free europe, i have a fairly specific question about the aftermath of the operation in marjah. and presumably about the similar operations that you will as nato undertake as you said. and that is what will happen to people's poppy crops especially in helmand where they form a vital part of people's livelihoods on a daily, monthly, yearly basis. thank you. >> people will be provided with an alternative way.

and that's exactly part of our strategy. and we have to fight the cultivation of opium and production of narcotics. in afghanistan. and to that end we need to provide peasants and farmers with alternative crops. offer them an alternative livelihood and that's also part of our strategy in marjah. >> months ago you sent a letter to the dutch government asking them to reconsider their decision to leave. since then that letter has become part of an enormous political round and then leading to the dutch government. what is your opinion on the way your leader was treated.

and were you -- were you promised a favorable reception of that letter? >> well, first of all, let me stress that i fully respect that this decision and this discussion are entirely domestic dutch issues. and i'm definitely not going to interfere with domestic dutch politics. next, i would like to say that i have not got any promises. and as a politician i know very well that in politics many things may happen. you can rarely give guarantees. what i did was to provide the dutch politicians with a possible way forward for consideration among dutch politicians.

i still think it would be the right way forward. i strongly regret the situation that has occurred in the netherlands. it has raised an international discussion about nato's engagement in afghanistan. i know that many afghans are very much concerned. the possible dutch withdrawal from afghanistan. but i can assure you that whatever happens nato will stay committed. we will stay and finish our job in afghanistan.

>> go ahead, ben. >> secretary-general on conventional arms control there's some disquiet in central and eastern european nato members on the sale of french warships to russia. are you concerned about that sale? and particularly, are you concerned about the impact on tensions in the black sea region at the moment that the sale might have? thank you. >> first of all, let me stress nato as such doesn't have any role in it. that the sale will take place. in accordance with all international rules and regulations. russia is a partner of nato and

it's for france to decide whether it will sell military equipment to russia. having said that, i understand very well the concerns raised by a number of allies. and i think it's understandable taking into consideration history as well as recent events. but i take it for granted that russia will not use or misuse such military equipment against any neighbor. >> secretary-general, interfox ukraine question on ucran. -- ukraine. do you plan to have a meeting and how do you see the future development of the relationship

between nato and ukraine in the light of his statement? i mean, ukraine will be european state with military neutrality status. thank you. >> first of all, i would be delighted to meet with the new ukrainian president and discuss ukraine's future relationship with nato. secondly, i would like to stress that the nato position is exactly the same after the presidential elections as it was before the presidential elections. we took the decision at bukarest summit that they will become members of nato if they shall wish and, of course, if they fulfill the necessary criteria. this is our open door policy.

and we stick to the open door policy. but finally, i also have to say it is for ukraine to decide its own future. and that's exactly our own basic principle. that it is for each individual country to decide herself the security policy as well as the alliance affiliation. and the same goes for ukraine. it is for ukraine to decide what will be the future relationship between ukraine and nato. our position stands. but it's for ukraine to decide ukraine will focus on a partnership or a future membership. for us it is important to stress that at the end of the day, it is purely a ukraine decision.

>> i'm from the german financial times. the first question is how are you going to replace the dutch troops, these 1,900 or 1,800 dutch troops. and if there's let's say a lag of especially trainers and the second question is, the dutch decision going to be a blueprint for other areas or could it be a blueprint for other european nations? are you let's say afraid that this might happen? because, you know, popularity of this afghanistan mission is shrinking from week to week? >> first of all, it is clear that we have to replace in one way or the other. we will not leave the afghanistan people behind. so nato will stay and provided

that the dutch troops are withdrawn, we have to find replacement. and that's exactly one of the problems. that the dutch decision has also forced other allies and partners to consider how we can replace the dutch soldiers. no decision has been taken yet. but i can assure you that the alliance that isaf will stay committed to protect and defend the people of the area. but i'm not able to present any solution to you today. you mentioned the shortfall

within our training mission. first of all, let me stress that from an overall perspective, it has been a great success. we have succeeded in generating almost 40,000 extra troops. it's pretty close to what was recommended by general mcchrystal. we had a conference focused on our training mission. and the status now is that we have filled more or less half the requirements. that was the first step in a gradual buildup of our training mission. so we have to do more because the training mission is essential for the success of our transition strategy. the handover of responsibility

for the security to the afghans themselves. so i have urged all allies to consider how they could provide extra resources to our. but based on what we have seen in the past, i feel confident that we will be able to gradually up our training mission to the desired level. and your last question was about -- [inaudible] >> yeah. the blueprint. no, no, definitely not a blueprint. and let me point to the fact that the trend in all other

countries has been exactly the opposite. while the dutch politicians have discussed a possible withdrawal from afghanistan, 36 other allies and partners have pledged additional troops to our mission in afghanistan. which i would say a strong testimony of commitment and solidarity. and also in answer to your question because i don't think the dutch decision will be a blueprint for is for other countries. they have demonstrated a clear commitment to our mission in afghanistan. >> a quick follow-up, for example, if you look -- for

example in my country in germany it's getting less and less popular the afghanistan mission. you know, i understand of course your view and i think it's great. but what the six nations did. but i think it might be a danger, you know, as it's getting less and less popular and people are losing their patience with their mission. >> i think we're all impatient. so am i. i do want to see a steady progress in afghanistan. and i think we will see progress in 2010. there's no reason to hide that 2009 was a difficult year with many casualties and lengthy and complicated electoral process. but we have taken a number of important decisions to increase the number of international troops significantly. to increase the number of afghanistan security forces both soldiers and police significantly. we have laid out a clear strategy for a transition leads.

the international community has committed itself to more development assistance and the afghanistan government has committed itself to better governance including strength and fight against and corruption. and all these elements will create new momentum, new flog 2010. so my conclusion is that when people see clear progress in afghanistan, we will also be able to maintain a broad public and political support for our mission provided that people can see the light at the end of the tunnel. and the light at the end of the tunnel is a gradual transfer of responsibility to the afghans. and, therefore, our training submission so crucial. and, therefore, our allies partners should invest in this training mission by providing trainers and resources. >> we have a question here.

