i quote, the senate must makehat absolutely clear that in ratifying this treaty, thehe united states is not reestablishing the cold war link between offense of force is in missile defenses. you start's preamble is buried in this regard as a recognized as the quote, interrelationship, unquote of the two.nship ne p the reestablishment of the pr interrelationship is one probeam with this cosmic preamble, but h there are others. the second problem comes in thet next line, whichhi states quotet that this interrelationship will become more important strategicd this is only enhancing and strengthening the linkage o between her offense of nuclear ll weapons and our missile defenses. because this treaty will the pri modestly reduce our strategic nuclear arms. and that the president is serious about his vision of a

nuclear free world -- and i t believe he's serious, then the inte importance of thisrr agreed-upon relationship will only deepen in the years ahead. this takes an already problematic idea and makes it po even more potentially damaging. the third problem in which the t most states quote the currentic strategic offensive arms do not undermine the viability and arm affect the myth of the strategic offensive arms of the parties. r this caused lays the groundwork ian forfe the political threat to russian federation wants to hold over theer united states with undrd to its missile defense deployments. effectiveness, this agreed-upon language in the preamble establishes that future missile defense deployments could undermine the treaty. thereby establishing a political

argument that the russian federation will surely use at a future date and try to keep us from building up our missile defenses. in short, we have handed the russian government the political pressure they have sought for so long to bind our future decisions and actions on strategic defensive arms. imagine a world a few years from now when, god forbid, an iran or a north korea or some other rogue state has deployed longer-range ballistic missiles and a tkhroeubl nuclear capability -- deployable nuclear capability much earlier than we assessed that they could. imagine we're faced with a situation where unforeseen saketion where unforeseen unforeseen events compel us for the sake of our national our security and that our allies to qualitatively and quantitativelr build up our missile defense, to develop or deploy new systems tt counter a new and far greater tn threat than we expected. if we c and then imagine the government tells us if we consider taking

r n these actions we deem to be international security interest in such action to improve defene missilse defense would undermine what with the treaty's effectiveness and of liability. this is an unacceptable what constraint on u.s. decision making. home as if to drive home the large tc from this cause in the preamble, the russian government issued a unilateral statement at the time the treaty was signed. not i realize this statement is not, legally binding either. but it certainly ads to thehat e political commitment the russias federation believes the united states has made on limiting our missile defenses. remar this is aka remarkable statemen. and it deserves to be read inll. full, and id quote, such treatya between the russian federation ion the united states of americt are measures for the for the production and limitation ofgue strategic offensive arms signed

on april 8, 2010 may be effective and viable only in conditions where there is no qualitative or quantitativeapab buildup in the missile defense system capabilities of the united states of america. consequently, the extraordinarye events referred to an article 14 of the treaty also include a buildup in the vessel defenseilt systemie capabilities of thee united states of america such that it would give rise to a threat to the strategic nuclearn force potential of the russian federation. ouat is a very clear statementet made by the russian government about the linkage betweende defensive missile systems and offensive arms. this is the russian interpretation o of what the twh governments haavve agreed to inm the preamble. the the explicitly draw theoffens connection between strategic

offensive and strategic defensive arms. the explicitly state that the united states is limited in its development and deployment of missile defense systems. refer o the explicitly referred to the language in the preamble about i the, quote, effectiveness andoro viability of the treaty in order to claim any build up forof impo improvement in u.s. missilefenst defense systems that would e the treaty. in the than who they can go one step further.at was they draw a logical connectionts between what was agreed to in this cause of the preamble to article 14 of the treaty, whicht establishes the rights of the dirties to withdraw from the con treaty and the conditions undero which they may do so. the in short, the russian government has effectively turned in non-binding political agreemento believes is a legal obligation s under the treaty itself. you don't have to take my word for it. just listen to what russian leaders themselves have said.thv

lavrov seeking march 28, 2010.r. the treaty and obligations contains are valid only within s the context of the levels which ntext of t are now present in the sphere of strategic defensive weapons, an" here was foreign minister lavrov again on april 6th, 2010.l havet quote, russia will have the accr right to exit of the accord if the u.s. buildup of its missile defense strategic potential inat numbers and quality begins to considerably affect the russiant efficiencyeg of russian strategc nuclear forces.linkage toissile linkage to missile defense isn clearly spelled out in the accord and is legally binding.oe i would remind my colleagues that's the statements of ther. russian foreign minister. td here is everybody's favorito president, dmitry medvedev,parln

speaking to the russian parliament on november 30th, just november 30 if. quote, either we reach anquote h agreement on missile defense ane create a full-fledged cooperation mechanism, or if wee can't come to a constructive agreement, we will see anothersr escalation of the arms race.ke we will have to make a decisionr to deploy new historic systems. finally, here is my favorite. prime minister vladimir putin p speaking on larry king live on , december 1st, 2010. the ame quote, i want you and all the tl american people to know this, ar least thoseam spectators who win follow our program here. it's not us moving forward the missiles to the territory, it is you planning to mount missiles that the defense vicinity of our borders of our territory. we've been told he will do it is order to secure against the as f let's say the iranian threat. but such a threat as of now does

not exists. now if the counter missiles will re deployed in the year 2012, oo 2015, they will work against our nuclear potential, our nuclear arsenal, and certainly that us, worries us, and we are obliged to take some actions in response. unfortunately the time the treaty was signed after agreeint to this problematic cause in the preamble, u.s. negotiators did not use the opportunity to make a unilateral statement of their own, to decisively and rsian unequivocally discredit the cla. hessian government's claims.th t instead, this is the statementgs that the united statest government issued in response to sied the statement that i read, quote, the united states of america takes note of the ited statement on missile defense bym the russian federation.ende united states missile defense systems are not intended to rus.

affect the strategic balancethen with russia.issle the united states missile b defense systems will be employed to defend the united states against limited missile launches than to defend its deploy it allies and partners against regional threats. the united states intends to m continue improving and employing its missile defense systems in order to defend itself against f limited attacks as part of our collaborative approach to strengthen i the stability in kd regions. driends, i understand diplomacyn are critical. that certainly stands out as one of those. we could have stated that the development and deployment of ae u.s. missile defenses are in no way limited by the treaty anyth commits preamble or anything the russian government says aboutlda them.he we could have stated that the united states does not recognizs decisions about its missile defense systems as a legitimatee and valid reraason tifor the run

federation to withdraw from the treaty as it is right under article 14.d we could have stated to affirmatively that the united states will continue to make both qualitative and quantitative improvements to our missile defense systems of whether the russian federation threatens to or actually choose to withdraw h from the new s.t.a.r.t. treaty. we could have said all that and. instead, we simply took note ofa what the russians had to say and then spoke passably about our is intentions without addressingdde the heart of the matter. matte mean?t does all this what it means is the senate the needs to fix the problem the presented by this cause in thees treaty's preamble. one way to do that, the easiestr way is to simply because of thee street from the pamreamble text amendmenty to, remove any recognition of an interrelationship between offensive nuclear weapons and

missile defense and would l undercutog the logical and unilateral statements as well as the clearly and repeatedly treay stated russian position that this treaty imposes a legally binding limitation on a u.s.he missile defenses. by i am joined on the floor by myos good friend and a co-sponsor ong this amendment, the senator fros wyoming. to thank again, i want to take the tak opportunity to thank him, takinn the lead in offering this amendment in the committee onn foreign relations during the markup of the resolution ofty t ratification. i've had the upper to nettie tor travel overseas with the senator from wyoming to iraq and place afghanistan, pakistans. and mant other places and i appreciate his consistent leadership on matters of national security. i would ask unanimous consent and senator barrasso be recognized next.

