buyers. very hard to get the word out. >> any way you can determine the degree to which taxpayers have taken advantage of these provisions? i know it's hard to determine. your sort of -- your gut take or your -- >> we have -- i don't have at hand any way to say that x percentage could have been taken it and x minus y did. we have the numbers x percentage did take it. nina has raised on first time home buyer in total 2009, 1.7 million folks, this year another 700,000. we have those sorts of numbers to make available. my time has expired. mr. wyden. >> thank you, chairman. and thank you for holding the committee. many of the restaurants are letting people eat for free today.

you can get free coffee and free tax bites at cinnabon -- >> what are we doing here? >> i was going to ask. it's because chairman baucus is trying to get everybody those goodies. my favorite, mr. chairman, was apparently mor tins is giving some kind of discount on some of their restaurants to the cpas. it downed on me maybe the cpas are the one group that gets so much income out of the tax code that they can afford mor tins. >> that maybe. but the service has delayed the date on which the brokage firms need to file their 1099. i've talked to preparers that said that's put a huge burden on them to get their tax returned processed by april 15th. that might be something we should look into. i'm sorry. >> no, no.

fair point. let me ask you about one idea that i've been interested in, ms. olson, the irs already gets a substantial amount of information say on an individual's wages and their interest and their investment income. the value of the mortgage deduction they are getting. one idea that has become popular that i've been interested in is the idea of letting the taxpayer on a voluntary basis, in other words, this is the taxpayers chose, if the taxpayer chose to do so, the taxpayer could ask the internal revenue service to in effect take the information they already have and in effect send them what amounts to their judgment about what is owed. and the taxpayers could then get it and modify it and file it and do these various things that ensure that it actually reflects

what they believe is owed. but it seems to me like an attractive kind of option. and something that could substantially short circuit the more than 6 billion hour that is people go into preparing these returns, $180 billion that's spent preparing these returns. my question to start with is if the irs had enough time for a transition because you obviously can't do this over night. i think chairman baucus is right about some of the hassle, you know, already. if you had enough time to make a transition, what do you think about the idea of letting the taxpayer voluntarily request something like this? >> well, this is something that we covered in this year's annual report where we looked at how could you get that information available. because we think it would minimize error, certainly be a burden reduction for the

taxpayer and it's also key to the -- that the irs had this information before returns are filed as we have more and more programs that are relying on information reporting such as the credit card reporting, some of the health care provisions, the basis reporting. the problem is that the irs right now doesn't start getting the data until sometime in the mid february and we don't really start pulling it together until may. and that's partly a problem in that we've pushed the filing dates back for the payors to the end of march on some of these things. so what we recommended was that congress require treasury to study what would it take to get the information as quickly in a usable form to run against returns but also make available to taxpayers as they wanted and report back in a year and some

of our suggestions has been you push forward the date in which payors have to get us the information, you figure out whether we could get the w-2 information directly, does it need to go to social security first or can we scrub it and clean it up as easily as social security does, and then you might even want to think about right now taxpayers get their w-2s on january 31. you might want to say in this day of electronic filing, january 15 and get us the information early on. very early on, it could be available to taxpayers. >> it looks to me like there are a fair number of re abuses with the refund anticipation loans. these are the ones where the person gets the short-term cash advance from the preparer end is backed by the refund. how serious of a problem do you

think this is? if you think it's a serious problem, what are you doing about it? >> well, i think it's a very serious problem. i know the irs is in discussions with various treasury and banking regulator officials about what they can do. our recommendation has been that you do not give the debt indicator on the refund anticipation loan until you have run the return through all of our fraud checks and eligibility rules. that in itself will slow up the process and increase the risk for the lenders so much that they will look elsewhere to make their money. that's my approach. >> thank you, mr. chairman. thank you, senator. >> thank you very much, mr. baucus, for having this hearing. this is obviously the right day to be talking about the filing of tax returns and problems that need to be addressed there.

today we're also going to introduce the taxpayer build of rights that contains provisions to improve services and put in law some of the protections that we think are important. it supports representation clinics and tax preparation programs such as the one we have in new mexico that's been extremely successful called tax help new mexico. it advances oversight of paid tax returned preparer which is what ms. olson just responded to senator wyden's question about. enhanced law income taxpayer access to financial institutions and thus a variety of other things. at any rate, i hope we can consider that legislation this year. i know it's difficult to get

anything considered this year. but this ought to be some good government legislation that could be acted upon much of the bill many of the provisions in the bill were passed out of this committee in the 108th congress. but were not acted upon by the full senate. i hope very much we can do -- act on them this year. let me ask ms. olson one the issues that you and i spoke about when you were kind enough to come by my office a few weeks ago was this whole issue of liens and the concern that you've expressed about the irs lien filing policies causing harm to taxpayers without necessarily increasing irs revenue collections in the process. i guess i'd just ask if you could describe the concern you

got and the solution you think we should consider. >> well, what we identified was that irs over the last few years has been instituted policies where liens are essentially filed automatically. if the taxpayer meets certain requirements of without really looking at the taxpayer specific facts and circumstances. and we look further into what the effect of that lien filing on the taxpayer? we learned that it caused the taxpayer credit score to plummet 100 points immediately and even when the taxpayer paid off of the lean or it expired after time it sat on the credit report for years and years and years. even though it might not be enforcible. and that has a huge effect on the taxpayers availability and their ability to pay the future taxes. we did a study that showed the payment that we could track very few payments and dollars came

from liens. the vast majority of payments came from collection activity that we needed no lien involved in. so we felt that we were really doing harm to taxpayers rather than having the lien be helpful. >> i think that's a good suggestion. i think if there's a way we can act on that, it would be good. let me ask also on this issue of return preparer standards. i know that the irs is beginning to move on that issue. and trying to put in place initiatives to require certain competence by preparers and certain seventyifications.

mr. miller, could you explain that? perhaps you did in your comments before when i was not here. if you could explain the status of that, it would be helpful. >> certainly. we did a six month study on the issue. we came out with some proposed recommends basically that would require preparers to actually get a preparer identifier so we would know and be able to track through the system what a particular preparer was doing in terms of returns. we're going to require testing for those other than attorneys and cpas and agents who have other testing. we're going to require that continuing education occur for folks who don't otherwise have a requirement. we hope to get the registration in place for the 2010 filing season. and that's our effort at this point. over the next three years

probably we will be testing people in and then we will be fully up and running. >> all right. you're going to exempt attorneys from the testing requirement? what's the -- what's the underlying assumption that justifies doing that? >> the assumption around cpas and attorneys is that there are otherwise bound by some other standards in testing procedures. there are also some limited legal impact that limit us in that regard. >> well, as one attorney who went to law school a long time ago, i don't know that exempting lawyers who the testing requirements is a vise. i'll defer. thank you, mr. chairman. >> thank you, senator. senator grassley. >> ms. olson, in your 2009 annual report, you report that you issued 16 taxpayers

assistance orders. the examples listed in your report seem to indicate that they are good examples of the use of liens and levies. i understand that you may have issued three for just one taxpayer including one to the commissioner to request that a lien be withdrawn. further the taxpayer lawsuit job because the lien impacted his credit rating which was not tolerated. could you describe the details surrounding this case to the extent possible and whether you think it resulted in the best outcome for the government? >> yes, the taxpayer has given me permission to discuss the facts of his case so the normal confidentiality provisions don't apply. this taxpayer had lost his job -- he had actually had his first employment reduced because he was in a particular industry that did due diligence and found a lien on the books.

this taxpayer was working with the irs to pay in full the debt without the lien having been filed. while he was talking over a period of three months or had seven or eight phone calls, his partner was boring the money from the partner's account. it was money the irs couldn't get his hands on. because the dollarment was over, they were going to file a lean on him anyway. which made the taxpayer angry as the record noted. would have made me angry too. ultimately, the taxpayer paid the face amount of the lien. the irs refused to withdraw the lean so that the taxpayers could get the employment and lost their job. that's what led to the three tax assistance orders issued in that case.

ultimately we we showed the irs that the reading of the law was incorrect. they believed they could only withdraw liens where congress had made a mistake. congress in 1996 passed a different provision and it made economic sense for us to have a taxpayer earning money to pay their debt. >> well, so the bottom line of it is if you are working and paying your debt, you are paying your taxes too and continue to be productive. >> yup. >> mr. miller, ms. olson's testimony about the irs's use of lien as to what i learned about the use of liens conversation i had last fall. in that call we discussed irs decision to file liens against taxpayers subject to the tax shelter disclosure penalty even though the irs had agreed not to pursue collection against such

taxpayers until congress had a chance to change the law. in general, i'm disappointed and the lack of judgment and discretion and exercise by irs employees, agents, lawyers, collections and appeals officers in certain of these cases. and in some cases, it was an irs regulation that prohibited the irs from abating the penalty such as by not allowing the filing of amended returns. in another case, irs did not consider the negative impact to a taxpayers line which was critical to the business before filing a lien. mr. miller, everyone including the president and treasury secretary agree that small businesses are economic engines of our recovery. the health reform bill imposing new burdens on the small businesses. so while i appreciate the commissioners statements regarding a kind policy of restraint for individual mandate, i would like to what happens the irs will be doing to help small businesses comply with the multitude of new laws

and regulations. specifically, will the irs develop the communications or outreach for small businesses and develop a similar policy of restraint for the employee mandate, and if you think i'm too much concerned about small business, before you answer that question and that'll be my last question, i'll give you the background that when we set up the commission, prior to 1998, and i think it was a couple of years before that, we reported 1998. it was because there was a lot of lack of concern about small business and outright harassment of small business that we don't see in regard to big corporations. so that's why i'm coming from. if you could answer the question, i would appreciate it. >> certainly, senator grassley. first, with respect to whether we will have an outreach plan for small businesses as well as other important components of the economy, yes, we certainly

will do that. we're working on that as we speak. that's a -- as we approach the health care we will do what we do with any piece of legislation which is approach is on a holistic bases beginning with communicating two people about what they are entitled to under the bill and their responsibilities are making available folks to answer questions, putting in place system that is will allow the processing of returns. and obviously we'll have an enforcement component as well. on the second piece as to whether we will utilize similar restraint with respect to small business, i don't have an answer to that. i do know that when you talk about the individual mandate, congress acted there to limit the number of tools in our tool box. they did not act with respect to small wisconsins, but it's my assumptions that we will work together to get to a place that

we are comfortable. >> thank you, mr. chairman. >> thank you, senator. let me ask you, mr. miller. i think this is also true in the state of iowa. there's no permanent appeals officer. irs appeals officer in the state of montana. i think it's true in the state of iowa, there are 18 states without one. some of our states are pretty big. it takes a long time to try to drive to them. and as a neighbor of other states. what about that? why can't we have an permanent appeals officer from montana. it just seems to me some of these other states too, all 18 states i'm not just going to say montana only. but, you know, if somebody wants to appeal and has to drive to salt lake city or denver, that's a long drive. >> i would agree, mr. chairman.