>> i'm afraid my question was a little in the same line. after the success of the conference in december, the conference last week for generating trainers was much -- much less successful. and if we add this to the decision of the situation in the dutch government, what we are seeing now is all the enthusiasm in january and december has been fading and that we are -- what we are seeing now is a growing afghan fatigue in the allies. thank you. >> no, not at all. on the contrary, during the last two or three months we have seen a strength in commitment. and the visible sign of this is

the pledges of almost 40,000 extra troops. i would not call the recent fourth generation conference a failure. it was a first step in a gradual build up of our training mission. definitely we have more to do and we will follow up and i have urged allies to contribute further. i would say that we have been quite successful if we look upon the overall number. but i think that not all allies and partners have been aware of the more detailed configuration of their contributions. and we now have to go more into details to maybe reconfigure the contributions with a view to

equipping our training mission fully. so this is first and foremost a discussion about whether the class is half full or half empty. so if you have a pessimistic view on world affairs it's half empty. if you, like me, by nature it's an optimist it's half full. i can tell you it's half full. >> i have a question on nato russia relations. the head of russian land forces announced last week that russia may deploy missiles fairly close to the astonia border. you mentioned that arms control is one of the topics at the meeting. how do you regard this kind of pronouncement? thank you. >> well, i have no detailed information about this news.

but in general, we attach great importance to disarmament also as far as conventional weapons and forces are concerned. we would very much like to resume real negotiations on full implementation of the cfe treaty. and that would also be part of our deliberations. >> pascal? [speaking in native tongue] >> translator: mr. secretary-general, i would like to ask your question in french if you would allow me. you said last november and you have repeated this in your statement that any decision on nato's nuclear policy should be multilateral, not unilateral. two of the nations that have

nuclear weapons at home, italy and turkey have not signed the letter that you received on friday from five countries out of which the netherlands and germany which do have nuclear weapons on their side. so how can you at the same time respect the authority of those countries which do have those weapons on the double key principle? and at the same time have a multilateral decision which you call for. isn't there going to be a split between none and some countries with nato? >> i did receive the letter from those five nations. and this is exactly the reason why we're going to discuss this issue.

the five countries have underlined that they agree for decisions on nuclear policy to be multilateral. and so i am considering -- i expect -- as a matter of fact, i expect an agreement within the strategic concept. >> i'm over here in the corner. just to follow up my colleague's question about the french arms sale to russia, i wondered first if president sarkozy discussed this with you in advance? and what you told him?

second, does it violate any nato code of conduct or informal understanding? and thirdly, what will the consequences be? will nato have to take further steps to ensure its eastern european members they are protected against any russian threat? >> as i said earlier, nato is not a part of this. nato does not have a role. as far as this sale of military equipment is concerned. and having said that, i have also indicated that i have not been informed in advance and i've not had any expectation to be informed in advance as nato doesn't play a role in this case.

and as far as the protection of allies is concerned, i can assure you that nato has all necessary plans in place to protect and defend all allies. >> one question there -- >> secretary-general you used the word "deterrence" concerning the nuclear nonproliferation. could you please specify on these policies? in particularly what kind of are we going to deter the intentions, the capabilities, what kind of policies of nato will it be in the field of nuclear nonproliferation. thank you. >> actually i think it's a bit premature to embark on that. one very important aspect of

deterrence -- let me take this opportunity to stress that is development on the well functioning missile defense system in europe. let me stress that nato is not engaged in the iran question. we follow the development closely. we support the international political efforts to find a diplomatic solution to the problems. we urge the iranian leadership to live up to iran's international obligations. stop the enrichment of uranium. however, if at the end of the day iran acquires a nuclear capability, then, of course, it is a matter of strong concern for nato and eventually might

also be a threat to nato and its allies. and in that respect, the development of a missile defense system is of utmost importance. so i personally see a clear link here between a possible nuclear threat and the development of a well functioning missile defense system in europe and north america. >> last question is here. >> i'm from the japanese daily newspaper just to follow up on the question on the nuclear pressure on nato. well, given to the fact there seems to be day of of opinions among the member countries regarding the nuclear policy between the u.s. tactical weapons in europe, how do you -- how are you going to seek the conversion during the course of this.

and second, there would be an mpt conference in may. about the nato's nuclear-sharing policy, do you think this will be also the subject, the discussion -- how do you think of the possibility that nato will change its nuclear-sharing policy. thank you very much. >> well, we will discuss our nuclear position from now until november. we have a nato summit in november. at the summit we will approve a new strategic concept. and without anticipating what will be the outcome of our deliberations, i can assure you that the nuclear policy -- the nuclear poster will be one of the very important items on our

agenda in the preparation of the new strategic concept. well, it's quite natural that we have a discussion -- i mean, the nato alliance is an alliance of free democracies. i find it quite natural that free democracies can discuss hot issues like our nuclear poster. i feel confident that at the end of the day the 28 nato allies will find a common solution to that based as always on consensus on that and i would also expect an agreement on this.

again, without anticipating the outcome of our discussions, i have already today indicated what i would call a pragmatic and realistic approach while keeping the vision clear, the vision, which i think all people could and should embrace. it would be an ideal world if we had a world free of nuclear weapons. it would be wonderful. so keeping the vision clear i think at the same time we should in practical politics have a realistic approach and realize that as long as there are nuclear weapons on earth and as long as certain states aspire to acquire a nuclear capacity, it

would be wise to have and maintain a nuclear capacity as part of a credible detoorns. -- deterrence. that's my approach and now we'll discuss it in the coming months until november. but i can assure you that it will be a united alliance also on our nuclear policies. >> that's all you have time, secretary-general. but don't you go anywhere. not you. >> next another nato briefing with general william caldwell. nato training mission commander for afghanistan. general caldwell talks about building up the afghan security forces and the need for allied nations to provide more instructors. this is just over a half hour. >> a training command in afghanistan. very, very important command for us as the secretary-general has just highlighted. he has just briefed the north atlantic council this morning and has had -- has the time to meet with you.

you'll see how young-looking he is even though i've read in his biography that he has five kids and that's pretty impressive aside from his command duties. general, thank you for taking the time. >> well, thank you. first of all, let me just say on behalf of the nato training mission i appreciate the opportunity today to just give you a quick update on where we are. just over 100 days ago the nato training mission in afghanistan activated inside of afghanistan. and i was given the opportunity to serve as its first commander so we've been in existence to be exact 102 days today. a decision made last june here in nato to form this command to represent all therwl÷ different entities that have something to do with the training, the education, the development of the afghan national security forces. it's a combined organization. we have over 20 different nations associated with this, with members part of our organization within afghanistan. we have another 26 nations that

contributed to some shape or form in kind with either monetary contributions or donations of equipment or other type of activities. we're made up of both nato and nonnato entities. we're military. we're police and we're civilians. we have different national police officers in countries such as italy, france, the united kingdom, canada, spain and others. each of these are contributing to both force, generation, and capacity-building. we do mostly instructing and advising. those are our two primary functions. we serve as instructors and as advisors in helping build the afghan national security forces. when we say there's an afghan national security forces, we're talking about the army, the police, the army air corps, the medical facilities associated with those entities, logistic facilities associated with those entities. and we also do infrastructure development.