>> the senate devils into marlo

test the carnegie endowment for international peace, the president's adviser on terrorism says that u.s. homeland security officials are on heightened alert this christmas season. this is part of a speech on counterterrorism efforts in yemen where an american embassy vehicle was attacked this week. this is an hour.

[inaudible conversations] >> good morning, all. i am just come matthews, president of the carnegie endowment and it's a pleasure to welcome you this morning. we are privileged to have with us today the assistant to the president for homeland security and counterterrorism john brennan. as we reflect on the end of 2010 and look towards 2011, it's difficult to overstate the effect weeks states have had on global politics and security and are having and near the top of the list of the countries of concern is yemen, and we are therefore particularly keen to hear mr. brennan's insight today. you have in front of you a brief biography. i want to emphasize this has been a impressive career in the intelligence arena.

at the cia he served from 2008 -- from 1980 to 2005 and numerous high-level positions. his accomplishments include establishing the national counterterrorism center and directing the terrorist threat center and he served as a principal senior aide to the cia director george tenant and the principal of intelligence brief for president clinton. for the last two years, john brennan served as the top counterterrorism official in the white house. "the new york times" said of him of it, meaning the war the counterterrorism war is now obama's war brann ennis his general, general brennan, we are very happy to have you. [laughter] >> def rett mr. brennan will address today, yemen, has been on the wiltz radar screen ever since the tragic u.s. haskell bombing ten years ago. it returned to the front pages

after the young men trained christmas day bomber last year, and again in recent months when al qaeda in the arabian peninsula attempted to send explosives to the chicago synagogues. aqap as i greater threat in all likelihood the and the more well-known central al qaeda organization in south asia. at carnegie, christopher has shed new light on the unprecedented problems facing young men today. in addition to the research and al qaeda the government has to contend with the symbol war in the north and increasingly active session mixed movements in the south. the deepening economic crisis, dwindling water supply which is linked directly to much of the violence in the country, addiction to a wide spread of narcotics even more widespread

corruption and the weak central government. as chris noted in his work, yemen as a country close to the brink of failure and if it were to fail, the ripples from that would certainly spread widely in the region. given the spectrum of the questions we are eager to hear answers to today are with the u.s. can do to help stabilize yemen, how was the counter terrorism policy adapting to this threat and how can the united states work with other nations to ensure yemen and the region's security? i think there probably is no better person to address all of these questions than our speaker today, and so i hope he will join me in welcoming him, john brennan. thanks. [applause]

>> thank you very much, jessica, for the kind introduction as well as your leadership not only here at carnegie but your years of public service in your ridings which have helped with policy makers and the american people better understand and address the challenges facing the nation. i'd like to thank everyone here at carnegie as well for being here today and for sustaining this institution as a force for global peace and security for 100 years and congratulations on your centennial. >> thank you. >> the mission statement on your web site says that carnegie is dedicated to advancing cooperation between nations and promoting active international engagement by the united states. these two words, cooperation and engagement, capture the essence of what i want to talk about today and that is why the carnegie endowment for international peace is such a fitting venue for my remarks. and let me say that it's wonderful to see so many people

here, diplomatics of a society leaders, public servants, academics who have dedicated their professional lives to the study of yemen, and i especially want to acknowledge u.s. ambassador's david newton, stephens - for being here today and for your service and support of our nation's policy objectives in that part of the world. i very much appreciate the opportunity to discuss the country and people that i have come to know and admire for over 30 years. when i first joined the government in 19801 of my first assignments was an analyst on yemen. and when was posted to saudi arabia in the early 1980's i traveled several times to the yemenis border, cantelon and with the tribes in the region and saw firsthand the beauty of the land known in ancient times as a arabia felix, were happy every beah because the rich landscape, the plentiful spices and the enterprising and

beautiful people found here. i've had a great pleasure to return to yemen four times since joining the administration 23 months ago. with each visit to find something new and fascinating about the country. the dramatic typography, the beautiful architecture, the hand crafted silver and back streets that appear unaffected by the passing centuries. and in each of the last four visits i have had the opportunity to meet with president ali abdullah saleh. in each meetings we've had directed serious negotiations about the partnership between yemen and the united states. if i came away from each of these visits from yemen with better insights on the concerns and aspirations of not only presidents ali abdullah saleh but also the yemenis people, and more about that in a few minutes. in short, i have had the pleasure of coming to see yemen not merely how many westerners including americans sometimes precede it, but for what it

truly is, a rich culture, beautiful country, and a proud and resilient people. i have also come to understand something all of you know. yemen matters. yemen matters to the will not simply because of threats emanating from within its borders today as we saw again during this week's attack on our embassy personnel which we strongly condemn. yemen and matters because its underlying strategic significance. with a strategic location at the junction of the two of the world's most important waterways, the red sea and the gulf aid in yemen served as a commercial transportation hub for centuries connecting mediterranean, african and arab ports. this location of course has made yemen the target of the foreign intervention that has left an indelible mark on the country. yet its location has also allowed in yemen to enjoy periods of wealth and prosperity, cultural development

and though industry. during medieval times yemen became a commercial center for spice and textiles and as recently as this month in the midst of so much challenge yemen hosted the soccer tournament for the first time ever with thousands of soccer fans flocking to aid in and that successful and peaceful international event was a tribute to the yemeni determination to hold the tournament despite the challenges as allows the threats. likewise is impossible to understand yemen's current situation without a historical context. those of you in this room need no lesson in yemen's complex history for me but i do want to spend a few minutes on the past because it informs how president obama and those in the administration seek yemen today. traditionally, yemen has not been united into one nation to cover slash various tribal and external actors. in the 19th century, yemen had the carter part of the british

empire's which resulted in the north coming on to the control of the ottomans and the south becoming part of the british sphere of influence. essentially, the ottomans and the british lost control and the south fell under the influence of the communists supported by the soviet union and wasn't until 1990 under president ali abdullah saleh that yemen was united. this is the history that feeds into the current tension but in the yemenis government and domestic opponents. some in the southern part of the countryside and in the equitable distribution of resources and political power as the reasons behind increased tensions with the yemenis government. the government has engaged in these issues with political activists including those calling for secession. this engagement can help maintain stability and foster a political environment and institutions that address the longstanding grievances. the dialogue between the government and the southerners must continue. the hope is in the order of the

country present another challenge, one that at times has resulted in open a lot of conflict with those of the yemeni and saudi government. based on the government, the oppositionists are followers of the family to claim elite status among the 80 muslims who say the profits of muhammed. they cite similar concerns of opposition and the south and secret construction of war images, economic assistance in stable access to essential services as well as the listing of religious and educational restrictions. the have developed a robust and cohesive military arsenal and the yemenis forces clashed again last year for the sixth round of fighting since 2004. even more daunting is the scope of the yemen's socio-economic charges. it remains one of the poorest countries in the world with perhaps 40% unemployment and per capita income under $1,000 a year. yemen was severely affected by