it's a long drive. i don't know what the -- why appeals officer are where they are. i can say two things, one is it is about resources and secondly, we are face to face and the that's the case today. whenever it makes sense to have somebody in montana or iowa. i don't have an answer to that today. i can come back. >> one thing that's always struck me over the years is that some cabinets, some departments have a lot -- have people out in the field. frankly, they do better and there's more -- better report with the people and the department. compared to other departments. let me give an example. in my state, montana, there are a lot of usda personnel.

there are very few housing people in the state of montana. and there are -- and the opinion that montanans have the state is very high. certainly higher than the department of housing or development. because there's nobody in montana. but we do have a lot of issues with that department. and i'm just throwing ideas out to give, you know, the marvels of modern technology. as you mention, not all appeals will face to face. i can put people out in the states. and they can construct not only face to face appeals but also they can do some of the appeals by correspondence. it might be in some other state. at least you have people there in the state. it gives the appeals officer and his or her people a sense of that state too. and it gives access to people in the state in montana, for example. to appeals officer if the taxpayers want to appeal a

decision. i think it's good to have people in washington, d.c., i believe that very strongly outside of the major cities. get them out in the country. so they can better understand what's going on. >> yup. >> we do have appeals officer that are outside of washington. >> i'm sure you do. you do in 32 other states. but you don't in 18. >> yeah. i'm sorry. i will come back to you with a more detailed answer. i'm not sure what the thought process is. expect again we have a limited amount of resources. there are 2,000 plus appeals. >> no, you didn't hear my point. take those same resources and put them in other places. you can do a lot of work by electronic correspondence. it likes a lot of time for the circuit rider to get there.

that's a lot of frustration for people. and frankly, of the executive branch of the treasury to address the tax camp. the last time the tax gap was estimated by, i think either treasury or irs was 2001. back then i think it was 340 billion of dollars. why? it's unconsciencable. if the irs does not more aggressively address the tax gap. these are taxes legally owed but not paid. it puts the burden on the rest of the taxpayers who are paying their taxes. what's the plan? i made this point constantly. i'm getting nowhere. nowhere. it's just a stone wall. not like you are protecting all of these folks that aren't paying their taxes. >> i don't think we're trying to do that, mr. chairman. >> well, it appears that you are

not doing much about it. >> my understanding of when we will update the chart that we have is at the end of 2011. that's the current target. what we are doing is multifaceted. we talk about some of the things this morning. but i split up what we are doing currently, what we will be doing and what i would ask to help us with. >> we'll help, because we don't have a plan. >> the first is what we're doing currently. we've talked about return which is leveraging with respect to individual taxpayers. we've talked about offshore compliance which is work that we're doing. and we have, in fact, increased the number of examinations, we've increased our nonfiler work considerably over the last decade with respect to where we are headedded, congress and you in particular sort of helped us immensely in terms of the new information, streams of information we will be receiving and we will be able to do that

matching as it comes in. that will target specifically the under reporter portion of the program. whether it's credit card, whether it's basis reporting, these are thing that is are going to help in the next few years. what i guess i would ask famously the 2011 budget support which provides staffing for those of some, which provides a couple of ideas as to rho we can move forward, including a employer independent contractor provision that will help us get at misclassified employees. another key component of the tax gap. >> all right. you know, i asked secretary paulson -- in fact. i want to make sure i state that when he was secretary, he said a goal for voluntary compliance was 90% by the year 2017. compared with the rate of 84%

i'm told in 2007. so that's 6 percentage point over 10 year. of that was the goal. i asked treasury and irs developed a plan. so i'm asking you again, i'd like to -- what's today? tax day couldn't be more appropriate. we meet again next year, i'd like to know the degree to which you progressed. i want to hear your plan. by what percentage, what's the percentage progress? . >> understood. i want numbers. i don't want goals, i want numbers. i want data. i want metrics. i want benchmarks. i am fed up the failure of the treasury and irs to adequately deal with this problem. fed up. there's one way to change that. that's to produce. we want to help. we will help. but i don't get any sense that

the irs to really significantly addressing it in a meaningful way. i keep brushing it off. brushing it off. that's how it appears. senator wyden. >> thank you, mr. chairman. i share your view with respect to the tax gap. i look toward to getting that information. i think it's absolutely pivotal. a couple of points, one, of course, ms. olson, if you simplify the tax, you know, system, it'll be easier to collect taxes owed, isn't that correct? >> one would hope so, yes. now the overwhelming majority of taxpayers in this country are honest, they are people who work hard and they play by the rules. there is just no question about that. but it seems to me that taxpayers that i'm speaking about, the overwhelming majority who are honest often make inadvertent errors, they end up

over paying their taxes, or they under pay their taxes because the system is so complicated, it's not possible to get an accurate assessment of what's owed. how rev hasn't is that? i'm struck when i listens to folks at home in oregon that there is a very, very substantial problem. could you kind of put some numbers around it? how much people honestly trying to comply with tax law get snared in this bureaucratic, you know, water torture and even over or under pay? >> the only number that is i have seen from the 2001 national research program audits of individuals where we asked audits to identify whether an error was essentially intentional or inadvertent. and the auditors only classified

3% of the errors of the returns that they audited -- this is a random sample of individual taxpayers as intentional. but -- >> so -- >> now the -- the irs always say that is we didn't give good guidance to the auditors. they don't know what they answer. that's the only number i've seen. >> and i recognize with your caveat that these are not always, you know, scientific in every particular. but what you have told us is what is my seat of the assessment. it's the vast, vast overwhelming majority of instances that involve people who are anxious to comply with the rules, they want to be honest, and just getting snared in the net of bureaucratic torture. and that is essentially what i think has to change. now my view is -- and i think y'all have recommended. we aught to have the 1 page

1040. it aught to be one page, 30 lines. this has been recommended over the years by democrats, republicans, all aboard. absence legislation. i don't think we're going to get a one page 1040 form. do you agree? :

this destroys business the prospect of certainty and predictability and the same is true for individuals and prepares of course very frustrated as well because you try to get accurate answers to the clients. how serious is the problem getting consistent answers from the irs and what to be done with it? >> this is a result of the complexity of the law and the response when the accuracy rate went down several years ago was to limit the questions they what the answer so we've gotten a

very high accuracy rate in the 90s on the phone. but they get there by taking off all of the difficult questions or things the irs called out of scope which doesn't solve the problem. the problem is the law is complex and difficult for the irs employees to answer a particular taxpayers questions accurately, consistently. >> they try to solve the problem by pretended that doesn't exist. >> that's my assessment. >> thank you for holding this important hearing. >> thank you. senator nancy, you are next. >> thank you, mr. chairman. early eckert you asked some questions i want to delve more into. this will be a question for mr. miller. is the onerous restructuring the 1998 commissioner the internal revenue service shall insure an appeals officer is regularly available within each state.

yet wyoming and eight other states don't have such personnel physically located within their borders. the appeals process is the last step processors to to argue the merits of the return before another decision is recorded and collection process begins. so i think it is critical all taxpayers even for all tax payers have unfettered access to the irs officers. once that understand the area. wyoming is a state of high altitude and global to and lots of roads and but somebody has to kind of understand that to understand the people that live there and i realize the act also permits the irs to video conferencing in rural areas but i don't think the nation's founders guaranteed rights to two process under the constitution. i know in some circumstances that could be hamdi but videoconferencing doesn't give

you all the body language and capability. i understand the with the agency budgets are strained the bottom of asking to hire new staff. i think it is perfectly reasonable to suggest the irs redeploy existing resources to provide at least one full time appeals officer and one full-time settlement agent in every state. would you agree to assess the feasibility of doing that redeployment so there would be irs resources that would guarantee a full-time appeals officer and full-time settlement agent per state? you don't feel they would be busy enough of the state they could drive into the other states or thrown into the more popular states that we would like for them to be in there and i would hope you would agree to get this assistant to the committee in a timely fashion. i'm sure my colleagues from arkansas and idaho and north dakota would be interested in

the finding since they are two of the appealed that lack the appeals officer and settlement lights. >> understood. we will be glad to take a look at that. >> i might ask to take a look at it to send a letter back to this committee after you've made that assessment. >> this is of critical importance to almost a majority of this committee. we would like answers on that and i have had comments from our tax payer advocates in the state about what a difference there would make and it seems just as reasonable to have people come from wyoming to other states or video conference in other states and wyoming and i ask the chairman -- >> thank you very much. now we are going to hear from the senator from kansas.

>> i think that is [inaudible] the member for his alleged work senator enzi as well and think you folks for coming up in the wood is a busy time for you and taking the time to come up and try to answer the questions. as you know most of the questions have been about the mandate that individual's purchase health insurance and basically the bill imposes a penalty that would be collected by you folks for those that fail to obtain the irs obtained insurance. i think that the rule will be straightforward. it's great to be added and mistreating the tax provisions. i think there was a statement made by one of your folks and i

would like to know how will people prove to the irs they have health insurance? how will approve the venture and speed reported to the irs? i read several reports in the press there's been a lot of confusion about this. is this going to be a form of a 1099 the detachment from an insurance company or what? how are they going to prove this? >> senator, that is basically correct. the bill in the beginning stage is looking at the systems and all of that and we can get into that, but the bill itself indicates insurance companies will be sending 1099s. our thought is that is how we will be matching the yes and no answer as to whether you have eligibility taken up by a plan that meets the requirements under the law but the insurer is making a determination. probably in all likelihood we are not going to look behind that.

we are going to receive a 1099 that says yes or no. if the answer is no we will talk to the taxpayer. we will do that of course no doubt. >> the next question how with the irs be about to cross check or verify the information submitted by the taxpayer with information submitted by the insurance provider. there is a forum in massachusetts they call it the tanned 99hc form. that is an additional three page tax form and tim page instruction booklet. is that what we envision for everybody? >> i'm not familiar with the form, senator. i don't think so -- >> i hope not. if it were three pages from the standpoint and ten pages of the destruction it would probably be six and 20 at least. what will happen if an individual does not purchase insurance therefore required to pay a penalty initially as little as $95 increasing up to 695 per person a year how would

you collect the penalty? >> with respect to the individual mandate, congress has been very clear in terms of the rules we can use and we cannot. you cannot use levees. it's not a criminal penalty. but there are tools we can use and we obviously will be notifying folks letting them in there with do we have these classrooms. >> as i mentioned the matching program we will be sending out a notice that we happened to notice we didn't get a 1099 with respect to health insurance here and an explanation of that. >> we have a highly mobile society here within that particular group as well as being highly mobile. i don't know how you will keep up with that by mail, i guess it's mail. we will let that go. let me just point out to set you are still in the process trying to figure that out and i understand that are trying to implement and dread plan for contingencies.