we also are responsible for and indirectly -- it's an organization which i'm dual-hatted is called the combined treaty security in afghanistan which has been in existence for many years but it has ministerial development. so we help develop the systems within the ministries of interior and defense. our budget that we operate with is right at about probably just under 1 billion u.s. dollars per month. it's the funding that we have available to us to accomplish this nation we've been given. our challenges that we faced over the last 100 days that we've seen -- first and foremost is how do we take on and develop leaders inside of afghanistan. when i say leaders not only in the membership industries of interior and defense but more importantly both within the army and the police. and so leader development is our number one priority that we've taken on and are working very diligently. we want to figure out how to make them much more transparent,

merit-based, assignments, promotions and everything else associated with what they do so that it reduces corruption to the greater extent possible. the next we're taking on working is police reform. when somebody tells me that today the police are not well trained, my answer is, they've never been trained. the way that it had been done for many years until just in the last few months, we literally took and recruited somebody and then put them out on the street. we gave them a badge, a gun and said you're now the patrolman in this area. there was no formal training process. that was recognized and there is this thing called focused district development that was started about a year ago where we'd take and retrain police or reform police that have never been trained. so what we have now instituted in coordination with the afghans is a policy where if you're going to join the police force, you're recruited, you're trained and then you're sent out to

operate with a police person. today about 30% of the police in afghanistan have actually been through the formalized training. the other 70% have not. attrition within the police force has been slightly improving over the last three months since nato-trained missions have stood up. a multitude of factors the least of which was the in the month of december the pay of police was brought up on parity with the army. it had been less than the army before that. and the army paid gone up in december so when the police pay increased it increased in that same manner as the army so that today whether you serve in the afghan national police or in the afghan international army, you have pay parity. and rank and longevity pay, which is a very positive step forward. the greatest challenge we have in the police force right now is we have an organization called ancop, the afghanistan national civil order police.

within ancop, we do have an attrition of about 67%. it is probably the best trained, most educated force that they have within the afghan national police. the challenge is a high attrition which is something this is an ongoing effort between the afghan ministry of interior and you say to work. we have a pretty good plan, i think, in place that the afghans will institute around 1 may that will provide a cyclical program for the ancop so that in the future they not only will be trained, employed and then they'll have the period of rest where they can go through the literacy training program, education, take some vacation time leave and then go back to their training and employment again. and that's an important step forward to get at that. because the overall attrition of the police themselves is about 25%. but within that one unique element of ancop, it's obviously about 67%. we've been working real hard at quality and quantity.

up till now everybody has focused on the quantity. how many policing are you producing and how many army are you producing? what are the numbers and we can talk those if you'd like. but within that it's just as important that we put as equal emphasis and effort on the quality of that young patrol madison and soldier. we are seeing some steady improvement in that as the number of instructors has gone up. over the last three months. we were at about 33% of our authorized manning level when we first stood up. we're at about 50% now. and in just in that 17% growth of instructors we put into the force we can already see a difference in the quality of the policemen and the soldiers we're producing. it's in simple things. very important things for soldiers like weapons qualification and the basic training program for the soldiers. it used to be about a 30%

qualification rate for a soldier that went through the training program. today we're moving up toward 60% qualified. still not where we want it to be. but a step in the right direction. a difference that we're seeing. the structured nature of the afghan national army, we had originally been looking at several more years to continue growing the army. the international community has made the decision that we are going to grow the security forces to 305,000. that's about 171,000 army. about 134,000 police. if, in fact, that's the case, and that's what the international community is committed to at this point, we have restructured the growth of the army such that when it reaches 171.6 to be exact, 1,000 it will be a balanced force. it will be a force that has the ability to be self-sustaining and regenerate itself. and that's a very important step that we did.

originally that would not come unless there was much more continual growth. we're now going to set the conditions such that when it reaches 171.6 in the army it has its logistics. it has this engineers and supply systems as a part of that army. and then the last thing i would just tell you on manning. nato-trained anything else afghanistan today makes up about just less than 2% of all the military forces that are currently in afghanistan. a very small portion of the metaforces deployed there yet a tremendous return in its investment in terms of the long term development and growth of this army and police force. we as our primary mission to develop enduring, self-sustaining systems that are going to last for a much longer time. it's not just about initially developing and producing an army or a police force. it's about developing and producing an army and police

force that could be self-sustaining, that's enduring. that could regenerate itself. that has the leadership necessary to continue to guide and lead into the future. so that, therefore, the coalition forces that are there today can be reduced in numbers because the afghans will have the ability to be much more responsible for their own security and stability in the future and less reliant on the coalition effort. so those are the key points i just really wanted to give you an update on. as the secretary-general said, i had the opportunity today to talk both to the military committee and the nac and give them this 100-day update and i'll take any questions they had and just let them know where their nato training mission of which they've asked me to take the command of is today and what we're doing for the government and the people of afghanistan. so with that i'll be happy to take whatever questions. >> please identify yourself to help the general. >> i'm from the german press

agency, dpa. a question on the numbers. first of all you said you're at 50% of the manning levels required at the moment, ballpark figure. is that 50% of the figure you would require to get to the overall figure of 305,000 or is that 50% of what you would need to get to the 200 that it was before? and can you just give us a little bit more detail on the numbers of where you're at now in relation to the overall requirement? >> yeah. it's a good question to clarify. what i was talking 50% of the manning of our internal organization of nato training mission in afghanistan itself. that 50% manning is what we currently have in our organization. it's not in the afghan national security forces. right now for the growth of the afghan national security forces we are looking for still some additional pledges by the

international committee with some additional trainers to assist us in this effort to grow both the army and the police forces as we move forward. today we are able to continue the growth but to increase the quality of the recruit both in the army and the police. it will require us to put some additional trainers into the program. additional traders into the program. and in terms of there is a slight -- our job is to do the trading of the forces and sent out into the operational force. the work in the operational force and so it's not an item we have daily oversight of. we are aware but it's not an item that we have responsibility for >> david from to follow-up on that. to bring the numbers >> how many more trainers do you

need from its national forces? and also on issue of a attrition rates, is there any evidence that people who are beginning police or military training than going over to the insurgencies? is there any danger you're actually helping to train insurgents to shoot straight? >> on those two questions, first, on the numbers, there's about 1200 additional trainers and instructors that we're looking for today. there has been some commitments made by the international community, perhaps up to as many 700 very recently. those are not yet in country. we are encouraged the fact that there is still an ongoing discussion. we're very fortunate the secretary-general and are both continuing to advocate and ask the international community for additional assistance, but that still does leave us of a delta of about 700, 650 traders that

we are still looking for. but in addition to those that have been committed and pledged to our right in theater to start being employed and used in the operations. what i would tell you is, one thing we have done is, as we bring new recruits in, we have started, we now to biometrics on every single new recruit. there's two things that are a part of it. we do not only the eye retina scan and the fingerprints but we also do, you have to produce a letter from somebody in your village, your district or province who can't attest to your ability to store the country of afghanistan, the people of afghanistan. and so, the measure that we've put in place is to track that very carefully so that as a young man in very few select women come into the police and army, we in fact now have a good database to start from to track down. there have not been large numbers. there's only been a handful since i've been there, of those

that we have not allowed into the army or police, based on the biometrics. but in fact it has raised the red flag on a few cases. again, just a handful. where we've gone back in and done a little more look at a person's background, based on something that was there in this biomedical database. so that's the method by which we are working towards so we preclude having somebody come in that should not be serving. the second part of that is this idea of leadership. when we set our number one focus was working on leadership, if young men and women are properly lead, both in the police and the army, what we find in any military system or any police system, normally you build the allegiance, the trust, confidence so that they want to serve in the organization which they are a part. so therefore, leadership is very important. we don't have a lot of the mid grade level leaders today. they are not resident. it takes years to build a.