the recent flood crisis and about one-third are considered undernourished, one of the highest rates in the region. basic services are woefully lacking with just 40% of people having access to electricity and much of the population living in relative isolation. and the pressure on yemen will only continue to grow if more than half the population under the age of 20 and with its population of 23 million projected to double well before the year 2040. in addition, yemen is one of the most scarce countries in the world and is drawing water faster than it can be replenished. creating enormous challenges for public health and agriculture. many farmers have turned to cultivation to which so many are now one fortunately addicted. the cultivation also requires a large amount of water to grow making for a vicious cycle with much of the available water being used to grow the age limit

of other crops is stifled even more. atop all this, but the economy which isn't sufficiently diversified continues to deteriorate. much of the economy into the lion's share of the government revenue and public expenditure is based on oil revenue. but oil revenues are expected to drop due to a variety of factors including natural field decline and the reluctance of international oil companies to work in yemen. the companies cite poor political security environments and opaque business environments as reasons they don't do business in yemen. without the company's working alongside them they are losing key investments and technical expertise. with the decrease in oil revenue the dee-tal-ya reading fiscal situation yen and reached out to the imf persistence to help stabilize the situation. so let me say this. even if there were no threats to our security emanating from yemen the circumstances i have

described would be more than worthy of american attention, yemen matters. the people of yemen matters and president obama has made clear connection to the yemenis who are struggling to make ends meet and to live in freedom and dignity. all of these challenges have made not only young men who write for internal stability the have made the country and attractive recruiting training ground for al qaeda. the arabian peninsula is the most operationally inductive note of the al qaeda network. so who are these terrorists? al qaeda of course has had a presence in yemen and saudi arabia for over a decade. for its part, al qaeda and the arabian peninsula is a hybrid of of protests with close ties to osama bin laden and al qaeda leadership in south asia as well as elements for al qaeda hoeven priest bin ladens's mandate to attack the united states and the

west to read it was operatives in yemen who attacked the uss cole and the oil tanker in 2002. some of the individuals responsible for the attack on the uss cole diskette to prison as part of a larger prison break in 2006 and would go on to form the leadership of the al qaeda arabian peninsula franchise. in saudi arabia the al qaeda affiliate conducted a series of attacks beginning in 2003 over the next two years killed 13 americans including an attack on the consulate in 2004. the campaign against the group waged by the saudi government has been largely successful capturing and killing most of the group's leadership in saudi arabia by 2007. however, the remnants of that network fled the kingdom. many of them going to yemen where they join their yemenis counterparts to form al qaeda and arabian peninsula in 2009. more recently the ranks of al qaeda have been bolstered by

members with ties to the west or american citizenship such as anwar al-awlaki. indy 500 al qaeda is seeking to attract not just westerners are americans overseas but americans inside the united states. this increasingly active outreach is in line with dhaka does leadership vision, the vision against the united states and its allies. as a result, al qaeda today poses a serious threat to yemen, saudi arabia and the united states. al qaeda conducted a wave of attacks against the security forces attacked our embassy in september, 2008 and attended a small rocket attack against the british investors vehicle earlier this week. it also attempted to sit back saudi counterterrorism success with a suicide attack against the prince in 2000 mind which thankfully failed. and of course, al qaeda has been responsible for the attempted attacks against the u.s.

homeland over the past year. the attempt by umar farouk abdulmutallab to bring down a flight on christmas day last year and more recently, attempting to send air cargo packages containing explosives to the united states. the group leadership really seeks to apply lessons learned from past attacks including those of other groups and their definition of success stoneking if you're even if their attacks fail portend such attempt. this is a challenge the united states and partners face today from al qaeda folks who've put down roots in the arabian peninsula. no nation could evidence the challenges alone and yemen is no different. it needs partners, it needs assistance, and it needs to know the international community will not stand by and watch yemen fall victim to al qaeda's murderous agenda and that is why

the obama administration has developed a comprehensive approach to support yemen in its time of need. in this sense, the policy reflects the president's understanding of the challenges before us in our work to protect the american people and our partners to read on the one hand there is the near-term challenge of destroying al qaeda and its extremist affiliate's read and let me assure everyone in this room we will destroy al qaeda. there is a larger and longer-term challenges confronting the political economic and social forces that can sometimes drive individuals down the path towards militancy. this involves offering an alternative that affords people the political space, economic opportunity and social inclusion that make countries like yemen less vulnerable to the terrorist networks. in other words, we aim to forge partnerships that offer people a future of hope and dignity. in fact president obama has been in assistant to those of us on

his team that our partnership with yemen not be defined solely by common threats but rather by the vision of a brighter future that the yemenis people want and deserve. so in yemen and elsewhere we are pursuing a comprehensive approach that addresses both near and long term challenges and we are doing so by harnessing every tool of american power, military and civilian, economic and diplomatic as well as the power of values. the obama administration has been working closely with our yemenis partners to address the drivers of instability in yemen before the al qaeda and arabian peninsula attempted the attack last christmas. over the past few years we strengthen our relationship and have dramatically expanded efforts to help improve the political situation and socio-economic outlook. we have increased u.s. assistance from $22 million in 2008 to about 300 million in

2010. the role of our civilian agencies is steadily increasing and our bilateral nonmilitary assistance accounts for nearly half of the assistance provided to yemen in 2010 with a total reaching approximately 130 million in the long security assistance. our efforts in yemen involve a wide range of u.s. government agencies. the department of state and defense and usaid have been working in yemen for years and are now working alongside counterparts from agencies including commerce, treasury, homeland security, health and human services, justice and agriculture. on the economic front, the treasury and state department supported yemen negotiations for the programs signed this summer which provided much-needed fiscal relief for the government and the people. i was pleased to learn about the approval earlier this week of the world bank grant to support the yemenis growth and social

protection. we also look forward to seeing the next version of yemen's to from a plan for poverty reduction. in another important step the united states and yemen have concluded bilateral negotiations is a part of the efforts to the world trade organization. temmins's progress to add up to international standards is an important step towards integration of global markets and improving the economic fortunes of the yemeni people. to increase the opportunity for the next generation we continue to expand the educational exchange programs. department of state programs provide world-class educational and training opportunities for over 100 yemenis students each year from high school students to cabinet level government officials. these are the people who will help determine the future of their nation and the united states is committed to lending a helping hand to the next generation of leaders. our comprehensive strategy in

yemen puts a premium on reform that increases stability, capacity, accountability and inclusiveness of the government in both the short as well as the long term. we are working with yemenis and international partners to help build the necessary components of the functioning space system to the this includes promoting reconciliation, increased government transferred to come improved delivery of essential services, support for freedom of the press, the growth of the vibrant civil society, strengthened will fall and free and open elections. it is no secret that yemen faces profound challenges in many of these areas, and none of them can be ignored. yet it is also undeniable that governments and will fall are the bedrock of development and to the limit is a foundation for stability. just last week my staff had the opportunity to meet with 23 dedicated representatives from

yemen's anti-corruption body to discuss opportunities for training our financial investigations and law. we continue to stress the importance of the national dialogue which is the mechanism used in yemen to reach political consensus on a range of problems including election modalities, the conflict in southern unrest. at the same time, we are working closely with international partners to leverage the expertise, resources and assistance that nations in the region and around the world can offer yemen. for the simple, the trends of yemen forum including saudi arabia, united arab emirates, united states and united kingdom regarding valuable assistance has yemen pursues political economic and social reform. a working group chaired by the uav is holding on the economic development and governments front. another working group chaired by jordan focuses on improving justice, security and the rule of law. we are looking forward to participating in the friends of