everybody does in the business community. every health providers sitting down there with their lawyer, c. p.a. and actor larry. this is the lawyer, cpa at to react i think that day divided it up and they keep coming to my office and there's a gentleman over here to my right asking these questions. if an individual doesn't have a tax liability, doesn't need to file returns that is required to pay the penalty for not having insurance how will you enforce this provision? >> you kind of stepped beyond my understanding of the bill. if there is no filing requirement i will have to come back as to what the health bill requires that situation, center. >> i'm down to 14 seconds, but the health care provides a tax credit for small business for two years to help manage the cost of providing mandated health the germans to employees but there is a cliff in the second year where the credit

expires. what would be the cost of small business? have you made any kind of estimates or guesstimates to provide health insurance without this tax credit? what will be the cost of compliance for small business? that is a very key question. can you comment generally if you don't have a specific answer the cost of compliance for small business. >> i don't think i have any numbers in that regard from the irs. >> but you think you might have? >> i'm not sure the irs would be doing the analysis on that. we are administering the provision as best we can. >> who would? >> i would assume -- >> if we ask the cbo is that the answer? >> it is possible. we have responsible over administering the credit and they are active in terms of making sure folks know it exists. >> would be the compliance for indigenous and families to meet the individual mandate requirement that requires individuals to purchase entrance to prove the evidence and pay a

penalty for not obtaining insurance. it gets back to that individual and the individuals cost and what they are obligated to do or not obligated to do i think that is a question upon it but if you would like to comment on it and also your time is more than expired. sprick thank you. i might also add there is no mandate for any small business with 50 or fewer and we use. >> i just have one question for mr. miller with regard to the comments the national press club on april 5th in that speech indicated that the individual mandate would be enforced through matching program of some sort based on insurance companies providing 1899 document to an individual who would attach it to the return. then in a recent television interview he stated the irs would not be auditing individuals to check their

insurance status. this position was then reiterated today in "the washington post" op-ed. what incentives to individuals have to purchase insurance they know the irs won't be checking and will be seeking to collect individual mandate penalties? >> we will be looking, mr. brusquely. we will be corresponding with people whether that triggers examination or not it is going to depend on a given case. it's not likely what my boss was saying that is not the kind of case that we send out an agent to pursue it is the kind of case we correspond with a taxpayer congress limited the tools we can use but we will be talking to the taxpayer and we do have a refund offset mechanism in order to enforce the provision. that is in our toolbox. >> let me give you this, some

idea something could happen, so if you have matching which is one of the ways of checking if an individual doesn't purchase health insurance and it wouldn't be receiving anything from the insurance company and also has no filing requirement with the irs with the irs the match against? >> again that is senator roberts question as well and i will have to -- i am not sure of the income levels and when that requirement triggers so i have to get back to the committee on that. >> thank you. i thought i would ask a couple of questions. how many dollars do you think are lost on the tax evasion each year? >> i know the numbers are thrown around a lot, mr. chairman. we don't have an estimate on that. we don't know what we don't know unfortunately is the answer.

>> is there a way to find out? >> ultimately yes. we obviously have done i believe some very good things in the last 12 months in this area. and congress has as well as you are very much aware and as supporters are on the fact of the bill is going to get a much better sense of what is out there as people either come in or for an organization's become subject to the 30% withholding alternative so that will give a much better feel for what's out there. >> that is a provision that we put in in the higher act. >> yes, sir. >> how much do you think that you will clamp down and that local? >> i think i started with the statement we don't know what we don't know. the fact is going to give much

more information to know more and so the on a certain part should be reduced considerably within the next couple of years. >> what questions should i ask you next year when we have this hearing? >> i think by this time next year we will have a much better sense of our next targets in the offshore area. i think it would be fair for this committee to be looking for a much more robust discussion on where we are on health care and much further along on credit card reporting basis reporting in fact the information tools you provided us we should be prepared to discuss a much more detail. >> a year is a long time from now. some of that can be addressed earlier don't you think? >> certainly. and we are not waiting for the hearing to move.

some of the information reporting requirements are not yet triggered. they will not be in effect yet. certainly offshore will have made significant progress i hope. >> this is a little bit in complete this answer of yours. basically saying you don't know. help us figure out a way to get that information or then you just now said. maybe we should meet again six months from now. >> certainly willing to do that. >> do you know you well know more in six months and now? that is enough to make progress report? that's meaningful? >> of sure? >> we will be much further along in terms of the outcome of the monetary disclosure program on the outcome of the john doe work

and in follow-up investigations as we pursue other leads in the information. >> how will you know how much is lost offshore. >> that does have to wait until fact of reporting comes in and that isn't a couple of years off. >> why does that takes a long? >> again, we don't know what we don't know. we don't know who is holding off sets out of short. >> why does it take so long to figure that out? >> there is no reporting of that or they are not reporting accurately and the leverage points are being treated by a factor which will come into play in a couple of years. sprick you have to refresh my recollection. >> it is requiring a dupe qualified intermediary program and increased reporting both on the individual side with respect to the bank accounts that i might hold off shore and also new withholding regime whereby -- >> as we've just been

discussing. isn't that the 30%, potential 30% requirement of foreign banks to report? >> correct. >> that is a fact of? >> along with beneficial ownership and statute limitations a whole host of excellent provisions. stat you are very welcome but i can't figure of why it would take so long to find out how much we are losing off shore. >> [inaudible] >> you can't answer that question more quickly? in respect of what the law says why don't you come back and tell what changes you need in the law if it takes additional legislation. >> there are a couple of provisions in the budget along those lines. >> what are they? >> there is one about the transfer of intangibles overseas to the low tax jurisdiction and there is also the removal of a

deduction for certain premium payments to u.s. foreign affiliates for the reinsurance so i would commend those to the committee. >> would be those provisions to deal with offshore loss? >> i think they will help in terms of international, the shifting of income overseas and they will help in terms of that not necessarily offshore accounts obviously but in terms of the largest business taxpayers shifting the income to a low tax jurisdiction and peacekeeping u.s. tax. >> i appreciate the intent i just urge you to be more aggressive. >> yes, sir. >> okay. thanks very much certainly need a year from now and follow-up on these questions and we may meet

earlier. we will meet earlier. and you are going to answer that question by senator enzi and myself. >> yes, sir. >> thank you. the hearing is adjourned. [inaudible conversations]

the senate is expected to consider a financial industry regulation bill within the next week or two. chris dodd, the chairman of the senate banking committee, came to the senate floor to defend the bill republican criticism. >> ra thank my colleague from arizona as well. i can to the floor of the united

states senate -- i come to the floor -- i can to the floor yesterday rather in response to a campaign by those both outside and apparently with inside the chamber trying to kill the wall street reform legislation and tie that reform to that bill to the bailout. i pointed out in those discussions yesterday the arguments are straight out of the wall street playbook written by political strategist as we know i submitted his political strategy he offered months or weeks before even consideration of the bill outlining politically how to defeat this legislation so even before there was a bill mr. wants had a strategy how to kill that. we have to look at the date of the memo to know what i am talking about. so yesterday we had a strategy basically written by him to avoid any accountability for the

mess they had made of our economy and it seemed strange, if it seems strange to you mr. president that is the minor league leader attacking the bill of being too kind to wall street by reciting talking points written on behalf of wall street will you are not alone obviously. that seems strange even stranger of course was the leaders' insistence of this legislation to partisan perhaps they haven't spoken of my colleague and friend from alabama the chairman of the banking committee senator shelby with whom i have spent months working on building consensus bush himself said months ago the need a key to consensus on as much as 70% of the bill would be presented in a matter of days perhaps the leader minority leader hasn't spoken to any republicans on the banking committee mr. president joined with democrats and a bipartisan working groups and i ask reform the back months ago each of which of those groups achieved real and meaningful

progress that is reflected in the bill that will be on the floor in a matter of days. that is amendments offered in the bill of those groups, democrats and republicans on the banking committee. perhaps the republican leader had forgotten as far back as february of 2009 on the insisted meetings with the treasury department as they were still crafting their plan for reforming wall street include republican staff with the republican ideas would be in the proposal from the very beginning mr. president. this morning the mcclatchy newspapers looked at the minority leader's accusations made in his chamber yesterday morning and found them lacking. please indulge me for and what mr. president and reading for this morning's newspaper let me quote if i can. mccaul accused the daughter of crafting partisan legislation. even though the banking committee chairman worked roughly half a year the republicans and the incorporated

many ideas into his bill. mcconnell also said the bill contained controversial bank bailouts but it doesn't, and of quote. and this from today's associated press reported. mccaul on tuesday said his views on the financial regulation package have been the most influenced by the bankers and kentucky his home state. degette such bankers are represented by the industry group that most favor setting up an advanced refinanced liquidation fund for the large institutions. the independent community bankers association. the very community banks that insist upon the $50 billion the banks point out they would be on line did rather than the tax year. the very banks my friend from kentucky claims are advising him on his views of a different view than he does about the bill that is before us. the newspaper article goes on and says mcconnell has also completed the democratic bill was partisan and the white house

intervened to stop democratic republican negotiations but senator christopher dodd from connecticut chairman of the senate banking committee negotiated for months with leading republicans and found much common ground. only to see both in his committee on fold along party lines. there you have it mr. president, black and white. the attacks of the wall street reform bill are wrong. this legislation for corporates the ideas come the democratic ideas and it includes one idea we all agree on indian taxpayer bailouts. just ask sheila bair the chair person of the federal deposit insurance corporation the organization that comes in and puts the and to family needs. she is also a republican, former legal advisor to senator bob dole. former majority leader minority leader of the united states senate and appointee of the previous administration the bush at ministration.

she told sheila bair told the american banker in an article published this morning mr. president and i quote, the status quo is bailouts, the status quo is bailouts. that's what we have now i go on to quote. if you don't do anything, she says, you're going to keep having bailouts, and of quote. and nothing is what we will have if members vote against to even come up for debate on the floor of the united states senate. sheila bair goes on to say it makes bailouts in this bill that will happen before this body it makes bailout's impossible and it showed. we worked hard to squeeze bailout language out of this bill. the construct is you can't be allowed an individual institution. you just can't do it. >> what the senat yield for a

questioned? a first of all i just want to say thank you so much for taking to the floor to explain to the american people the very strange debate we hear coming from the republican leader on this. i was stunned because i had heard he had met with the wall street people and the banks and then he said over and over again the same phrase yesterday which was repeated endlessly the bill that you had the president and the democrats are working on to get bipartisan support for which i commend you he said the bill would mean one thing and one thing only, taxpayer bailouts and we all know the entire purpose is to put an end to 1 dollar of loss of tax payer bills. so i have a question to ask you. isn't it my friends goal to get into a situation where the banks

and the super big banks in the investment house is paid into a fund themselves with their own money so that if there is any problem and the need to be wild down it doesn't cost a dollar of tax payer money that the fund will be paid for by these businesses themselves; am i correct on that? colleague from california. she says it so much more directly and clearly than my efforts here to explain this. she's just absolutely correct. this is the ira irony of ironie. the $50 billion provision in this bill was proposed by the republicans. i didn't come up with this idea. this was an idea that was brought up by the community bankers and republicans who said the taxpayer, if there's an unwinding of a failed institution, the american taxpayer shouldn't have to pay a nickel for that. it should be paid for by the institutions that put nem selves in that position.