it does in any army or police force. but, of course, a short 16 we course sets the conditions but it takes years of experience in mentoring to produce a mid-grade level leader. so we're putting a lot of focus on that area there, too, because we understand that not will it drive down attrition, it will increase retention. and also instill in those young men and women a much greater desire to serve the people of afghanistan. >> just to follow up, the question really was not so much how your screen people before they come in, if people leave what then happens? is there any evidence you have people your training then go over to the insurgency better trained than there were before? >> obviously, we don't track what each person does after they leave the service in the military. but what i can to you is based on the fact with biographical data, if, in fact, somebody were picked up and identified as, you

know, taliban member or insurgent, and were given biomedical data we will be able to determine if they had previously served in the army and the police. again, the databases are fairly new, all the been doing for a short bit of time. but in fact i think longer term there will be some indication. but otherwise we just don't track people after they leave the military. and there's nothing i've seen yet that would indicate what you're asking about. >> i am from the kuwait news agency. general, you said there were 20 nations involved in the training of training missions in afghanistan. are there any from the arab and muslim world and fault? or will you call on arab and muslim world to get involved in the training mission? thank you. >> that's a good question. we, in fact, have aking at. there is an ongoing dialogue

between the ministry of interior and the country of jordan, the united arab emirates, and turkey. where they have had discussions about training. i do know that today the country of afghanistan, on bilateral arrangements, has people training on their own that they worked with other nations in that part of the world. about 12 different nations. again, not something that's done through navy training michigan but they on a bilateral basis have both officers and ncos from the place in the army and other nations, not several hundred altogether probably, that are training in that part of the world through some sort of professionalized training, whether it be education or professional skills training. one thing we're doing right now is recently turkey, for example. turkey came up to us and in december and said we would like

to train some afghan army soldiers inside of turkey. would you be willing to assist us? and we said, well, we would be willing to move the soldiers to turkey, if once they arrive there you take care of them, provide for everything from that point. you do the training, the transportation, the facilities, the ammunition, instructors. you do everything once they're inside a turkey. we will continue to pay their salaries, but we will move in there to turkey and you take control of the training and also port requirements associated with that. and then after 30 days we will pick them up and bring them back, and at the same time drop off another group of soldiers. so we're on our third month of doing that with the country of turkey. so yes, we are looking at and exploring different types of options. and we of course very much want to have that part of the world engaged in a part of it be associated with the training and education of both the army and the police forces.

>> i am from the journal. to make it very simple, follow-up to my colleague, on figures, you said if i understood welcome about 1200 additional trainers, instructors were requested, but that already 700 have been provided? or am i wrong? >> in this last force generation conference that took place last week, there are pledges in commitment of -- a summary have the exact number? 541. total pledges. out of the 1200 or so we were looking for, in this last force generation conference, there were commitments and pledges of 541. >> but the total that you would like to have under your

responsibility, how much -- how many? how many today? >> that leaves us, the total number of traders altogether that are uniform personnel, both police and army, is about 5200. >> before or after the 1200? >> i'm sorry. yeah, the total amount we would want in the very end would be 5200. today, we have in nato training mission afghanistan, approximately -- you have that data there? yeah, okay. i can give you specific. our current shortage today is about 1901. to be exact. we have mitigated that they're using some contractors and bilateral arrangements to wear then we have roughly 1200.

we went into this conference lastly asking for 1200 instructors and trainers. we had pledges and commitments last week of 541. that's going to leave you a delta there of about 660. that we are still looking for. and, of course, those pledges and commitments we're still going to look to arrive in afghanistan. so that we can employ them in the country of afghanistan. >> general, i am from spain. the army has already gone through an exercise of its abilities now in marjah. how have they been doing and what are the shortfalls? thank you, if at all. >> no, that's a great question.

the reason why a lot of people want to talk just statistics, and so last week i spent monday and tuesday down and helmand province and marjah. actually talking with and being around the afghan national police forces and afghan army soldiers. so that i could see the end product and how it is being, how it is operating down there in that area. i would say most of us saw it performed better than i think the expectations were. you know, then you say what were those expectations. i with the expectations we had were perhaps not as promising as we saw them actually doing. if i took the commando unit that i saw down there, exceptional. the commandos, we have seven battalions today. we are building two more for a total of nine. they perform superbly. well-trained, well led, well

organized and the superb organization. the transit, afghan national civil order police, were brought in on are being part of the whole phase down there. i would say performing very well. but they went to a little retraining program by coalition forces just before being employed and behind the combat forces, who had just done a clearing operation. so they are now part of this whole phase in certain areas. and they are doing very well. there's no question. there's room for growth. it's like any army. you never quit -- [inaudible] -- and that's something we're trying to instill also in afghan army and the police forces so they understand even though you may have gone through basic training and collective training, when you get out in the future have to continue training and growing and developing that you have to go back to leadership forces for

your midgrade level leaders. it's a lifelong process of growing and developing and educating them. but back to your basic question, over all the forces performed i would say better than most had expected them to come which is very promising for the possibility of what can be as we continue to move forward from here. >> i'm from financial times germany. three questions about the training itself. first, question is is there a huge interest among afghans to let's say become policemen or whatever? they have lot of people who really want to become that? is there a love interest? second question is could you just tell me a little bit more typical training day looks like? let's say, is it eight hours, 10 hours? you know, what do you focus on? and third question is what is the main challenge? what is the main difficulty?