yemen saudi arabia next year and we will continue to work with the government's and people of yemen and our international partners on coordinating and streamlining dillinger assistance coming forward. this is a long-term challenge and while the results might not be immediate than absolutely critical. since the very first days of this at the station we have also focused substantial time and attention on the terrorism threats emanating from yemen and on developing the appropriate responses to that threat. we are helping to train and develop the yemenis counterterrorism forces and those efforts will continue. the result of yemenis security forces is grown over the past year as al qaeda began specifically targeting the many security officials and many brave yemenis have given their lives in defense of their country and the felicitous cents. we will continue to work with the yemenis forces with the intention of building their capacity which would allow us

over time to rant on security aid and assistance as the forces develop greater proficiency. we are helping them and build its counterterrorism capacity for a very specific purpose so that began with our assistance can go on the offensive against al qaeda. going on the offensive against al qaeda means exactly that, using all the tools available to identify, locate, captured, and when necessary, kill those who are dedicated to murdering innocent men, women and children. and in my many discussions with the president ali abdullah saleh weather in person or on the phone five conveyed president obama's personal commitment the united states will do whatever it can to help the people of yemen for their country of the terrible cancer of al qaeda. in addition to near-term capacity building efforts, we are currently engaged with the yemenis officials to build the reintegration program to complement their increasingly

aggressive arrest campaign against al qaeda. they agree on the need to better facilitate the integration of the former terrorists back into society to a combination of job training, post-religious monitoring, psychological evaluations as well as religious instruction. we are currently working with our international partners through the friends of yemen construct and other bilateral discussions to determine the best way to leverage each of the strengths to address the need for this type of long-term program in yen. achieving our shared goal of distracting and dismantling the al qaeda network in yemen will require patience. we need to draw on not just our cooperation with yemen and other partner nations against al qaeda but also refine and develop intelligence solutions zips, security screening process season and the yemenis counterterrorism forces to address effectively the threat posed by al qaeda. the it to the attack from the al qaeda operatives' over the past

year also underscore the importance of a multilayer defense of our homeland and the need to constantly strengthening each layer. in the wake of the atom that attack west christmas we implemented new screening measures and intelligence forms to read over the past year that a part of homeland security has worked with the international civil aviation organization to reach a historic agreement on improving international aviation security and putting new standards for screening air cargo and concurrently deploy transportation center for the administration experts to yemen to treat over 300 yemenis aviation personnel on security screening procedures and to play screening a comment to address the gaps in the process in yemen. the department is also working closely with fun yemenis government to determine a way for word that includes improved security measures that will allow lifting of the air cargo ban now in place against items coming from yemen. the attempt by terrorists to ship the devices as air cargo

also demonstrates the crucial role intelligence relationships with our partners play in disrupting terrorist attacks. in this case they provided the actionable information that enabled the british and elbaradei friends and industry partners to intercept the package and disable the devices. i also want to note that we achieve our culture was an object is not only by disrupting operations and protecting the homeland but also by depriving them of recruiters of the symbols the views to help radicalize and indoctrinate their foot soldiers. as president obama has said, one such symbol is the u.s. detention facility at guantanamo bay. secure gates, admiral mike mahlon and general petraeus have spoken publicly about the lasting effect of guantanamo as a recruiting symbol for terrorists and that concludes al qaeda and ann and that is why the united states continues to work to build a gym in capacity as a vital partner in the administration's ongoing efforts

to close guantanamo. a significant proportion of the detainees still incarcerated in guantanamo are yemenis nationals. as the president said we will not release or transfer detainee's we consider the continuing threat under any circumstances so we are working diligently with the government to build their capacity to properly monitor, prosecute and incarcerate individuals as required to protect both our nations. what we take a moment at this point to say a few words about the candor of the discourse that is taking place between the yemenis and american governments. as with all bilateral relationships, relationships between washington is at times marked by differences of view, attention and even strong frustration by each side. we, the united states, frequently pushed them to move further and faster along the path of economic and political reform to reach a peaceful

accommodation and southern oppositionists and to be more aggressive in the actions they take against al qaeda. for their part they complain to us our security and to the moment assistance hard to slow by the bureaucratic requirements and complications. that we expect economic and political reform overnight without understanding the implications of such reforms on the society and stability and that we are more interested in fighting al qaeda than helping the people. i consider this to be a healthy tension and the president and i have had little will called many animated conversations as we have today to and argued over major substantive issues, but that is the hallmark of true friendship, not telling the other what they want to hear, but telling the other with the need to hear, and that is why i called president salah the day

before the wikileaks leaks to the press. i explained to the president saleh we regret to the public release of the correspondence that resulted from despicable criminal activities. i told president saleh it was unfortunate these releases would be taking place and that i hope they wouldn't cause problems for him, the yemeni government or the yemeni people. i told president saleh that president obama appreciated his understanding of an unfortunate and regrettable development and that the united states is now even more determined to pursue even stronger ties to yemen in the future. so this is a comprehensive strategy we are pursuing with our yemenis partners not simply to destroy the terrorists to defile the yemeni ground they will come but help him and address the political and economic and social forces that contribute to violence and terrorism and deprive the people of young men of a future of security and prosperity. our approach toward yemen is

emblematic of our overall approach to counterterrorism. as i said previously, our strategy must be nested within and consistent with our broad foreign policy national security strategy. that is true whether we are talking about afghanistan and the fata, so wally and horn of africa, the region of africa or the arabian peninsula. in the yemen as in the other critically important regions we are drawing on all of our resources and capabilities to counter and disrupted the immediate threat and protect the american people from attack. at the same time, however, also working to create lasting security, stability and prosperity in yemen so that al qaeda and other extremists cannot find safe haven. if we fail to do our part to address the underlying economic political and security challenges in countries such as yemen will find ourselves fighting against the al qaeda threat for years and years to

come. a counterterrorism strategy that focuses on the immediate threat to the exclusion of the more comprehensive political economic and development oriented approach is not only short-sighted, but also doomed to fail. in closing, i would simply reiterate our counterterrorism efforts in yemen are part of our larger comprehensive approach to protecting the american people. yesterday the president provided the american people with an update with regard to our efforts in afghanistan and pakistan. as the president said, the goal remains the same, to disrupt, dismantle and the ft al qaeda and prevent its capacity to threaten the american people and our allies in the future. we are making significant progress toward that goal and the tribal region but in afghanistan and pakistan the core of al qaeda is under more pressure than any point since it fled afghanistan nine years ago. senior leaders have been killed. it's hard for them to recruit,

travel, treen, plot, to launch attacks. in short, al qaeda is hunkered down. as the president said it will take time to ultimately defeated al qaeda and it remains a ruthless and resilient enemy bent on attacking our country but we are going to remain relentless and disrupting and dismantling that terrorist organization, and i can envision the demise of dhaka the senior leadership and a cadre in the coming years. and around the world, where a for al qaeda and its affiliate's try to take root, we are going to continue using every tool at our disposal to protect the american people and build the capacity of partners to protect their people and that includes the and true to the ideals and values that make us americans and make our nation great. because as the president said, whereas terrorists offer nothing but a vision of death and destruction, the united states is going to continue to offer people around the world a vision of hope, progress and justice.