that's what we did. in fact in the other body they have a stronger provision with even more dollars involved in t the irony of ironies, that a republican provision in this bill designed to insulate the american taxpayer from having to pay a nickel to unwind a failed institution, they're knew calling somehow evidence that this is a bailout. the only reason that money can be used is to bail out -- rather, unwind that institution if it gets that that situation. mrs. boxer: and further, if i could say, my understanding is, could say, my understanding is, >> i am understand that i write down this. i think the people appreciate the effort of the

fdic another way for taxpayers to be kept out of the problem because the insurance fund the banks are taxed and they put the money into the fund and if there is a bankruptcy you will covered your deposit is covered i think right now it is $250,000. so it has worked very well. it seems to me suddenly there has been a huge injection of politics as you point* out bipartisan support if an fact the republicans came you have a fee on these institutions to protect the taxpayers who

after meeting with the banks and it feels like to me with the big institutions have turned on their own idea that they're using the language that is the opposite of what they wanted to because as i understand it, and i am right if we keep the status quo and do nothing which is their idea we are in trouble because we saw what happened when these big institutions get in trouble mainstream starts to occur in lending stars to increase and we have seen millions of job losses due to that horrible time that we went o 12 commend my friend and urge him to explain to the american people the truth i am so tired of politics of securing the truth will we're not perfect the other

party is not perfect we don't have the ideas that will save four care every problem but we know one thing from a crisis, we have to turn to taxpayers what a nightmare think goodness by the way those funds are being repaid we're still out but the vast majority we will not go through that again. they gambled so therefore let's put something into place where they pay into a fund so if there is a problem in the future and they go bust we will wind them down and out on their dollar and i hope you will keep saying that because then a mind getting into debates with the other side as a matter of fact i think there are great differences between the two parties that makes our country great

because we all appeal to different people it is good for the stability of the nation but let's not come here with false debate with made up arguments because that only hurts the debate i just want to pray for my friend pence spend a couple of minutes for doing that. >> you only have to ask yourself you don't have to have a ph.d. in banking just ask the idea of requiring these institutions to put up money in advance so that if they fail they end up paying for the cost of one winding. who would object to that? who is subject the? and engender there it is not my idea brought to me buy the republicans it sounds like they have to put the money up are the ones that are objecting that are the large institutions that don't want to be assessed any cost associated with their mismanagement of an

operation i guess to make the case i know there are other matters to be heard but i want to think she the bear from the fdic for legal counsel and being the appointee of the bush to administration when she talks about our bill that absolutely this bill has been written specifically to end any notion of any kind of a bailout of the american taxpayer it makes doubts impossible and it should she says we work really hard to squeeze bailout and we did and she goes on to say if you cannot bail-out the individual institution you

can do it and of quote. to further stock bailouts i would tell you how by the requirements on wall street firms being too big and interconnected will cost these firms do a and should that not be enough regulators can use the power in the legislation to break those firms up before they can take down the economy of our country to stop bailouts by forcing firms dares don't have to pay one dime for that and they shouldn't do that is not enough it is eliminating any possibility for the government of the united states to bail the firms out. the wall street firms believe no matter how much we hate bailouts, if they are important enough at the

end of the day the taxpayers will come writing and on a white horse to save them just like they did under the bushes administration. this bill has as the white course. if they fail they fail. management gets fired under our bill the assets will be liquidated under our bill. creditors lose money under our belt and taxpayers don't pay for any of it under our bill mr. president. the bill stops the bailout. when indicating either the minority leader does not know what is in the bill or chose to distort what is in the bill and yet mr. president i read this morning in the "wall street journal" republican leadership and a "struggling to maintain a unified opposition and" going so far

to circulating a letter that each republican senator will vote to filibuster to keep it from being discussed. i hope that is not the case i cannot tell you mr. president and my 30 years what a denial of everything i have stood for and worked on with countless pieces of legislation sends for three decades that the members of this body who are spent hours with me crafting this bill including their ideas to than vote against even allowing it to be debated i know that cannot happen. i don't want to believe that 41 of my colleagues many of whom have worked with me on this bill will sign on to a commitment that they won't let it be debated or discussed for i have never seen anything like that in my 30 years prior worked tirelessly for months to put together a bill that

reflects various ideas. i have been criticized by the left and the right to. but i tried to put together a bill that what i thought was common sense or good legislation and i pray the news i am hearing of the 41 signatures have any idea what is it out and it signing onto a political commitment without understanding what is at stake by losing the bill to have the status quo remain pelops in place and taxpayers are exposed and the 8 million jobs lost and others that have suffered as a result get little or no relief. back to is a stunning conclusion if you will of the efforts that have gone on. it is not about us but the people out there who deserve far better than they are getting.

even after it has become clear the minority has little to offer except some false talking points verbatim from the big bank script to get the floor again this morning "the republicans believe the notion talks will continue. they will. mr. president as frustrated as i am my door has never been shot. the door is still open. to resolve and work together but i will not sit around days on end with the rope a dope never know who i am talking with if they have any ability to bring people to the table agree with my idea but i am still against the bill. why did i go to this process of agreeing to much of what they offered and not a single political blow to show for it and vote against debating the bill? why in the world would you go through what i just did

it to end up with this particular point*? somebody in for the minority leader that has been going on for over year so they will continue then again he was again made the false statement it would "allow tax pay-- taxpayer dollars to spell out wall street's banks there they go against the same mantra repeated abuse they've of the becomes true. mr. president i would say to my friend the minority leader if you want to continue the debate stop by filibustering the bill and maybe two or three people have seen it or how many titles are what it includes our what we tried to achieve under the bill itself. if you want to debate that is what this body exist for. let me also say that the debate will consist of democrats offering ideas and

it is a very complex set of issues and critical challenges and the republican talking points from the wall street playbook then count me out there will not engage in that kind of a debate or negotiation i have no interest in that whatsoever. i have a job to do and my friends on the other side of the aisle don't feel like doing their work to think about the millions of unemployed americans. they did not go to work because their lost a job created by the mismanagement of the failure to step up to take steps to correct the problems over the last number of years those americans who love nothing more than to put an honest day's work but they can because the same banks who were sponsoring the bamboozle meant of one side of the iowa cost the country 8.4 million jobs and 7 million homes and lost

health care and destroyed future retirement accounts. that is gone. what about them? there issues, their concerns will they be discussed or shut it down? don't debate the issue? because you will not agree with my idea? mr. president that is not with this idea is for it is that about committee assignments or your idea but the people of that are beyond the walls of this chamber counting on us to get a job done for them and our failure to step up for debate the issues is a tragedy. i know my friends on if a side of the aisle are faced with a difficult choice between supporting party leadership am participating in the complicated and difficult debate i am not naive that is a hard place to be better if we cannot act like united states senators for the sake of the issue of legislation of

success or failure with an enormous impact with our economy as we know it then why are we even here? why are we a engaged? it is easy to understand why the big banks alike the bill but far harder to understand why any of us would be sympathetic to those arguments we don't work for the big banks rework for the american people who said us here we are for the families who made a price for wall street's risky behavior and work for the american public that loss the jobs more than 80 million and still face double-digit unemployment we work for the american public that lost nearly 7 million homes to foreclosure i have seen small businesses fail or accounts evaporate in a matter of hours and a public

that is sick and tired of and the feeling nobody is looking out for their interest. mr. president it seems they are trying to move their right i am worried they may be right to an improving there is no issue more important than saying no and stopping is trying to gain political advantage and strangling the bill with a filibuster or suffocating with false claims that attack that taxpayers with bailout's river and won't leave us will marble once again with another economic crisis. i have been hear a long time i know this institution is better than that i know there are friends of mine on the other side who care about this bill the want to be a part of the debate and solution and have ideas to

bring to the table and recognizes no one group for senator will write exclusively this bill but i can get there if the attitude is we will not even let you debated or discussed said that attitude is not what the american people expect of this body so on their behalf they desperately need us to act in the coming-- before it reaches the floor to find the common ground we need to have that debate on the floor of the united states and the. >> i came to the floor because my friend from connecticut who is my friend made numerous comments about the process i know he is still here i would hope that possibly he would be injured -- willing to enter into a colloquy as he talks to the president right now. i will wait just a second.

i was opening that maybe the gentlemen from connecticut would be interested in a two-minute colloquy are maybe five. all like to give a preamble of i could there's a lot of rhetoric going on around the financial reform bill and i appreciate it sell much the chairmen of the committee engagingly 30 days to reach a bipartisan agreement. we voted 13306 page bill out of committee and 21 minutes with no amendments and we did so with the understanding and leased it was my understanding of love to have it cleared up right now the best way to reach a bipartisan deal was to go to it out of committee too not step in a position by having a bunch of amendments

debated and have people polled for their part and then what we would do is try to seek a template for a bipartisan bill before it came to the floor. >> that was the intention but 401 amendments filed on 2:00 p.m. on friday before the announced the mark above the bill and over the weekend staff came to work on amendments i say respectfully no one over the minority side came that weekend but it was suggested to me buy the minority that they would not offer any amendments. after the 21 minute locked up if i was prepared to stay there all week so for the purposes of understanding that was the decision hoping we can get to some agreement we agreed to allow the bill on the table that day was

substantially different that i offered it reflected a lot of ideas and thoughts inc. between that date and the mark update. >> i have repeatedly and publicly thanked the good senator from connecticut foregoing through that process and there is no question it is a much better bill and a very commendable. here is what i would say i think things are being said that there is no question some of the attacks on the order of the liquidation have been over the top on the other hand, there is no question that treasury and fdic created loopholes that is what executive branches do because they want the flexibility to do whatever they would like to do and i would do the same thing if i were them but there are some things that need to be tightened up and i think we could do that in five minutes i talked with the treasury secretary yesterday it is more of a committee

level deal and i understand that but i think we can resolve that but the thing if i could come i know there is discussion about this letter the fact is what we're trying to do is say let's get the template done over the next couple weeks let's not slow it down and you talked about in to ring a bell on april 26 i know there are talks about sliding away from other cats and dogs but we can do this and if everybody would just calm down and quit exaggerating how bad things are, there is a lot of cooperation i met with a ranking member i left his office i think there is a strong strong strong desire to reach a bipartisan agreement and i am not blaming anybody but i think the white house is stirring

around and i think the good senator from connecticut wants a bipartisan bill that will span the test of time. i know the ranking member wants one i think most every republican wants one and if we could quit shooting things up and settled down i think not slowing the introduction of this bill down if we just get serious for the next 10 days or one week we can finish. i really believe that. i would ask the of all my colleagues and respectfully of my colleagues and connecticut things and not get to our they needed to be and i understand but i relish the fact that we came close and i think we can get back there i don't think anybody is trying to