when you educate these people. >> first of all, i would say our recruits if you asked me that in november i would've said we are very challenge, and i'm not sure that we're going to be able to make the growth of numbers that we're being asked asked to do. last september, only about 880 afghans, recruits, came into the army, about 880. in the simmer it was 7800. that's about almost 800% plus increase in the amount of recruits. in the months of december, january and february, we have recruited well, and i say we, we haven't done anything. the afghan leadership has. the afghan leadership has recorded well over 7000 young men, some women, into their army, each of those months. to the point where they have recruited so many in the last three months, that we have not been able to put everyone right away into training. because we just didn't have that

throughput capacity built to handle that large number of recruits. at the afghan leadership can sustain that kind of recruiting numbers, you know, the amount of growth that we do in the army can be unlimited. they can keep reducing those kind of numbers. it's phenomenal what they are doing. they didn't do it earlier last year, but starting in december, january federally, they have three months that they have been doing it. i would say a trend may be starting, but they are proving. these are traditionally the highest recording months anyway, so i don't want to give the false perception that they are. they are. traditionally, december, gender, faerber, march on the highest recruiting months. however, we've never seen the summer of recruits during this time of year ever before. so that's the key difference. so we in fact are getting more than enough recruits to come into the army and into the police forces that we need right now. as far as a training day goes,

the training day by their standards is a pretty full day. they are up about 5:30 a.m. and ago pretty much to about three or 4:00 in the afternoon. they go about five and a half days a week. so it's a fairly full day for them, especially for these young men that have never done something like this before. our biggest challenge in the training base is the literacy. most of the young recruits come in, we have about a 14% literac rate, which means of these young soldiers coming in, not the officers and ncos, but the soldiers, about 14% are literate which means 86% really can't read or write. sopá means everything we do is done and a show and tell basis. we show and tell them how to do it, and they hands on repeated and do it. and that process continues. it's not like we can hand them a

manual and say, read this, or go read these instructions. because they don't have the capability to do that. 86 percent of them do not. so what we're doing, it's a show and tell way of instructing. therefore you need a higher percentage of instructors. because you need to be able to let them repeat multiple times with good instruction associate with it when you're dealing with that kind of elders a challenge. and we are going to do here towards the end of this month, we're going to bring literacy very basic, literacy into the training programs. [inaudible] >> yes. know, we're going to bring in dari for them. but, of course, and were going to do is to teach them letters, off of it, numbers and how to write their name.

that's our goal. is that everybody will come out of basic training being able to understand all the letters of the alphabet, how to write their name and understand the numbers. which is a major step forward, and then the intent is, longer-term year, to put literacy programs out into the army itself so that we continue increasing their levels of letters he. we're not expected to make them high school graduates. were just expecting to get into basic literacy standards of about third grade over a time period. because then they will take tremendous pride, self pride into the are as a person, they will remember that it came from their government, that gave them this uplift in who they are as a person. and they will feel a much greater sense of ownership in the whole process and a commitment to the country. i've got to tell you, the thing that surprises me. i walked in being told are two

different light which is, dari and posh configures the challenge of literacy. you're going to find out when you get there that people don't really understand this nationalistic fever of being a part of a country. unit, they're all very tribal in their nature. yet in fact i go out and talk to almost all these new recruits coming in, and i wonder through the crowds with my translator talking to them. and they all want to serve their country. i really thought most i would hear was i'm glad you brought the new pay in now to give me a basic standard of living here, to serve the country because i could have a nice basic standard of living now. there are $165 a month we pay them when you first come in. that's not the case at all. most of them say i want to serve my country. i want to be a part of the afghan army. you know, for any of you who haven't been out there, i would say please. and we will take you out of which into the training centers and let you just talk with these young men, and some women that

we have. and experience it yourself. actually unattended we will send you out there and just let you wander around. i think most of the press people that have been able to get out there spend sometime in the training base, walk away really surprised at how enthusiastic these young men are about serving their country. i mean, they really want to. so the key is how do we keep that energy, that excitement that brought an end and instill in them in the process and out to the army? and again he goes back to leadership and having the right leaders out there with those soldiers. >> general, following on from what you just said, are you a where or are you concerned about the fact that although you seem to have 40 percent of the army not pashtun or ethic represented

as far as the country goes, these postures would mostly be recruited from the northern and eastern areas and very few of them, if any, come from the south which would severely is where you have your biggest problem in keeping the country together. is this something, is a something registered with you? is this something you actively address in your policies? thank you? >> that's a great question. were very, very concerned about that. it's an ongoing dialogue. we have the afghan this year. the question being asked is to you track this ethnicity inside the army ranks, and the answer is yes, we do. do you track a bike noncommissioned officers and enlisted? and the answer is yes what do. the next question is do you track it by provinces, and the answer is yes, we do. so what are results you see an are you satisfied with that? and answer is no, we are not satisfied with the number of pashtuns that we see come into the army from the south. although we have a good pashtun

rep you tatian, if you were just look at the ethnicity of the army, and say how many pashtuns do you have don't it's a quote unquote fairly representative of what most people think is the percentage of pashtuns in the country. but the challenges only about two or 3% come from the south. and then impact of what we're trying to change is the dynamics of this country to make the southern pashtuns feel more part of this nation and be, take greater ownership in it, we're going to have to do a better job of recruiting down there. and so we've had long talks, about how as this march operation moves forward, that people down there see the difference that's taking place. because it's not about a military operation. it's about a government bringing basic services act to their people and taking ownership of the area being held responsible to the people's basic needs of which the military helps of such

those conditions. but it's the governance piece that's going to be critical. and so as they watch this and see this, the effort that we want to make that is to go behind that and tried to get some of the young pashtuns from the south to be willing to join their army and their police forces. but we have to do better. we have a small media advertising campaign that were going to launcher in about another 30 days down in the south, encouraging pashtuns from the south to join the police and the army. and so we are hopeful that that will help change some of the dynamics and take us from two or 3 percent to a much higher percentage. because it needs to be representative of the whole nation. >> from japanese newspaper. last year when i went, there were talks that the taliban paid better than.

they being the motivation of the young africans. but has this improved? >> yes. the new pay system that was just put into place in december pays a basic recruit in the army of the place $165 a month. then if they are in a hazardous area like down in the south, they get an additional $45 or so extra a month of of that. and then if they have been in the army a certain amount of years, then they get some additional longevity pay. what we were shooting for with the 165 is to give them enough money that they had the ability to live a decent standard of life, not exceptional, but they are minimal, decent standard of life within afghanistan. and that 165 does it by all, you know, economic equation, factors that were utilized to come to that him out. because what we wanted to do was

have a soldier and a police man be able to serve their country and not have to do anything else to provide for their family than just serve their country. which is a reasonable expectation. we do it in any other nation today. and then that would also help reduce corruption because then they would be less inclined to look for ways to make a little additional income to support their family just so they could feed them. so this money is enough that a young soldier can in fact be differently now. especially once they've served a little longer and they get promoted because the pacers going up, longevity pay starts going out. we are very much generally aware of what he taliban foot soldier makes. and it varies, obviously, and reports from around the country, but we are, if you were to try to make some comparable amount, we are comparable to probably what we hear and understand most foot soldiers will make doing something for the taliban.