thank you very much. [applause] >> thank you for a note to to -- nalubaale cui your statement i think all of us learned. mr. brennan is going to take some questions. let me ask you to be brief and identify yourself just as a courtesy to him. we will start with the gentleman right here. wait for the microphone if he would. >> thank you very much. mark from the middle east policy council. mr. brennan, i would like to applaud you very much on your statement of a strategy that goes beyond simply counterterrorism but also talks about development. my question is is it enough? the figures he mentioned are small compared to the kind of things we are spending

elsewhere, and i couldn't envision spending even ten times as much as the figures you mentioned would make the task challenging. if it's worth doing do we devote more resources to yemen? thank you. >> absolutely. i agree that there are quite a number of challenges in jam and that require a tremendous amount of resources. that is one of the reasons we put together the ann contract so we can be working in concert with our partners overseas that it be the gulf arab states, europeans and others to ensure we have a comprehensive program that goes beyond bilateral relations between individual countries and yemen but also the question about the capacity of hegemony and making sure the investment in yemen is the man to be something that is coming to address some of the longstanding and structural problems in the country. obviously yemen gets a lot of budgetary relief and support from other countries so that they can't continue to make

payroll and other types of things. and we are not talking about drawing to move all of the bilateral assistance into the friends of human constructs. however, he wanted to make sure we identified infrastructure projects, those types of economic and development projects that are going to be a part of the future of young men so that the investment is done wisely not just as a temporary power that is going to address requirements or requests and i think for too long it has been more tactical and strategic, more short-term than long term but this is going to take some time and that is what we tried to explain to not just the yemenis partners but others as well a long-term approach. >> with your permission i will take three at the time. estimate that would be fine. >> let's take this group and then i will move to the back. >> good morning, john. bald dreyfus from the nation and

rolling stone. i remember a conversation we had a number of years ago where you set of military is the wrong instrument to fight terrorism with a and among the incentives for recording terrorism, many people argue that the drone of tax and the night raids by forces in southern afghanistan and so forth are actually like the guantanamo recruiting posters for al qaeda, can you address that point and are we, as rumsfeld said creating more tourists than we are killing? and i want to ask sorters and the parallel sense, you said al qaeda is concord down. can you see something about the relationship between al qaeda and taliban? many people think we could make a deal with katella and if they would renounce al qaeda under

certain circumstances. >> john, to achieve a comprehensive plan that you have outlined, don't you think we need a special envoy like the late richard holbrooke number one. number two, have we talked to our friends about allowing the yemenis to work in these countries? i mean, -- >> right behind you, please. >> from the world organization for research, to the net and a jacuzzi. i want to thank you for the informative presentation. my question is there's a comprehensive strategy that sounds similar to what we already have been several places like pakistan for the sample. on one front we are supporting pakistan military counter insurgency efforts while at the same time providing humanitarian to let assistance. however despite our best efforts, pakistan situation has to mast to leave to drastically worsened so are there lessons we can apply from their two young

men? >> -- yemen. >> treat people? i don't think i said the military is the instrument. i said it would be inappropriate to think of military as the only instrument and that is what we are trying to do is make sure there is balance against the other key devotees the government house, kinetic, not kinetic, to the moment, what ever. are we creating more tourists than we are removing from the battlefield? i mean that is sort of the key question. we have made sycophant progress in fata in partnership with pakistan a partners so we feel as though al qaeda core has taken on the chin and that they are focusing more on trying to ensure their own security than carrying out attacks. that doesn't mean they are not lethal but have the capability we have to be careful about to i think we have been able to make progress and i think it is a

combination of addressing the near-term threats and identify and that terrorist operatives who plan to carry out attacks and find them if we can capture them or if need be to remove them from the battlefield we will do that but it has to be balanced against the effort we are working with our partners and as far as al qaeda and the taliban, they have had a long history. i think the next chapter of the relationship between them is to be played out as we see the next phases of the situation in afghanistan. taliban and others know clearly what our position is that we will not tolerate what so ever in the relationship of any entity organization or country with al qaeda but we continue to prosecute our effort in afghanistan and as the report yesterday said we have arrested the momentum of taliban. as far as the comprehensive plan

on yemen and special envoy, i think some people can't believe i'm a special envoy since i go out there so often but also, what president obama wanted to do early on is to signal to yemen and president saleh and other governments the white house has a vested interest in their future that it is critically important that we move now to arrest some of the trend is to include the growth of al qaeda and deterioration of some of those economic features of the country, so i deal a lot not just with our partners but also other countries about and then so at some point those turney to be a special envoy as steve to the great job out there and the investor out there now they are the front and center on voice every day pushing for the foreign policy and objectives. comprehensive strategies we have

in places like pakistan, yes we have learned a lot from that. in many respects what we are trying to do in countries like pakistan and yemen and others where there's a serious terrorist problem and problem of militancy, we are trying to ensure our counterterrorism strategy is nested within this broad more comprehensive framework but in all of these cases i think time really is required in order to change the situations that have been the product of many years in the making so we are trying to and absorbed the lessons and apply them as we move forward. >> okay. let's turn to the fact. okay. go right ahead. >> carolyn with a voice of america's tv. a question about wikileaks. some analysts are saying because of the tables released both on the whiskey and air strikes that this will just strengthen al qaeda's recruitment efforts in

yemen. you have proof of that and how is the administration following that? >> okay, who else -- there is another lady right there. >> thank you. [inaudible] i wanted just to clarify some of the points you made about guantanamo. are you saying the possibility would be to strengthen the yen and's capabilities to try those being held at guantanamo of yemeni origin and if you could clarify a bit on that. thank you. >> and the gentleman right here. >> thanks. , with human rights watch. two quick questions. first, can you say with confidence today that no u.s. assistance is being diverted by yemen for the fight against the southern secessionists? second come on guantanamo what would you say sitting the politics aside and congressional

restrictions aside would you say from a strictly counterterrorism points of view hurts us more right now? what would hurt more? an effort to begin repatriating the young men in detainee's the the sort of rehabilitation program with the knowledge that it wouldn't be perfect and that a handful of people probably would be seen going back to the fight or maintaining guantanamo indefinitely as a camp for mostly young men who detainee's and retaining it as a symbol you and the president -- >> okay. for stryker wikileaks i am not going to address any specifics that might have been in the press about the contents of the reported cables. al qaeda and other terrorists will use whenever they can to try to recruit individuals and additional of insurance to their

twisted ideology. so they might point a certain demint of things that come out in the public and press, but as i said, they are going to seize upon what it for they can. they are a bunch of murderous thugs, they are individuals that are just determined to destroy and kill, and i think more and more individuals in yemen as well as other parts of the world are seeing that al qaeda's suppose it sort of religious banner is a facade for this murderous agenda. on guantanamo, in terms of trying individuals they did include the prosecution because as we've repatriated the detainee's to the various countries, those countries may also have reason to prosecute individuals for whatever types of violations of their mall they might want to consider that has happened in a number of cases. we are not saying they need to