subterfuge this i don't provide much with all of my colleagues yesterday we may have a few folks who don't want the bill because little like the law slightly over the top myself but i think most people really want a good bill and i think the chairman what you did demonstrated you really want to a good bipartisan bill i don't think it is right trying to call one republican senator to pick them off is bipartisan and let's get back to the table. >> you wanted a colloquy and i am grades-- glad to be an audience. >> but let me say if i had been strong i am the minority leader paying the bill perpetuates bailouts i will not sit here i believe

to allow those accusations to be spread when we both know that is not true when i am told it is a partisan bill. i have spent too much time over too many years doing exactly i have done on the 38 months i have been chairman of the committee to have a bipartisan solution it has motivated me everything i have done now of a sudden out of the blue knowing all of the efforts i have made to try to find the common ground as my colleague from 10 to see those then to face with the minority leader who should know better coming to the floor of making false accusations about a process that has been anything but partisan or conclusions in the bill anything but accurate in fact, what is included in i'm willing to listen to ideas to make it tighter to stop the sellouts and all of that but then having a letter circulated were 41 people most of them

have no idea what is in this bill but taking a political position because they are being asked to do so without having some appreciation for those of us who worked so hard to produce a good bill and understanding their ideas many colleagues want to bring to the debate and they should have a right to do that having a debate on the floor what does that say why would you bother doing where went through it that the end of that all the answer is i'm sorry we did not get our way so we will stop the debate? that is distressing as a member of this body i will not be here next year but i have to say to the younger knew were members be careful. if this is a template on how we operate all the things we tried to do with the hearings and discussions then you have to ask

yourself why would you do that if you have a letter circulated stopping the motion to proceed if this is a purely partisan and you're not allowed in the room then i get that you are right. this is not that case i say that respectfully. >> i think the course of action is trying to get under way is to finish the bipartisan me went along way and restocked on march 10th and understood that you were losing democrats on your committee. >> that is all you ask for when you started their lead to reiterate that i never said i could speak for anybody but myself and i never left the table some of the fact is the bill has

taken a partisan turn on march 10 there is no denying that. look at me with a straight face there are some bipartisan solutions and i grant that and i thank you for those inclusions but there is still work to be done and i would say to you republicans are trying to do is let's finish the work before it gets to the floor i would never betray a confidence -- confidence generally intentionally but we do need to get the template bipartisan in the beginning then you are right there issues like the volcker rule and governance issues that will be amended back-and-forth but at least let's get the main parts of the bill right from the beginning. not the way you wanted on your own or the way i wanted on my own that has not

happened on the number of titles, and fairness. i would urge everyone there has been a lot of work done you have done a tremendous amount of work let's finish the work over the next 10 days and quit yelling at each other and finish the work the american people sent us to do i am not lecturing and say it respectfully let's finish restarted. >> i hope that is the case i end of the colloquy.

>> afternoon and welcome to the national press club by a reporter for bloomberg news and president of the national press club we aren't leading organization for journalist and we're committed to our programming and fostering a free press worldwide for mar affirmation please visit our web site at press.org to donate to our programs please visit hot press.org/library. behalf of our members are by to look the speaker that it welcomes working journalists also our c-span and public radio audience after the speech concludes cost as many questions as time permits now more like to introduce the head table

gas from your right, anthony the prince of all of left of solutions and the m.b.a. candidate at george washington university and a 2004 harry s. truman scholar a distinction shared by our speaker today who was among the first class of 1977. the national editor for "vanity fair", john hughes reporter for bloomberg news and national press club board member this senior business editor fact aviation week magazine. the undersecretary for national protection of programs and a guest of the speaker and we have andrew schneider the associate editor for it to blinder and speaker of the committee and a skipping the speaker the national press club board me the committee member who led the organization of today's event.

gaelic, acting tsa administrator and a guest of the speaker and linda kramer a member of the speakers' committee and also help to put together this event. chris chambers a journalism professor nine commentator for russia today also a new member of the press club. and a director of communications for the harris corporation and a former homeland security spokesman and a current homeland security spokesman. [applause] our guest today has spoken before although the title has changed she was last our guest here three years ago handling many issues over the same she did during her time out of governor as arizona with border security "today show" be talking about aviation security and terrorist threats.

janet napolitano runs a massive federal agency that is still new by washington standards and has seven federal organizations under her leadership $60 billion in the annual budget and responsible for about a quarter of a billion employees and those jobs are about as diverse as any federal agency including the coast guard the federal emergency management agency the secret service and customs enforcement u.s. customs and border protection and the transportation security administration board tsa whether purchasing mobile radios working in the border region in search and rescue helicopters or body scanners to discourage another would the bomber bound for the u.s., today's guest is vital to securing the nation from a threats we face from other nature. please welcome the third

secretary of homeland security janet napolitano. [applause] >> thank-you and good afternoon it is a pleasure to be back at the national press club. with a different job. some of the same issues and additional ones as well was mentioned in the introduction. very briefly before i turned to the actual topic which is aviation security and the ever changing threat to environment in which we live, let me briefly describe our department and that is the amalgam of 22 agencies and formed in the wake of 9/11 and out of the realization there were aspects of the federal

government that were squirreled away or piece together in different departments that really should be under one roof i am often asked how one could manage such a large and diverse organization but what we have done i was glad to give a sarcastic answer. [laughter] but i won't for this idea is. [laughter] we have done a quadrennial review for doing a long-term plan for the department the first one ever since it is such a young department we have boiled ourselves down 25 major mission areas when is the counterterrorism missions in the reason for our founding and a primary threat to that runs through almost every area of the department the second is to

carry the borders of the united states whether land borders whether at to see zero or a year for the third is enforcement of the nation's immigration laws and to do that smartly and the effectively even as we advocate for reform of the law. the fourth is the protection of cyberspace and we're probably the first apartment her major department to identify a cyberspace as a separate and discreet mission area deserving of our protection and then the fifth is the ability to prepare in advance and plan for and respond quickly to any type of emergency that may occur. whether tornadoes or floods or ice storms forest fires

hurricanes tsunami is we see all of that by a further new-line three aeronaut the first responders per se but what we do is work with the first responders in this state and city to make sure they're ready to respond then come in when the resources are overwhelmed. viewed that way through that prison you can see why the department makes sense and how it all comes together but the topic i wanted to talk about today is the threat 22 aviation what we're doing domestically and internationally with respect to aviation and security. we know that al qaeda and al qaeda related groups continue to move the taking down a commercial airliner

or two weapon is a commercial airliner would be a great leap forward in their terrorists view of the world. we also know they are a smart and determined adversary. they are very familiar with the steps we have already taken as a country and as the world in the wake of what happened on 9/11 park row our task is not only to respond but really not being reactive but proactive been dealing with that contributing threat in a world where aviation is a key engine of the economy both domestically and internationally i don't know it is a key engine for

families who live in different places of the world to be able to get together. you can't imagine a world without a safe and secure aviation system. our job is to focus on that and what we need to do to keep it safe and secure and to give a sense of scale because this adds complexity to the issue every week there are 2500 commercial flights carrying half a million people that come into the united states just from europe a. and we have a 2.2 billion passengers to fly every year and 10 million business people and visitors board and international flights bound for the united states each week those numbers give a sense of scale some not only do we need to address

it as it emerges but anticipation of future threats and what we do to enable us to continue to work. a lot of what we're doing right now quite frankly is because of what happened on christmas. we were in the works already planning for the purchase and deployment of the advanced imaging technology called the of body scanners but life a christmas put a very stark reminder in people's minds about the fact that aviation and continues to be the target of threats. and that the new kinds of threats don't necessarily involve large-scale conspiracies that took months if not years to

prepare but applying individuals who are carrying things that can be picked up but the powders are liquids are the gisele's that could be decimated in an airplane. putting those in the hard to find locations for mac those are individuals who don't fit what we think of as a terrorist profile they may have no derogatory information in any intel file or example we see the use of women and the recruitment of would been for these kinds of mission which is also a change. it is the ever at of well-being world that we deal with so what have we

done since christmas? i will be very precise. the day before getting in a plane from nigeria he was freed and then he transferred to amsterdam it is day simple airport where again he was being screened he did not appear on any screen watchlist which would be available overseas. of course, he got on a plane bound for detroit of which he was unsuccessful in detonating a load that is basically a powder form of explosive material. the president in response three did an immediate review of what went wrong to enable them to get on the

plane and possibly kill not just himself but individuals? >> what went wrong was to fall to and when was he was not on the right watchlist but because of pert -- practices in the committee he did not make it onto rights to his call the no-fly last two that are actually pushed abroad before somebody organizes the plane. >> that was addressed and that the issue but we're also pushing for information for overseas so that individuals at foreign airports even though they are not u.s. employees have the opportunity to have the benefits of that intelligence. then of course, the second thing that happened is that

because he was not on watch west, he was not given a secondary inspection and because it was not metallic did not get picked up with standard equipment. what does that mean an end to how are we addressing this? and with the department of homeland security. i already mentioned above watch west which is primarily into the hands of the fbi. but we have done some things for a list overseas, we have domestically in the airports under our direct supervision , the plate different types of equipment

10 mechanisms designed to give greater granule rarity and more layers so they get their one you may not get to the next by the way we don't do the same thing at every airport. when you ask your question how come this happen to me at this airport but not this one? that is because it is designed to be unpredictable because those who seek to attack the aviation system depend in part on predictability but we have added more behavior detection officand more explosive trades where your plan is to see in the explosive trace on its and of course, the point* the advanced imaging technology machines and more airports and really by the end of next year that it will be

1000 + that are stored around the country by the way the people who actually go through them the more that we buy in the country is by the better the technology. in addition we have formed an innovative and new partnership with the department of energy. it has of course, within it the national lab it has some of the best scientific minds of our country and we have asked them to really help us design the 21st century checkpoint what do we need to think of that really take us beyond us the advanced screening we could do today? >> that is under way domestically but perhaps the greatest era of reform has

been international because one of the things that became so clear on christmas was aviation was global. and to you potentially have access to airports around the world so immediately after christmas within one week or so i sent the deputy secretary of romance security and the assistant secretary and several others on the plane and they went around the world and 12 days meeting with ministers of and terrier, home secretary transportation coming to begin talking about what we need to do internationally to make sure that the global aviation system remains safe and a meeting with the

international organization that is the united nation branch that deals with global aviation and formed in the wake of world war ii to keep aviation safe. under the secretary who is here wants a month we should meet with a joint initiative for we have been going region by region around the world reaching the international consensus unimproved aviation security. better information and trying to get the passengers before they get to the airport with stronger cooperation of the development of deployment of new technologies and modernized aviation security shared across the world that can be audited and in

forced? >> we began this day meeting with them ministers and reach a very strong consensus that resulted in what is now called the tornado regulation and then we went to mexico city and have the countries of the western hemisphere there from brazil and argentina and others and that resulted in a regional international consensus known as the mexico city declaration of. several weeks ago we were in tokyo japan and i was at all of these by the way were we forged an international consensus with 20 some odd countries of asia directly represented and then just the past sunday money tuesday we were in nigeria with ministers from dozens of countries from africa

which resulted again in a strong international consensus. we will finish up in a few weeks in a meeting focused on the middle east where we will meet that the view a e2 forge. >> with collection intimation sharing at the airports themselves and then we will have gone basically nine months from zero to a revived global consensus what to read nine -- need to do not only react to the press that we know exist but bill capacity to be proactively feeling the safety and security of global aviation.