so what we have hoped has been created in the afghan government has created is the ability for young men or women now to join and serve their country and be able to provide basic substances were found around that have been turned to some of the way of life to make some money. >> general kolber, thank you on behalf of all of us are for taking the time out. you and your staff, i know that some data has been passed around. we have also put together some stock footage of training which i offer to anybody here, both for websites and for broadcast. but once again thank you for taking the time and it was good to see you. >> and there is a website we put up two weeks ago if he buddies interested. it's open to the international public. there is no passwords or anything, protected or corralled or anything else. you can just go to the website and pretty much go on and read

about anything or doing over there. we don't classify anything in the organization, and 102 days it has only been a paper classified because it is directed by higher authorities. so pretty much it is very open and transparent. you can see anything we're doing. this website you should be able to come in and look at pretty much comma be able to ascertain any data you want about who we are and what we're doing. so if you have any questions, please just ask is that we would love to answer them and help to better educate everybody. thank you. >> thank you. [inaudible conversations] [inaudible conversations] >> next remarks and several republican senators regarding

health care legislation. following that senate finance committee chairman max baucus. this is an hour. >> thank you, madam president. i come from a background having earlier been in the state senate, and then after that the united states house of representatives. and sometimes when i was a state legislator, and it look like we're making a hash of legislation on the senate side, someone would say, well, let's pass the bill anyway, we will clean it up in conference that it was always to be. to send on to conference and hope that cooler heads would prevail and we would get a better work product. sometimes that happens and worked out well, and sometimes it turned out that we didn't clean it up in conference. and i'm reminded of that when i hear about what is being discussed in what's now seems to be the clear plan for the democratic majority and president obama and moving forward with health care legislation.

the house has passed a flawed bill. with one half trillion dollars in cuts to medicare, with huge mandates to the states, with tax increases, the largest increase really in entitlement big government, in my memory. and the senate has passed its flawed version, not only those flaws that i just mentioned with the house version, but also special deals. a special deal for nebraska, special deal for florida and louisiana, and on and on and on. and that's where we are now. the plan now seems to be that that mistake and go, that flawed bill that the senate has passed on christmas eve, is now at the desk, at the house of representatives. and leadership over there it is tempted to take that flawed product, pass it without any changes whatsoever, and send it to the president for his

signature. the plan there is not the old legislative trick of we will clean it up in conference. the plan is we will clean it up in reconciliation. well, as i mentioned, madam president, sometimes that works and sometimes it doesn't. the problem with cleaning it up in reconciliation, is that if this democratic scheme goes forward and we do that, we will have not only, not just a bill in conference, to be worked out, where it, if a mistake is made, we can vote against it in the end. we will have a whole statute. the plan is for the president to sign this flawed senate product, with all the taxes, with all the mandates, with all the special deals, and purchases, signed into law and then hope that the senate can correct all of those

mistakes in reconciliation. congress to deal with. certainly, it will be the key, the top paramount election issue for the next several months. if the plan works, if the democratic scheme works, we'll still have this. maybe the louisiana purchase will be taken out, the cornhusker kickback, the gatorade, -- the gator aid, all of the special deals. then we'll have the president's additional taxes, additional federal regulation that he has recently proposed. when it's all said and done, even at their best, most optimistic predictions, we'll have massive funding mandates to the states. we'll have a one half trillion dollar cut to medicare, we'll have huge tax increases and a

large new entitlement program. the people don't want this. i heard a democratic member of he house of representatives >> the people don't want this. i heard a democratic member of the house of representatives very articulately stating this on television just this morning. he said people must be out of their minds. this is wrong. according to this member of the house of representatives. a democrat who says he's voted against it before and he's not going to be one of those that is willing to change his mind. i don't want to spend the rest of this year with this flawed legislation as the only campaign issue. it may be our only choice. but i can assure everyone within the sound of my voice of this. if this scheme goes through, if the flawed senate version is signed into law and we have this reconciliation debate, this will

be the number one issue if not the only issue. and there will be devastation for my friends on the other side of the aisle if they persist in thumbing their noses at the american people and defying the clear will of the american people in this issue. i'm glad to be joined by my friend senator brasso. a legislator in his own right with considerable experience. and a physician. and so i'd be happy to hear the comments of my colleague from wyoming. >> well, thank you very much, senator. i agree with exactly what you said 'cause my experience has been very similar. i served five years in the state senate in wyoming. and before that was a physician practicing in wyoming, taking care of so many families and just this monday was at the wyoming medical center, the largest hospital in our state. and it is a hospital where i previously been chief of staff. and what i heard from the people

of wyoming is i'm sure what you've heard from the people at home in mississippi. they say, why don't you just stop and start over? it's not just the people from our states and a cnn recent poll 50% of all americans say it is time to stop and start over. we do need healthcare reform but we don't need this 2700-page bill with all of the unintended consequences that may come with it. all of the new government boards and commissions. a program that cuts $500 billion from our seniors who depend upon medicare for their healthcare and raises taxes by another $500 billion. the american people are saying stop and start over. they know that we have good ideas. they listened to that summit last week that i was able to attend at the white house. they've heard that republicans say let people buy insurance across state lines.

that will help 12 million more people get insurance today. they say let's deal with lawsuit abuse. that will help cut down the cost of these unnecessary tests which are done as defensive medicine. they understand american people, the value of allowing small businesses to join together to help more effectively get down the cost of care. and that's why half of all americans say stop and start over. 1 in 4 just say stop. only 1 in 4 americans say, yes, pass the bill. so 3 in 4 do not want what the president seems to be wanting to shove through congress and shove down the throats of the american people. the american people are incensed and that's what i heard in wyoming this weekend and i'm sure from my colleague who is here from mississippi, that's what he has heard as well. so the president made his speech yesterday which seemed to be a new sales pitch but it's for the same bill.

and it's why so many folks have said stop, start over, focus on ideas that we know will work. give individual -- give individuals as patients, as citizens rights to make more choices that affect their own life. give them those opportunities. we don't need a government bureaucrat standing between a government and a patient. we don't need a government bureau. i see senator coburn is on the fought who as i fought against government bureaucrats and insurance company bureaucrats all for our patients. because we need a patient-centered healthcare program and we need healthcare reform but we do not need this massive bill. and now i see my colleague from florida has joined. and he knows we have positive ideas that will make a difference because we need to be focused also on the cost of care. people like the quality of care that they're getting. they like the fact that it is available.