be tried during this administration we repatriated eight guantanamo detainees, two of them yemen and and this administration has come. there were many more that were released in the previous out ministration the this is something we are continuing to look at and to work on which is related to the last question about a first of the issue related to u.s. assistance. we have put in place i think some mechanisms that we have made part of our program insistence this not be used to refer to it, this is something that was worked on very diligently with the yemenis to ensure our support would be used for counterterrorism. security assistance to them whether it be for counterterrorism, sometimes and i piracy, maritime security and that it would not be used for

use against domestic opposition. .. >> this is why we have a dialogue and we've had a dialogue just these week with the yemenese about the measures put in place for the individuals. and to date, the individuals that have been repateuated to yemen, no indication that they have returned in any way to

terrorists activities. >> gentleman here. >> larry from cnn. mr. brennan, you mention a couple of times the christmas bombing attempt last year. and then earlier this christmas season, there was the attempting bombing of the portland christmas tree lighting ceremony. can you give us any specifics about your concerns about a possible terrorist attack or attempted terrorist attack during this christmas season? >> okay. a couple of other hands right here. right back. go ahead. >> lieutenant commander, senator mccain fellow. we see the navy in 5th fleets roll in an already stressful region? there there -- >> and there was a gentleman right here. >> ken from "the new york

times." >> does the government know where anwar al-awlaki is? >> related to christmas threats. i was starting to make dinner when i got a call from the white house situation room with somebody landing on detroit with a bit of an issue. one the things that we always do within the counterterrorism and intelligence community is be vigilant during the holiday season because of the increased travel that is taking place both within countries as well as transnationally. and, you know, i think what we feel that we need to do in light of concerns about possible threats in europe and other places, we always have to stay on our guard. that's one of the things about the counterterrorism is 24/7. the holiday season is a continuation. if anyone, we step it up during

that time because of the heightened volume of travel. but at this point, i'm feeling good that we have the appropriate resources in place. but as i said before, al qaeda is determined to carry out attacks. also, you pointed out the portland attempt. that was not something that was associated with al qaeda, per se. it may have been inspired by it. but we are also looking at those smaller-scale, low-level types of terrorists attacks that are sometimes more difficult to detect than some of those more strategic ones. in terms of the navy and 5th fleets role? clearly the terrorists challenge presents many different sort of requirements. and so when i said we're using all instruments of american power, and as i mentioned to bobby before, the military

mentioned one of the most important arrows in the quiver. ensuring that part of the world is not going to be used by terrorists. so the 5th fleet in the golf region and other areas where the u.s. military is present. it's something that we continue to take into consideration as we think about how we're going to help our partner countries do the capacity building and as necessary, you know, leverage those capabilities at a time when we believe it is necessary. on the issue of anwar al-awlaki. one the rumors about yemen and the people that have been there, most people in the room have, i was on the flight deck of the plane that was going in 45 minutes or so before we landed in sanaa. the topography of the country is really, really breathtaking.

one the things that really strikes one is just how desolate a number of the areas are of yemen. people know that the central government if yemen, you know, has had sort of tenuous control or oversight over many parts of the country and that the tribes that are out there really are the ones that rule those areas. you know, the location of any one individual, at any one time is maybe known by others. what we are trying to do is make sure the individuals that we are interested in finding and detaining that we are working very closely with our yemeni partners as well as with others who might have knowledge about that. so i'm hoping that if people know where a certain individuals are, they are going to come forward and assist the yemeni government in tracking down these individuals that are trying to kill innocent people. >> gentleman right here. and we'll go to here.

then there. yes? >> this has got to be the last round. make them good. >> joseph from freedom house. you mentioned in your private consideration with president sal -- saleh, you mentioned the political reform. we can't expect that over night. how could you characterize the pace of political reform in yemen? what can you point to specifically that they can do? what should they be doing right now? >> thanks. right here. >> mike with fox news. two questions, first you mentioned with regards to wikileaks, criminal activity. i was wondering if you would include julian assange in that. also in terms of aqap, groups like that in yemen. how might they use internet and

cyberattacks to further their cause? >> thank you. gentleman right here. >> thank you. [inaudible] independent journalist and originally from yemen. two days ago, a yemeni journalist in sanaa who is a correspondent of the "daily" met with one of the u.s. called bomber. they interviewed him, took photos in the tribal area in the -- providence. do you think the journalist can meet and the yemeni government cannot find him? and if al qaeda bring him president saleh $300 million a year, why should he go after him? this is common sense that we as yemenese american ask myself. thanks. >> as far as what is happening on political reform and civil liberties front, i think, you

know, there are -- political reform takes many different dimensions and steps. the fact that the yemeni government engaged directly with some of the southern oppositionist is a good stretch. but it needs to be followed up. there needs to be a lot more done along those lines. it is something that we continue to emphasize in our discussions with them on a regular basis. i know the embassy does that. the political system in yemen is one that has evolved over the years. one of the things that as i said our staff had met with some of the individuals involved in sort of anti-corruption and rule of law and governance. and there needs to be continued engagement with that. that's where i think our assistance is going to be particularly important. but the political reform front has to go hand in hand. what we want food is make sure that we are able to push it as

quickly -- as far as we can, but also recognizes within the yemeni system. we want to make sure we are able to do things without destabilizing the country. that should not also be an excuse for yemen not to move forward on the economic reform front. i think in the past it has. as far as my reference to despicable criminal activity. any declassification that finds it way out of the appropriate channels is something that is done in a very -- unauthorized way. and that violates that u.s. law. and individuals who are responsible for that are subject to prosecution, criminal charges. the wikileaks investigation is ongoing. i'm going to comment on any individual's potential involvement in that. i want to say in the first instance, the unauthorized

disclosure of declassified information is criminal violation. as far as aqap and cyber activity and cyberattacks, a number of the terrorists organizations, including al qaeda and aqap have shown in a deafness and skill in using the internet for various propaganda purposes, other purposes, and that's one the things that we are being vigilant about. about how they are using -- how they might use different mechanisms to not just communicate or propagandize, but also to create problems and cause harm. so it's something that we are watching carefully. as far as the question of the reported interview, yes, i saw the reports about this interview that was conducted. i don't have any additional information on it. there clearly are individuals

within yemen who are able to have access to terrorists and to al qaeda types. they find their way to them. and i would just hope that more and more yemenese of whatever stripe are going to see the al qaeda as opposition to yemenese interest. they should not be facilitating al qaeda's ability to get it's message out and recruit and market itself. i do think the yemeni government is looking to the yemeni people to provide them the support, provide them the assistance, to provide them the information about where these -- these terrorists are hiding. and that's what they are doing. they are hiding within the population. so that they protect themselves. and i always find it disturbing that these individuals who had

this profile send others to their death. they don't send themselves to their death. they send others. these poor, young, unfortunate individuals who are given suicide packs or other things while these individuals, you know, the ilk of awlaki hides in caves and places of yemen because they are trying to protect themselves and put others at harm. it's just a matter of time before we and the yemenese are able to find them, uproot them, and to bring them to justice. certainly, i am determined to do that. i have found a resolve in yemen. that's why i continue to go back there. talking with president saleh, as i said, a number of yemenese have given their lives to try to protect their fellow citizens. and i think more and more yemenese are going to rally to the cause against al qaeda and see it for the cancer it is. thank you. >> i think -- i want to

apologize to the many people i couldn't call on. judging from the number of hands, we could spend the better part of an afternoon together. i think it's a testament to mr. brennan's talk and his answers to the question the amount of questions out there. you've been incredibly candid and knowledgeable, frank, and generous with your knowledge and for that i hope all of you will join me in thanking you very much for this. [applause] [applause] [inaudible conversations] [inaudible conversations] >> coming up on c-span2, treasury secretary tim geithner gives an update on t.a.r.p.