and there we need to do with capacity and resources that every country has the same resources and we know that. that is part of the discussion moving forward but i think it is highly significant and all of our discussions, with all of the issues involved and possible attentions it is remarkable to me that and to have a global safe and secure a piece in system that allows people to lose see you travel the globe with every bit of safety and security there has been no resistance are pushed back whatsoever. let me close if i might on the following. even with all of this that has gone on there is no

guarantee that somewhere or somehow someone will managed too successfully destroyed an airplane or turn that plane again into a weapon as was done on 9/11 we go live in a world but guarantees that vicious 90 and are rich in which we exist so i am not here to say there is a guarantee being provided but i am here to say that every step reasonable that we can conceive of domestically and internationally is being pursued to make sure aviation remains safe and i'm also here to say that if something were to happen we are prepared to respond effectively and strongly that it is our tradition as a country that we will

uphold regardless of any circumstance because this nation is one that is very strong and to. so with that money close my remarks and thank you for having me. i want to especially thank mandan to kill who have been leading a reference and i will share with you that when i say we have been pushing more information overseas, that has been a remarkable effort not only to push the effort by based on intel and threats and more precise information so we know we no longer have to say if you travel to this country 100% will get to screenings which in the aftermath of christmas day we had to do so we turned

that system into more intelligent driven as well. like to think gail and the plan to -- and the people from homeland security when i accepted the position some describe it as the ultimate of thankless positions. i don't need thanks but the men and women do. they have a great job. thank you very much. [applause] >> thank you madame secretary and the people who have brought him four questions i don't know if i have never seen that many i apologize in advance of they are not all ast but we will do the best we can. the best question how can you ensure that planes are safe when you cannot compel foreign government to set the regime that you want?

>> i think part of itss the respective of the u.s. compulsion there are passengers from all over the world and every country such as because it is bound for the u.s. does not mean it is the u.s. plane and as i mentioned before, there were individuals from 17 countries and a dish 10 that were on the flight on christmas day. and looking at the departures for the united states to insist on certain protections at the gate and ultimately we are happy not to allow planes or trains are at a mobiles to get into it security and snow security is not being maintained. and idle think it has ever been employed but it is a

month of legal authorities. >> cardoza 30 contingencies you have been discussing at the international assignments? >> we have not had to. every recognizes the global aviation system is linked and the united states is a key part of the linkage for everybody us everybody has a part to make sure. >> was the most challenging aimed issues today as it relates to airline security? >> i think manufacturers obviously 82 make the aircraft themselves as a resilient as possible to be able to have a catastrophic incident fits securely while the plane is in the year but

from a scientific and engineering standpoint that is extraordinarily difficult issue give them the vast array of different material to be used in the interior of the plane. that is why we had good information but passenger information or screening mechanisms that to no one gets the plane. >> how is it supported with land borders and such a way too not unto the restrict trade? >> our job and function has to be sensitive to several things. one is the safety and security of the mandates and

one is the protection of civil liberties that is a great concern as you add layers of the protection world. one of the things that we do is have a chief privacy officer and civil-rights and bureau within the department that works on and helps us even as we develop changes in the policy equipment standards and the like and at the outset rather than the end and the one i had with me and commerce the first was port security, the seaport door airport for crow there we work with the private sector of like in the aviation environment i have met now with the

association that represents airports of both domestically then i met when i was with the association that represents international airports and also have meant extensively with the u.s. flag carriers and the international flag carriers to are looking to be part of the solution. they have issues about cost and they have questions we all have issues. and nobody really enjoy is waiting in line prerelease i have not volunteered to somebody. we know that and those things have to be thought through and accommodated to the greatest extent possible even as you are adding different kind of security regiments' into place.

in my concluding remarks nothing in this environment is 100%. is it objectively better, safer? absolutely. >> what steps is the department taking to reduce false positives on the identification because the share on the watch list or facial recognition or other technology? >> the false positive problem is a problem and a few are one who is caught in that it is difficult in part because we rely on the passenger names for example. some things are happening now that over the next year or two will reduce greatly the incidence of false positives through something called the secure flight.

these are initiatives implemented that will assist us in keeping that number down. the other thing we are working on and it is a work in progress is a quicker and more efficient redress system. in other words if you are still a false positive and keep getting pulled aside regardless what airport you are not because your name matches, and that occurs, they're has to be a way to be able to clear the list. we call that redress. i think there redress' system right now is not where we want it to be from a consumer standpoint among other things and so over the next months and years we will be working to make it more efficient system as

well. >> also for implementation when will we implement the traveler program that tsa has been touting for years? [laughter] >> as soon as we can. [laughter] >> related hal goes the search time for a new full time tsa administrator? >> as soon as we can. [laughter] look, as you know, the president has not -- he has nominated to people but they haven't completely confirmation process. and i'm going to in paris her right now but it's been my fortune as the secretary to have as the acting head who knows

this business and has kept me advised on what is being done on a class a level. we have civil servants in the government who do a wonderful job even as the president decides who the next nominee will be. >> many issues people in the audience and washington would like to hear about, this question is about a nuclear summit taking place in washington. how will the department execute or carry out the summit by time border enforcement disintegration to the smuggling of potential bomb materials under this scenario some gangsters could be hired to bring in fissile material? >> well let's switch out of aviation to land border because it would be applicable here. and the united states has

immensely borders north and south with lots of points of entry, lots of highway. and remember in addition to the security issues as i said before we also have the trade, the commerce, the torah some issues that need to be taken into account. mexico by way of example is the number one or two trading partner for 22 states in the united states. the border has to work. traffic has to be able to flow. and so the issue becomes how do you keep out contraband like narcotics, how do you keep out illegal immigration, and then another and of the spectrum as a word nuclear fissile type of material, on that we deploy scanning technology both land

and sea designed to detect that material. but there again we don't want to wait until something is of the physical border of the united states to pick up something. that's why it's so important. i did everything by saying this is about leaders and the leaders begin with could information gathering, good intelligence analysis and sharing. a good ways of picking things up as they go through the supply chain if i can use that phrase of getting to the physical border be the land air or sea in the united states. so we have responsibilities in all of those areas. as you might imagine our country is unique in the amount of land border it needs to protect. >> more questions on the land border.

recently arizona rancher was killed by someone in this country illegally. what does that say about the current border security needs on land and will american ranchers and landowners see increase in federal law activity along the arizona southern border soon? >> as you mentioned in the introduction, i am a former governor of arizona, former attorney general and u.s. attorney for arizona. i know that area very well. i did not know him personally but i know other ranchers from that area who knew him. that is a long time ranching family in arizona. in fact i spent an hour on the phone a week and a half or so ago with a number of ranchers from that part of arizona which is near douglas for those of you that the state. the investigation is still ongoing as to the identification of the murder or murderers.

we are working by the way closely with mexican law enforcement of this which is a growing trend working very closely with mexican law enforcement which we need to do not just this irrigable along the u.s.-mexico border. we had prior to this murder put a lot of additional resources into the southwest border particularly arizona because there was so much activity there. we to increase the number of border enforcement teams and the number of the mobile radar machines and checkpoints. i could go list by list. everything was increased. nonetheless this outrageous crime occurred. number one, working in every law enforcement tool in command identify the perpetrators, bring the perpetrators to justice and then number two working to see

what if any additional resources would be helpful largest in arizona but other parts of the border as well. i think the visit by the president of mexico next month is a very important is it because he is engaged in an effort that deserves applause more important than a loss our ups of the cooperation and commitment with him and that is to go after the big drug cartels that are the cause for the violence along the border and break them up. they've been there for a long time and as long as i've been an arizona which was many years and it's time for our security as well as mexico both countries have a stake in this that they were broken up.

>> looking at the texas border who is running these days and what does that have to say about the homeland security? >> portales is across the border from el paso texas. it has been the site of literally thousands of homicides drug related over several years and when i say thousands i may not know the exact number but last year was something of north of 6,000 homicides drug-related. 550 of whom are officers right over the border so this is something of intense importance both to mexico and the president of mexico president caldera has been investing resources in restoring the rule of law and the state of chihuahua and we are working with mexico on that and on our side of the border to

assist in things like southbound vehicles for arms or book cash to go back to the cartel's for the first time for example we are expecting real traffic that is going south into mexico that hasn't been done before looking for the type of contraband drugs come north from the arms and cash go south so we have a role to play in preventing the drugs from coming in but also trying to keep the arms and the cash and goings of of the cartel's and we are working on that as well. >> as the search for the perpetrators continue in the case with that as a backdrop earlier this week the arizona house of representatives passed a bill that increases the power of local police to start, question and detain people they suspect may be illegal immigrants. are such powers necessary, is it a good thing for states to be

sold in front of the federal government on immigration policies and given your experience is in the knowledge of the legislature based on what you know is it constitutional? >> i know a little bit about the law. it is immigration its delicate enforcement tools and the issue of the flow of workers now and in the future and it needs to look at how we deal with those already in the country illegally and without that kind of commitment by the congress to really deal with it i think we are going to see more and more states take up the issue of immigration and the danger as a patchwork of law in this area

and i see this as a former state ag and governor while i do not believe the federal government has exclusive power where immigration enforcement is concerned the kind of wholesale turnover that i believe represents in my view doesn't strike the right balance that we need, but frankly until we can move forward on immigration reform i know the president is committed to this. he's asked a number of us in the cabinet to be working on it which we have been. we look forward to when the congress begins to take up this important subject. >> how does that balance come into play when you hear folks press treated with immigration policies say build a wall between the u.s. and mexico?