but the cost is what is affecting us and that's why warren buffett just on monday has said we need to focus on cost. they need to take 2,000 pages of the nonsense out of the bill, focused on getting the costs under control. and so many of the ideas that the republicans have brought forth are focused specifically on that. so i would ask my colleague from florida, are there things you have heard from the people in your state that you might want to add to this discussion right now? >> well, i appreciate my colleague dr. barrasso for referring that question to me and certainly the people of florida are concerned about this bill. they want their costs to go down. they thought that the whole reason why we were doing this healthcare bill was to address the skyrocketing cost of healthcare. of 130% on average over the past 10 years. but what we find out with this bill is not only does it lower the cost of health insurance for americans, some americans are

going to have to pay more. so why would we undertake this huge enterprise of creating a trillion dollar new program, multitrillion over time, a program that cuts a half of a trillion dollars out of healthcare for seniors, raises taxes by a half a trillion dollars. why would we undertake all of that if he with weren't going to reduce the cost of health insurance for most americans. that's what we think we're doing here. they don't think we're creating a brand-new entitlement program. they want us to lower the kos. so republicans have put forward proposals and some of them my colleague just mentioned. allowing insurance companies to sell across state lines. trying to get rid of junk lawsuits. my wife is pregnant with our fourth child. she goes and sees her doctor in tallahassee, florida, not a big town. he's paying $120,000 a year in medical malpractice insurance. that affects not only the cost

of care but it also creates this defensive medicine which runs up costs. we've got some real concrete step-by-step solutions on our side of the aisle that will make things better and reduce the cost of healthcare. one thing that i've had the privilege of working on with dr. coburn is this idea of going after waste, fraud and abuse. in the medicare system we know there's $60 billion a year, $60 billion in waste, fraud and abuse. my state, florida, unfortunately, is the capital of this healthcare fraud. i'll give you one statistic, madam president, that is really, i think, says it all. in miami-dade county, we have 7% of the country's aids population. yet, reimbursements for healthcare for aids patients in miami-dade county constitutes 83% of what's spent in the entire country. now why is that?

it's because folks are committing fraud on the system. healthcare providers and warehouses and strip centers and nonexistent centers at all. they are not providers. they are just scam artists. running the codes, running these medical codes and submitting them to medicare and medicaid. and billions of dollars are being lost. why shouldn't the first thing we do is fix the system we have? stop this bleeding of billions of dollars and put it back in to medicare and medicaid, which are programs that are going broke. the president is right. there is a healthcare emergency in this country. and the number one emergency is medicare and medicaid. not creating a new program. we should make sure that medicare for seniors is viable. we should stop the waste, fraud and abuse and get the money back in medicare. and then we should do the same thing for medicaid. and once we've got those

programs more solvent and we meet the commitments we've already made, then we can take the step-by-step approach on trying to provide lower cost health insurance for people who have it. and more access for people who don't. so we have offered solutions. but as we understand it, what's going to happen is they're going to take the senate bill that was passed on a party line vote here in december on christmas eve, send it over to the house and then try to convince the house democrats that they're going to have a makeup bill that's going to fix their problems and try to send that over here and make us vote that on a simple majority which is not intended here. i'm new here to the united states senate and i want to defer to my colleagues and perhaps the senator from oklahoma city could speak to this and whether or not that's the appropriate thing to do. and also speak to the good step-by-step measures that we have to combat the problems with healthcare.

>> well, i thank my colleague from florida. i and senate barrasso extended it with the president and what we were going to take four to six weeks to see if we couldn't work out some compromises to get a bill that would the american people would accept and we would accept. and today i would tell you today marks a week since we had that and we had an announcement yesterday that it's time to quit talking. it's time to quit negotiating and they're going to ram a bill through. and i think there's a big contrast -- i appreciate what my colleagues have said. the problem in healthcare in america is cost. and if we don't attack the cost, whatever we do is going to expand the amount of dollars we spend on healthcare if we add people to it. but if you attack the cost, what you can do is add more people with no increase in cost. and the thing that denies somebody access to healthcare is

not not having an insurance policy. it's having a cost of the system that is unaffordable. whether you have insurance or not. and so when you look at it, malcolm sparrow from harvard said he believes 20% of all the billings in medicare are fraudulent. well, that's over $100 billion a year. that's $100 billion in just in medicare. we have good indications there's $15 billion in fraud in new york city alone in medicaid. just in one city. so why would we not go after the fraud, which is the second largest component of wasted dollars in healthcare? well, some of it the president has accepted. but the number one cost that it does not benefit anybody in this country is defensive medicine. and defensive medicine costs up to $250 billion a year. and let me tell you why it is so bad and it's terrible for us to ignore that. it's not just that we spend

money doing tests on patients. when we do tests on patients, we put them at risk. and let me give you an example. if you go to any emergency room in this country this summer, on a weekend you'll see a kid in there that has gotten hit with a baseball. and what the standard is now because of the legal system in this country is that child is going to get exposed to radiation for a ct scan. not because they need it. but because the e.r. doctor needs it. and the standard of care should be is if you have reliable adults around that child, and the child has no neurologic damage and no neurologic signs is watchful and waitful expectation in case some signs show up and then you return. but the legal system in this country has entrapped us now where we do hundreds of thousands of ct scans on children because they get hit with a baseball that none of them need. the ones that have true

neurologic changes do need it but the vast majority don't. well, there's billions of dollars just in one summertime event that gets chewed up at a level because we've added it on to the cost. not because a patient needs it but because the system demands it because doctors have to protect themselves against untoward extortion lawsuits. so to ignore that as a part of this bill says you're not going to go where the money is to cut the costs. and so, you know, i summarized just very shortly -- we've said that republicans don't have any plans. we haven't said that. the president has. and then when he acknowledges a plan, he acknowledges only one that covers 3 million. i have a plan, senator burr has a plan. senator greg has a plan and senator enzi has a plan. they all cover 20 to 25 million more americans. they do it by not raising taxes

and stealing money from medicare which has a $37 trillion unfunded liability over the near term. but we do all that without increasing the cost. so we get a true expansion of coverage without an increase in costs. so what we would actually think would be the right thing to do would be centered healthcare on patients not the government. you know, this plan has 88 new government plans. it has 1695 times where the secretary of hhs will write new regulations for healthcare. new regulations. what do you think the consequence of complying with those regulations is going to be in terms of costs? so we're adding more costs into the system that doesn't go to help anybody get well but become compliance costs. so we believe in patient-centered not government centered. we believe in expanding the options not available to patients. not expanding government. we believe in increasing access not increasing taxes. on people.

we believe in reducing costs not quality. and the bill we're going to have before us, no matter what the shenanigans are that they are going to pass doesn't attack the underlying problem and that's cost. and until we look at costs, we'll never get out of the problems with medicare and we'll never truly improve access for americans. and i'd yield to my colleague -- >> i think senator lemieux and i both agree on this. we owe a great debt of gratitude to our colleagues and to our physicians for making it clear on national television over the course of 7.5 hours last week that republicans have positive ideas. ideas that will work and frankly ideas that the american people believe in. and so i am astonished really that after we had such a clear demonstration of ideas not only that are popular but ideas that need to be given a chance to

work, that the whole thrust of that 7.5-hour discussion has been cast aside and we're back at this proposal of passing the flawed bill with all of the mistakes that people on the other side of the aisle agree that we've made and signing it into law before we do anything else. now, i have some comments i want to make about what senator coburn called shenanigans. the reconciliation process. now, let me just say this. never intended for this purpose. an outrage, a nonstarter. i will not accept it. i advised, a real mistake, not appropriate, undesirable.