>> i can only sort of get people to consider the words that with have a serious case here where the obama administration is trying to create new law there changing interpretation of the existing law. >> see what journalist, lawmakers, and founder julian assange has said about wikileaks online at the c-span video library. search, watch, and share. it's washington your way. >> thursday, timothy geithner said the final cost of t.a.r.p. is expected to be 1% of the gross domestic product. the oversight panel also question secretary geithner

about the home modification program designed for homeowners facing foreclosure. this is two hours. [gavel] [inaudible] >> we appreciate your willingness to come down here and help us. it's easy today to forget the sense of panic that overwhelmed the economy in late 2008. stock market was plummets, employment was plummets, home values were plummeting. i can remember turning on the television and flipping between news channel and seeing anchor after anchor looking frank and scared and frightened and confused. the american financial system, the envy of the world was never supposed to collapse in that way. today we know that the panic ended. and you played a key role in that turn around. as the panel stated in the past, the trouble asset relief program provided critical support to the financial market in a time when the market confidence was in

free fall. combined with the recovery act to our markets and economy. the congressional budget office recently estimated at the end of the day, t.a.r.p. will cost $35 million. i noticed you use the same thing in your opening system. astronomical sum. far less than we expected. it's work issue to protect the banking system, private citizens to help build the road to recovery. thanks to their shared effort, the economy is in a better place today than when t.a.r.p. was enacted. but -- it's a big but, we must not forget the pain that continues to plague no many americans. 15 million americans still cannot find a job. as many as 13 million families will lose their home and foreclosure. the panic of 2008 has subsided. but it's been replaced by the annoying pain of callused men and women who can't find work.

the t.a.r.p. was never intended to the the complete solution to the these problems. even though, your authority to make major change in the t.a.r.p., even though your authority has change, you can still make steps to help strengthen the economy. for example, they laid out a series of steps the treasury can take to help americans keep their home. make it easier for modification, by allowing online. helping them sliding backward from foreclosure. these steps only make a modest interest. they illustrate a larger point. although the legacy has been determined, details remain. they are important. in fact, mr. secretary, you can decide them. $50 in auto, $50 billion in banks, and $30 billion to

prevent foreclosures. that's a weighty obligation. i look forward to hearing you describe how you will handle it. i hope we can use today's hearings to focus on the remaining opportunity to reshape t.a.r.p. and strengthen the economy. we'll start with mr. mcwatters. >> thank you, senator. welcome, mr. secretary. although the congressional budget office has recently revised it's estimated subsidy cost of the t.a.r.p. downward to only $25 million, such metrics should not serve as the sole determinant of the success or failure of the program. we should remain mindful that the t.a.r.p.'s overall contribution to the rescue of the u.s. economy was relatively modest when compared along with multihundred billion bailout of fannie mae and freddie mac, the multitrillion of the federal reserve and fcid as well as the efforts of the private sector

capital market participates. it is particularly difficult to label the t.a.r.p. or any other government-sponsored program aimed at securing financial security an unqualified success when the unemployment rate nears 10%. the combined unemployment and underemployment rate equals 17% and millions of american families are struggling to modify the mortgage loans, so as to avoid foreclosure. it is cold comfort to the individuals and families that the too big to fail financial institutions, aided by the t.a.r.p. and other government-sponsored programs are recording near record earnings. in order to better assess the t.a.r.p. or offer the following recap of the issued raised by the panel and the individuals members over the past year, professor troske and i noticed in the 2010 oversight report that the repayment by t.a.r.p. recipient of advances received is a mid leading measure of the effectiveness of t.a.r.p. and

therefore should not serve as the standard by which the t.a.r.p. is judged. the unlimited bailout of fannie mae and freddie mac by treasury and the purchase of $1.25 trillion of gse guaranteed mortgage-backed securities and the secondary market by the federal reserve under it's first quantitative easing program no doubt benefited t.a.r.p. recipients and other financial institutions. [no audio]

>> greater portion of the cost of the t.a.r.p. than the t.a.r.p. recipients themselves to the taxpayers. cost such as this should be thoroughly considered for the value adding to t.a.r.p.. with respect to the aig, the panel offered the following observations in the june 2010 report. and i quote, the government's actions in rescuing aig continue to have a poisonous effect on the marketplace. by providing a complete rescue the call for no shared sacrifice among aig's creditors, the federal reserve and treasury fundamentally changed the relationship between the government and the country's most sophisticated financial players. the aig rescue demonstrated that treasury and federal reserve would commit taxpayers to pay any price and bear any burden to prevent of the collapse of the financial institutions and to assure repayment to the creditors doing business with them. as long as this remains the

case, the rescue in the marketplace will linger. the panel offered the following observations in it's november 2010 report. again quoting treasury is claimed that based upon evidence today, mortgage-related problems currently pose no danger to the financial system. -- >> with respect to camp and treasury's over programs, the panel offers the following observations in the december 2010 report which was released two days ago. again, quoting, while hamp's most dramatic shortcoming has been the poor results in preventing foreclosures, the program has other significant flaws. for example, despite repeating urging, they failed to collect and analyze data that would explain hamp's short comings and does not have data from many of

hamp's add on programs. further, treasury has refused to specify meaningful goals which to measure the progress, while the program's sole goal to prevent three to four million disclosures has been redefined and watered down. treasury also failed to hold loan services accountable when they lost borrower paperwork or reform loan modifications. in concluding, it's critical to note that although t.a.r.p. has played a meaningful role in the economy closing days -- [no audio] >> thank you, mr. chairman.

good morning. i would like to begin by thanking secretary geithner before appearing once again before our panel. and i would like to also note that i in general appreciate and concur with our colleague mr. mcwatters comments in summary of the some of the issues that we have been concerned about. the story of the troubled asset relief program over the last two years is one that really has two faces. on the one hand, looked at purely from the perspective of how much t.a.r.p. will cost the american public. and the effect of t.a.r.p. on the acute crisis and severe crisis we faced in 2008. the news just keeping getting better and better. recently as my fellow panelist have noted, the congressional budget office estimated the total cost will be $35 million. less than 1/10 of the estimates. certain individual investments which were entered into on terms that were clearly unfavorable of the taxpayers in light of the risk involved, such as the

preferred stock purchase and asset guarantees at citigroup has been managed to reduce profits. but there is another and frankly more important way of looking at t.a.r.p.. t.a.r.p. cannot be held solely accountable for the u.s. or economy. oversight of t.a.r.p. requires that we look at two critical areas of economy that t.a.r.p. was designed to address. the availability of credit to the real economy and the state of the foreclosure crisis. frankly on both fronts, the news is grim. witnesses have testified before our panels that we can expect between eight and 13 million families to face foreclosure before the crisis is over.