>> and the guy was the originator of the quote that set show me a 15-foot wall and i will show you a 16-foot ladder. just building a wall doesn't reflect first of all the reality of the border. it is a physical place and it is thousands of miles long across the most rugged terrain you can't imagine so to build and maintain a wall with the notion that you don't do anything else and that in and of itself is an immigration policy is neither why is orie effective. you've got to have a system that includes boats on the ground and technology and financing infrastructure as part of an overall system. but again you also have to deal with the demand for an illegal labor. that means you have to have the tools to go after in players who

continue to employee illegal labor intentionally knowingly exploiting that market we won of the things that needs reform and an immigration bill is that the law governing and players and sanctions for employers to continue to hire illegally are not strong enough and need to be reformed to match economic reality. while reform is something that is complex, it is something that is very necessary in this day of feige. sprick their principal with samples in the news showing a rise in self radicalize home grown terrorism. individuals who may be hungry and experienced compared to four interests before captivated by the islam many times they're pulled in bye friends, relatives or co-workers to two of the list changes in behavior. but action is dhs teaching to

educate the public to increase their awareness of the threat posed by terrorists of any origin in hopes of identifying them before the attack? >> this is really a change that i have seen even in my 14 or 15 months as the secretary of homeland security and that is the increase in the number of u.s. citizens who themselves are radicalized to the point they may travel to fatah or yemen or some peace and be in a camp and learn the trade craft of a terrorist and then return. or learn much of it simply by the internet among other things. this is something that we are

focused right now working with local law enforcement on. there are 800,000 some odd pairs of eyes and ears of of the country known as law enforcement what to look for, what are the markers from when somebody is moving from first amendment activity rhetoric which we have had as a country since we began to actively planning a violent act. it means being able to share threats or threat stream information. for example if there is a threat someone is planning to build bombs or a type that requires the purchase of abnormal amounts of hydrogen peroxide then making sure police and others are watching and know how to get information whether someone is

making abnormally large purchases of his church and peroxide it is that exchange of threat and threat information that really i feel as we move forward will give the architecture that will enable us to minimize the risk that threats will materialize into reality. we begin right now in our working closely with local law enforcement how do webnñ deal wh the home grown threat. >> early to be ray dennis blair told lawmakers that affiliate's made a high priority to it to the large scale attack on american soil within the next six months. raising awareness of domestic risk of international terrorism can help an attack. was the dhs doing on this front? >> i think we inform -- irc mentioned particularly with

state and local law enforcement making sure of the intel spread around the beltway also makes it all of the beltway to the fusion centers and other places around the united states it can then be in a twist on the ground. the other thing is to make sure people are prepared for emergencies of whatever type. that they know what to do, where to go, how to reunify the family a family event were to occur. it could be terrorist related defect or a natural defense but the plain fact of the matter is preparation and knowledge are ways to make sure as a people and community and country that we are resilient and respond with strength and resiliency that way you minimize the living in fear. we shouldn't live in fear.

we should live with the fact we're in an ever-changing threat environment. we deal with it, we've reactor anbar proactively dealing with it and then able to respond if something happens. >> early forecasts by organizations such as this year's hurricane season will be unusually severe. what steps is dhs and feed not taking to prepare for this? >> you're just trying to cheer me up with these questions aren't you? [laughter] we've come from nuclear -- >> we had dennis quaid on tuesday and was a very different tone. [laughter] maybe you want to do a job switch. >> we already, through fema are working with communities around the country on hurricane preparation and it is a number of things. grants to localities for their own mitigation.

it is making sure that warehouses are ready and portable rotor is ready, the equipment is prepared. exercises have been done and all of the rest. we have fortunately as the fema administrator craig fugate who was the emergency manager director in florida for a number of years and knows the hurricane business inside and out cities leading our preparation efforts and if i might suggest would be a good speaker for this group at some point. >> taking your point and going away from the discussions of disaster and catastrophe and terrorism and homeland security threats something the would be easier to a bursters a vacancy on the supreme court coming up. [laughter] >> really? east

>> given your background as a former attorney general and governor it with your legislative executive and a legal system experience who do you think would be a good nominee? [laughter] >> whomever the president appoints will be an excellent nominee. he has many good choices. sprick switching back this week with the nuclear summit in d.c. -- you will like this one -- there were military strikes in the street and a bicyclist was killed which leads to this questioners question are we striking the right balance between security and freedom as we protect the public events? >> i think there is review still being done about that accident. i think it was a national guard but it was a terrible thing and my sympathy to the family of the individual who was killed.

in terms of the question presented which is always striking the right balance i think as i mentioned before we build those issues and to our analysis and development at the outset before we are even doing major programmatic change so we want to be thinking of those things through. that being said the balance is not always obvious and sometimes you're in the middle of implementing something and realize you don't have it quite right and have to make adjustments and be flexible with agile enough to do that. the goal was to protect america while we protect american values and the values include freedom. it is something we were called constantly and adjust for constantly and we think about in every major product development

that we do. >> you talked about other speakers of the national press club. earlier this year we had had of coast guard leaving this spring. we had several questions but coast guard including what role do they play as the dhs moves forward to more effectively mitigating involving terrorist threats, sea and port issues and things like relating hurricanes etc. what do you see in the coast guard in that context? >> actually the coast guard has an enormous multifaceted role in a lot different things. the heavy footprint assisting and abroad and we have them and seas around the world. they are responsible for the protection of the nation's ports. for example they've been working on the implementation of which

basically the secured cards for port workers who have access to secure a curious. bigot the responsibility for search and rescue for the protection of the waterways for legitimate commerce and obviously whenever there is an emergency particularly hurricane type of nature they are usually first on the scene at the most recent example of this quite frankly was haiti. they were first on the scene in haiti and were on seen for weeks thereafter making sure that we could bring in search and rescue teams from around the country assisting in the bringing in of equipment and other things necessary to get pt restore stability restored in haiti in the aftermath of the earthquake helping in a whole variety of

ways. so the coast guard is a huge asset for the country and quite frankly as somebody who grew up in new mexico and was the governor of arizona i didn't have a lot of experience with the coast guard. coming into my position as secretary and i must say they are a total pleasure to work with it is a total service oriented military branch. >> we also have several questions about cybersecurity. in the aftermath is where you see activations of the cyber nation's second to the guilds and non-state actors using the internet as a way to spread messaging and communicate potentially violent threats about the u.s. citizens. what efforts are you doing in that area to sort of better monitor and combat the cybersecurity threats in the u.s.. >> in the wake of the president's cyber review, dhs

has the lead responsibility protecting the civil aspects of the federal government, the so-called dot gov sites as well as working with the private-sector on their sites. the dot gov and dot org sites. we are building a cyber basically subsection of the grand department. we are actually higher in right now aggressively. we've been given direct higher authority to hire up to 1,000 cyber professionals to work in this area. we have unified in number of our different cyber assets that were spread around into a facility known as the nkick and we are working closely with the white house cyber coordinator and others on how we move forward. there's a lot to do in this

library and i think again as i mentioned at the beginning of my talk it's one of the reasons we identified the cyberspace as a key separate missionary of the department of on land security particularly because so much of the nation's critical infrastructure is to fold by cyber networks. tele-communications, the financial institutions or utilities or water. they are controlled by cyber networks so both because we have the responsibility to protect critical infrastructure and on cyber we receive the responsibility for the civilian side of things this is an area that will be a growth area for the department. >> we are almost out of time that before we ask the last question we have to present you with the traditional everyone's been waiting for this moment national press club mug. >> thank you. [applause]

i think everyone in this audience would have something to say on this one but we would like to hear your story with is the worst experience you've ever had in an airport. [laughter] here's the thing and i hope he won't think less of me this is a tough job and it's a big job as you can tell from my talk today. there are some things that come with the fifth and one of it is a plain. the fact of the matter is no pun intended i haven't been in an airport as a passenger for about 15 months and of course before has governor but i will say the most recent experience i had that was not worse but interesting was the wednesday before thanksgiving this year because i went to the national

airport to work the line and help people get through the magnetometer screening devices so i basically wanted to work with our own to see what they were doing, what was the land and gave me a great appreciation of what they do and the care with which the need to do their job. and i also saw an immense variety of issues. [laughter] thank you very much. [applause] >> with that, thank you for attending today's national press club meeting. today's hearing is adjourned. [inaudible conversations]

today fbi director robert mueller testified before a senate appropriations subcommittee about his agency's counterterrorism efforts and its $8.3 billion budget request for the next fiscal year. senator barbara mikulski chairs this one hour and ten minute hearing. >> good morning. the commerce justice

subcommittee on appropriations will come to order. today the subcommittee will hear the fbi director make the presentation of the fbi budget and the priorities for fiscal year 2011. this morning we are going to begin with an unclassified hearing that will focus primarily on the fbi general budget and their budget request against -- across the entire agency. at the conclusion of the testimony and questions we will move to a classified hearing to discuss specific budget issues related to the fbi is classified operation we will take a ten minute break if we need to to secure the facility. why are we doing this? the fbi has an incredible shot

and we are really proud director mueller we welcome you proud of the fbi and the job that we ask you to do in the country and the job they're doing around the world to protect the country and the country's interest. we know we've asked the fbi after the terrible events 9/11 only you were in the job a matter of days to take on the responsibility in terms of national security. the move to have a chance for you to emphasize the need that the unit has and to make sure that we are participating in ensuring that you have the resources to do it. we think the fbi has the right stuff. we want to make sure we have given you the right resources. as the chair person of the committee i would be having three priorities when my discussion.

one which is american and domestic security and how are we keeping our families and communities safe. the other would be national security and how is the fbi working in that arena. and the other is oversight and accountability we need a spirit of reform and tough watchdogs. senator shelby and i wish to stay in close entry in things that could be cost overrun or the budget hitting in the direction of the boondoggle. the fbi does keep america safe. it is an agency that's on the job 24 hours a day, seven days a week and often the men and women serving the fbi themselves are in great danger as they protect us from everything from terrorists to organized crime the field offices 33,000 staff, 13,000 special agents those are the number and support staff, those are numbers and statistics

but behind them are men and women trying to protect us from some of the most despicable pattara behaviour. fight highlights of this new budget for those areas which we think are essential in the national interest. senator shelby and bayh teamed up in the concern about the issue of financial service fraud as his chairmanship and ranking membership on the banking committee he has been a leader calling for more action, more help to deal with mortgage fraud and other white-collar financial services. this will be a request of $453 million. at the same time we know they protect against organized crime and there is a budget request of 116 million for dismantling

organized criminals against shutting down money launderers to read this for both justin and also international activity then there's the issue of child predators three but more violent crime in the world than to do harm to children? what are those who try to loot children on the internet to children who are kidnapped and placed in sexual servitude to other aspects of the attack on children. i think the fbi has had a special commitment to this and we want to ensure there is the 300 some million dollars to deal with everything from children who've been exploited on the internet to those forced into

prosecution. this is related to the gathering intelligence on fraud security there's a request of 182 million. i would be concerned of more mass destruction as we look forward to working with you on that. there's 135 million for the cyber efforts and that was last year. this year there is 182 million. 46 million-dollar increase for new agents, and professional staff. we want to hear about that as i said in a more amplified classified situation. the fbi has also been charged with the national security mission and budget increases for the fbi counterterrorism and intelligence.