those are all comments of democratic members of the united states senate. about the concept of cramming this bill through and this procedure i described and then coming back with reconciliation. it's not simply a republican objection. it's an objection where we have our democratic colleagues on record. i hope they will recall their words. i hope there's not some pressure that is going to be issued against my colleagues in the house and in the senate to do something they don't believe in. simply because someone really wants it in the white house and is exerting pressure. the comments that i have read were all made by democrats. i happen to degree with that. -- agree with that. we have never under reconciliation attempted something of this magnitude and this substance.

and it would forever change the legislative process in the house and senate of the united states if we begin with healthcare. and i'll be happy to -- >> well, justify may -- and one of the phrases that you didn't use was that of the term of using reconciliation was called highjacking, highjacking the system, highjacking the way that this works. and that specific word was used by then-senator barack obama when he was a senator. very much opposed to this approach. one of the other things that he has said when we talk about the $500 billion being cut from our seniors on medicare -- he talks about a program called medicare advantage. well, that's only a part of the area that's being involved. and for people on medicare advantage and there are about 10 million on it and they like the program and there are some advantages. one, it actually works to help coordinate care. it works with preventive care.

those are things that are very important. but there are also cuts in medicare for nursing homes, for payments to doctors. for home healthcare, which is a lifeline for people. and for hospice care. for the care at the end of someone's life. that is all going to get cut under these $500 billion of medicare cuts. >> would the gentleman yield? >> absolutely. >> the one problem with the $500 billion worth of cuts -- if you read what the cbo said about that, is they said it's highly unlikely congress will ever effectuate those cuts. well, if that's true, then that means there's $500 billion in costs that aren't accounted for. so, one, you're either going to undermine the trust fund and actually lessen the available funds for seniors today or you're not and you're just using a ruse to say we're going to charge this to our children and grandchildren.

and having been in this body for over five years, this body won't make those cuts. and it won't do it. i wanted to make one other point. and it's this. we recognize there are difficulties in healthcare. we recognize that the number one difficulty keeping somebody from getting care is the cost of care. this bill does nothing for that. and i would go back and worry that when the president said we'll look at this for four to six weeks and now we're less than a week later and he's ramming it through, what does the american people want us to do. do they want us to create another entitlement system which every entitlement system we have today is bankrupt? and in creating that steal from the bankrupt entitlement systems we have today or do they want a commonsense approach that goes after costs that will lessen the costs of care for everybody in america?

because we will never solve the problem with medicare and its unfunded liabilities until we address the cost. i see the senior senator from arizona is here and i'm glad he's shown up. >> now that my two favorite doctors are on the floor, i would like to refer to both of them about a statement that the president just gave. and he said, quote, i believe it's time to give the american people more control over their own health insurance. i don't believe we can afford to leave life and death decisions about healthcare to the discretion of insurance company executives alone. i believe that doctors and nurses like the ones in this room should be free to decide what's best for their patients. by the way, i hope that from now on our doctors will be wearing white coats on the floor. it would be really impressive to me. but anyway, that's neither here nor there.

but isn't it true that on page 982 that it has created a new board of federal bureaucrats. the independent payment advisory board it's called required to make binding recommendations to reduce the costs of the medicare program? how does -- how does that work if the president is saying give the american people more control and there's an independent payment advisory board that's making binding recommendations? >> actually, there's three very worrisome provisions in this bill. one is the medicare advisory board that you just talked about that will decide what gets paid for and what doesn't. and congress will either have to agree to it or agree to some other cuts. the second is the cost comparative effectiveness panel which says we don't care what's best for you. this is cheapest so, therefore, this is what you're going to get. which ignores the doctor/patient relationship in terms of what's best for you as an individual patient. and then finally the task force

on preventive services which we saw during the debate in december had recommended women under 50 not get mammograms because it wasn't, quote, cost-effective. well, when you look behind that data, it's 1 to 1400 versus 1 to 1760 versus 60 years and above versus 50 years, 40 to 50. so what happens is you now have three government agencies that are going to step between the doctor and the patient when it comes to medicare and medicaid in this country and actually it will fall over and they will mandate it on your own private coverage. so very, very inconsistent in terms of saying you want doctors to be in control of healthcare but you have a bill that has three organizations in it that are designed to allow bureaucrats to make the decision on what your care is going to be. >> and i would ask dr. barrasso, if these provisions were operative at this time, how would that have affected your practice? >> well, it would have affected me in several ways.

it would have affected -- it would have affected my life in that my -- you know, my wife, bobbi, is a breast cancer survivor. she had a screening mammogram when she was in her 40s. something that this task force on preventive services says was none necessary. -- wasn't necessary. if it wasn't for that screening mammogram, her cancer wasn't detective and by having a screening mammogram which the american cancer society and others recommend for women in this country, by her following the guidelines of the cancer society as opposed to this new government mandated guidelines her cancer is detected. she's had three operations. several bouts of chemotherapy and is alive today, a breast cancer survivor six years later because she did what scientists, what those who know what's best for patients recommended.

as opposed to what a government panel might have recommended trying to focus on their cost-effectiveness. >> the patient comes to you with a certain orthopedic requirement that requires a certain level of treatment. what does that do to you as a physician as well as the patient? >> well, it puts -- it puts the government between you and your patient which is what you never want to have happen. as dr. coburn said, that is the wrong approach. it's not the way medicine has ever been practiced in america. it's not the way patients want it. it's not the way doctors want it. we don't want bureaucrats whether government or insurance company bureaucrats between doctors and patients. as we saw it at the healthcare summit on thursday of last week, the president kept talking about covering people, health coverage. he wants to put 15 million more people on medicaid, a program where we know half of the doctors don't see them because the government pays so little.

a program where the mayo clinic which the president has held up as a model for healthcare in america, clinics we can't continue to see medicaid patients from a number of states because we lose too much money. and now they've said the same with medicare. so when they're talking about $500 billion of cuts to medicare, the mayo clinic, january 1st, said we can't handle additional medicare patients because last year we lost they said $800 million by taking care of medicare patients because the government pays so little. >> on the issue of becoming between the doctor and the patient, this legislation, the 2,733 pages has 159 new boards, bureaucracies and programs created. 159. and when the president says that you will be able to choose your healthcare, how in the world

does that in any way comport with the fact that it requires every american to buy health insurance whether they want to or not. which to me raises a fundamental question. a constitutional question. where in the constitution does it say that we require every american to have a health insurance policy. and finally, i would ask my friend, you know, there were very -- a lot of impressive statements made, i thought, during the blair house meeting. and i thought, frankly, dr. barrasso gave one of the most impressive ones that i've heard. and the perspective from practicing physicians is something that has all too often been absent from this debate. but i'd also ask my friend -- i know he paid attention when congressman paul ryan gave his statement as far as the budgetary