counterterrorism alone makes up 40% of the fbi budget. the fbi requested over $3 billion for counterterrorism activities. 113 million-dollar increase from 2010. we want to hear how the funds are being used. i understand to disrupt terrorist and investigate crimes and identify, capture and deceit the terrorists cells with the are operating in the u.s. or overseas. i want to know if this budget request tackles the responsibilities. in the area of community and american security which is the traditional crime-fighting role and we know the fbi is wants to continue to do their work fighting traditional crime fighting efforts we are very

proud of the baltimore field office, the work they do with the task forces with the u.s. attorney. it's not only to make headlines but they are out there catching the bad guys. we hope the budget allows the fbi efforts to target sophisticated criminal organizations who threaten the community. the others cannot much substantial increases to deal with violence, crime and gangs and we are troubled by that and would like to hear your views or whether you think this request is appropriate or whether we should consider more. in the area of mortgage fraud the fbi provides $453 million to be able to do this. this a $75 million more. door requesting 143 agents, new friends accountants, 39 financial assistance. linus and there's over 3,000 mortgage fraud cases pending.

that is an amazing workload for the fbi to be handling and again we want to make sure you have the right people and thereby support to do that. on this committee in a bipartisan basis we want to send a clear message to the predators no more scanning, no more scheming, no more for being on hard-working families. if you want to come after families we are coming to come after you. i've been operating on the issue of protecting children from innocent images innocence lost. we want to make sure we are doing all we can to target those predators. a few months ago a little girl lost her life to a sexual predator in maryland. all of maryland was -- the general assembly enacted in increasing sentences but you know what? we have to stop the crimes before they happen and there they are out there on the

internet which are playgrounds they try to recruit our children. we want to make sure we have the right resources and policies. the other area of the committee will be asking about is a concern to protect against government boondoggles. unfortunately some years ago the fbi ran into trouble when it tried to create a virtual caseload. we lost out in over $117 million what became essentially technical john cui had to throw away. now we understand that sentinel which should be the crown jewel is running into problems. so we need to know is this just a delay that comes from developing the complex technological product that needs to be used by a variety of people here and around the world for once more are we heading for some type of cost overruns where

our agents don't have the tools they need to connect the dots. we place heavy demands on them. they should at least have the technology they need and the tax payer once value for the dollar. so that's the area we hope to be able to go over. you do so much work we could spend all day pursuing the questions but those are the highlights we want to pursue. i would now like to turn to senator shelby who through his work on banking and doctors has been a reformer and a crime fighter. >> thank you, senator mikulski. first of all women to recognize and extend my appreciation to the men and women of the fbi protect the country from terrorism and crime each day. we owe them a debt of gratitude as well as you, the leader, mr. mueller. in a few moments predators

mueller will tell how preventing terrorism is the high priority. however the budget requests doesn't necessarily reflect that. while the white house points to a 25 million increase in the request for the f.b.i. counterterrorism efforts the truth is they are irresponsible cuts to the fbi terrorism fighting capabilities. the cuts total nearly $162 million were made by presidential political appointees as the office of management budget omb. for every new dollar proposed by the white house six of counterterrorism dollars are caught. it makes no sense to me. this request fails to support the fbi on several fronts to working in theater with u.s. troops in iraq and afghanistan and identifying insurgents and terrorists to respond to overseas terrorist incidents and

assist foreign law enforcement partners in defeating tetris the target he was interested persons. the request was by $63 million yet i see no decrease in the terrorist threat according to the overall response mission. the white house does not appear to believe the assessment of its own department from land security that states that terrorists use of an professed explosive device remains one of the greatest threats in the united states. the administration ignores the department of defense analysis that the ied is our considered weapons, a strategic influence and that the terrorists use of ied is an end in endorsing global and transnational threat. as evidenced by the recent findings on the u.s.-mexican border as well as attempted bombings in detroit and new york the threat to the u.s. homeland a kiss to be increasing yet the

administration cut the funding i believe that is necessary to insure the fbi has the tools and facilities necessary to respond to this threat. it's clear from the request they are not relying on the right people when it is making decisions regarding the threat the country faces both domestically and abroad. if the wendi counsel to the experts they would not have counseled funding for the terrorist explosive device analytical. they provide the fbi and u.s. military with forensic facilities needed to exploit ied is and terrorist bomb making material evidence. omb decision to eliminate was based on a proposal from joint personnel to perform forensics. since the release they've abandoned the omb proposal to set up a level three in the

theater forensic capability. ironically now the joint ied organization is seeking input from the fbi and the defense intelligence agency to develop a practical near-term solution that meets the critical needs of the war fighter. this committee with an understanding that transnational indoor miniature after a service provided funding for the facility to address the media would be well on its way to construction if not for the administration. today the quantico is overwhelmed for the 56,000 boxes of ied and materials since 2004. 37,000 are awaiting processing. meanwhile the fbi received a monthly average of 700 new submissions. the fbi estimates that 86% of the back log contains critical information like by the metric intelligence, fingerprints, dna and so forth that it would assist the military and

intelligence community and federal law enforcement in identifying terrorists to read director mueller i believe the record shows the proposal by the omb funding is unwise and i think it is ill-timed. the threat from the terrorist use of explosives is significant, real and enduring. the u.s. needs to prepare for this threat. we in congress to give the fbi the tools it needs to do so. we have that obligation. in the and it proposes cancellation would leave this nation unprepared and unprotected and within an acceptable outcome. on tuesday i sent you a letter outlining concerns regarding the decision by the fbi to revisit procedures relating to technical reviews of dna data contained within the national dna index system. the scientific working groups on the dna analysis and methods is the official working group that

advises the fbi on the dna analysis methods. in 2008 the group sent letters to the house and senate judiciary committee strongly opposing the loosening of the technical review standards and private dna then burst labs having access to the combined dna index system. the group's initial physician was requested by the fbi director. i find it hard to believe, mr. director, the strong sentiment expressed in these letters by your designee have since changed so drastically. the state administrators, the american society of crime lab tractors, prosecutors and police departments around the country have issued positions opposing the fbi proposal to loosen standards. in light of the strongly stated positions with the subject matter experts the fbi laboratory mystifying the report concerns. as i said to you in my letter i

have serious reservations how this announcement came about and i am deeply concerned was possible to influence a by private dna vendors six serving pressure on the fbi lab. i believe this is an abomination to victims' law enforcement and the constitution when congress, department of justice and white house blindly ignore professional opinion of the most renowned dna experts in the world and begin down the path of considering changing the law and regulation affecting the integrity of evidence. this is complicated and technical issues and while i am not necessarily against evaluating and improving the policy i believe the decision was hastily made without appropriate evaluation of potential unintended consequences by the fbi laboratory. this issue must be carefully examined by the fbi and the leadership of all the state and local labs it directly affects. i want to continue working with

you, mr. director, to insure the fbi is provided the necessary resources to carry out the mission of protecting the american people and i look forward to hearing your thoughts on these issues on herraiz and others this morning. >> director mueller. >> thank you. senator shelby i appreciate all the work this committee has done over the years to provide us with the resources we need to do our jobs. i also appreciate the opportunity to appear before you to discuss the fiscal year 2011 budget. we are requesting as i believe chairman mikulski the point of approximately 8.3 billion to fund more than 33,000 fbi agents and analysts and staff and to build and maintain our infrastructure. this funding is critical to carry of the mission of protecting the nation from the ever changing national security and criminal threats. let me start by discussing a few of these significant threats.

fighting terrorism remains the highest priority at the fbi. over the past year the threat of terrorist attacks have proven to be consistent and global. al qaeda and its affiliates are still committed to striking us and the united states. we solve this with a plot by an al qaeda operative to get made explosives on the subway in new york city and the atom to the airline bombing on christmas day. these incidents involved in protest explosive devices are i edie's and underscore the importance of the terrorist device explosive center also known as tec to read it provides crucial intelligence including al qaeda. homegrown and lone wolf extremists oppose an equally serious threat. we solve this with the fort hood shootings attempted bombings of an office tower in dallas and springfield illinois and a

violent plans hatched by the militias in michigan. we also taken extremists plotting terrorism overseas as was the case with heavily-armed conspiracies in north carolina and david lee's involvement in the mumbai attacks. the terrorist threats are diverse, far reaching and ever-changing and wait and to combat these threats the fbi must stand overseas contingency operations and engage intelligence law enforcement partners both here at home and abroad. that is for -- that is why for fiscal year 2011 we request funds for national security positions and 25 million to enhance the national security efforts. turning to white collar crime. residential and non-commercial mortgage fraud is the most significant threat in efforts to combat financial fraud. mortgage fraud investigations have grown fivefold since 2003.

approximating 2900 such investigations. and more than two-thirds of the cases involve losses of $1 million. we need new intelligence driven methods for identifying fraud suspects and trends and we are focused on the most serious cases relating to real-estate professionals and insiders not just for borrowers. the fbi in san francisco and arrested 18 mortgage bankers real-estate brokers and agents for falsifying financial documents and $25 million worth of loans on 44 separate properties. the fraud resulted in over $10 million of losses and we anticipate more of these cases in the coming year. with the passage of the health care reform legislation the fbi will be expanding and intensifying efforts to root out

medicare and medicaid fraud. earlier this week in miami health clinic operator pleaded guilty to committing a 55 million-dollar medicare fraud where hiv and cancer services were never provided to patients instead he and his partner spent millions on luxury-car us and thoroughbred race horses. as we have in the past the fpi will use intelligence driven task forces to target those who will exploit health care programs through fraud. given the planned expansion of these health care programs in the future this will be among the highest priorities in the year to come. we have 33% more cases open today than five years ago. the economic downturn exposed a series of multibillion-dollar ponzi schemes unlike any seen in history. we must continue to be toward these offenses by seeking the

most serious as possible like the 50 year sentence for minnesota tycoon thomas patterson handed down just last week to we we are requesting funds for 367 new positions and $35.3 million for the white collar crime program and to make sure we bring to approach to justice those who commit fraud. turning next to the cyber threat, cyberattack scum from a wide range of individuals and groups many with different skills, motives and targets. terrorists increasingly use the internet to communicate to recruit, to plan and raise money. foreign nations continue to launch attacks on united states government computers and private industry hoping to steal the most sensitive secrets or to benefit from economic espionage. criminal hackers and child predators was a dangerous threat

as well as the use the anonymity of the internet to commit crimes across the country and around the world. the cyber threat to undermine our national security victimize our children and weaken our economy. we are seeking 163 new positions and $46 million for our cyber programs to strengthen the ability to defend against these cyber threats. fiscal year 2011 budget also requests additional funds for training facilities, information technology, forensic services and other enforcement programs. my written statement submitted for the record discusses these requests in greater detail. the past several years we worked to better integrate strategic direction with a five-year budget approach and more focused human resource management. the fbi fiscal management is recognized by the inspector general's annual of it as being among the top performers.

in department of justice and we are on pace to achieve the hiring staffing goals. turning for a moment to sentinel as you mentioned madame chair as you know in order to ensure success for the new case management system we divided the project into four separate phases. this phased approach to principal the advantages. first employees can be an immediate benefits from the system as it is being built and they are and secondly we can examine what has been delivered to make sure it needs our expectations in the terms of the contracts as well as providing a foundation for the future phases of development. five weeks ago we informed our contractor that the last segment of phase two didn't meet our expectations and accordingly we advised the contractor to partially stop work on phase three and spend work on phase four untha