millions more than we have experienced already. -- >> like but not limited to the gse. but business lending is hard to come by other than those that can access the credit markets. bank holding have over $1 trillion, while business lending remains stagnant. unemployment levels today are above those projected as the worse-case scenario in the t.a.r.p. bank stress test undertaken in the spring of 2009. asset deflation, banks that won't take normal lending risk, these are the signs of a financial system that remains unhealthy. i continue to believe that we made a fundamental mistake in our management of the financial

crisis but not restructuring the major banks. but not following our own nation's approach to similar crisis in the past, we started down the path that japan took in the 1990s and with are reaping the same outcomes. sluggish and uncertain recovery, banks that can't restructure bad loans, and won't lend to businesses to create jobs. because our financial crisis involves home mortgages, the decision to make preserving the banks our highest policy goal is much not just a weak economy, but the unprecedented human tragedy of millions of foreclosures. in the end, at worst, bank stockholders were die -- diluted. millions and millions of families were affected. i hope we will be able to explain t.a.r.p. and mortgage crisis with secretary geithner, and explore issues of systemic risk and overall help of our

economy. i look forward to the testimony and thank you for appearing before us. >> thank you. >> thank you, senator kaufman. mr. secretary, i would like to thank you for agreeing again to appear before the panel. your testimony is helpful as we carry out the oversight responsibility, and i'm confident that this trend will continue. during my time on the panel, i have become more and more concerned about the public's perception of t.a.r.p. and the impact it has on the government's ability to adopt similar measures during any future financial crisis. as we indicated in our september report, the consensus among academic economists and other experts that we consulted was that t.a.r.p. played an important roll of helping to end the financial crisis. despite the consensus among the experts, it's fair to say to the general public, t.a.r.p. is one of the most bill if id pieces of

legislation enacted on the part of former wall street executives to bailout current wall street executives. i would ask the large part of the public's view can be traced back to the way it was proposed, the congress asking for $7 billion with almost no oversight as well as how it was complementing. -- implemented. changing the focus as one that began to purchase equity. i would also argue that the previous administration's decision to classify general motor motors and chrysler as firms to use t.a.r.p. money affects. i am focus on the public's decision. in trying to over come t.a.r.p., you are forced to deal with the actions. however, there are a number of actions that treasury could and should be taking to help turn up

the perception. one important way that any government can show these programs are effective is to periodically have independent researchers conduct thorough and rigorous evaluation of the programs. this is true whether the program is designed to retrain displaced workers, rescue banks and financial crisis, or to assist struggling homeowners. when performing this type of analysis, the government needs to collect comprehensive data on both program participates and nonparticipates in order to have a meaningful campaignson group. yet, despite the panels repeated urging, for treasury to expand significantly the data collection efforts it does not appear that treasury has made comprehensive data collection for t.a.r.p. programs a priority. i would again urge you to do so and also urge you to make the data available to outside researchers. only by facing the steps will we obtain the credible research that is so vital in evaluating a program and convincing the public is t.a.r.p. is an

effective manner. i would also suggest that we again to recognize there are two parts of t.a.r.p.. one the set of programs designed to assist financial institutions in the midst of the financial crisis. the other programs that were largely directed at stimulating the economy. and their september report makes clear, there's a much broader about the former than the latter programs. we need to take a careful look at how much money should have been allocated to t.a.r.p.. changes to t.a.r.p. in the legislation indicate that congress felt in retrospect we could have been gotten by with $450 billion other than the original $700 billion. i would guess that careful analysis may have been better part of alternative legislation. in my opinion, making this distinction would help generate more support for what i consider the more key components of t.a.r.p. that we would certainly like to have at our disposal

during future crises. as they pointed out in written comments for the panel for september report, the proper cost-benefit analysis thus needs to price the risk taxpayers took during the financial crises. how much did the government earn or lose after the fact can yield an extremely misguided measure of the true cost, especially as a guide to future policy responses. i would add to the statement, that focusing on the accounting of this single program also failed to take into account the myriad of other government programs which provided significant assistance to banks. again, i'm not questioning the wisdom of these programs. it's clear. i believe it is clear by providing additional support for large financial institutions that receive t.a.r.p. funds, the programs made it possible and allowed some of the cost of t.a.r.p. to be shifted to other less scrutinized government

programs. i believe at a level, the american people recognize the cost of putting so much money at risk and the ability to shift cost to cost programs, therefore the public remains justifiably skeptical if t.a.r.p. was a success because of most of the money that will be paid back. that's why we need a more comprehensive evaluation and the bailout if we are ever going to convince the american people that any part of t.a.r.p. can be considered a success. mr. secretary, the panel wraps up the oversight responsibilities in the coming months. i believe these are the issues that we are going to be grappling with most. what parts are successful and how can we demonstrate the effectiveness. i am confident that your testimony today and future testimony will be great assistance in our efforts. i look forward to your comments today. i thank you again for appearing before us. >> thank you, mr. troske.

mr. neiman. >> thank you. additionally the small business lending fund was not established and $00 billion of losses were expected from the t.a.r.p. program. in the past six months, the regime is being implemented. the projected cost of t.a.r.p. is lower. given these development and that t.a.r.p. successfully prevented a depression, it might be fair to expect a public perception of t.a.r.p. could be -- have improved. and for the administration to get due credit for it's management of the program that it inherited. a public perception remains negative, perhaps because first impressions continue to linger. the reason probably has more deep rooted element. many people simply feel their lives have not gotten better during this period.

even as the financial system has stabilized and banks have returned to profitability. the government must continue to work to finally build t.a.r.p.'s unchecked boxes namely to encourage bank lending and to prevent needless foreclosures. it's my hope to discuss the two areas today. specifically with regard to foreclosures, we must hold mortgage services fully accountable for the nonhamp mortgage modifications they put homeowners into. they must be helpful and sustainable. nonhamp out number hamp modifications by three to one. more importantly, looking forward, i believe dodd-frank vision of effective cfpb must be realized in the foreclosure area. in order to protect homeowners, the cfpb has been empowered to write mortgage rules.

this must include national standards for mortgage services who are critical players in the foreclosure crisis. no such national standards exist today. some states like new york have comprehensive service or regulations in place that can serve as a model at the federal level. regardless, cfpb cannot tackle mortgage services alone. the new agency will need the cooperation of the states and the federal banking regulators to enforce any new rules. hopefully together in new era of cooperative federalism. with regard to small business lending fund to be successful. but loans supply is not the only reason that bank lending is down. other reasons must be integrated into the collective solutions such as loan demand, underwriting standards, regulation, and uncertainties. finally, i think nearly two years after the establishment of this oversight body, it should

be highlighted you will be valuable and available to the panel. we have an important oversight job on behalf of congress and the american public. you have appeared before us five times publicly and seven times privately. your openness has helped us to do our job. i thank you and look forward to our discussion this morning. >> thank you. i have to comment that each five panelist made up their remarks separately. i mean as i was sitting and thinking about how incredible it is that five people come up with testimony that's similar. really we all say the same thank. thank you for coming today. we are interested in your statement. >> thank you, mr. chairman, and all of you. i agree with most of you what said, not all. but we'll have a chance to talk about the concerns and i'll be open about the challenges that we face going forward. i want to provide as you suggested a broad overview of the impact of the programs on

the economy and financial system and the channels that we face ahead. i think also very important to recognize in the beginning that it's very hard to separate the impact of t.a.r.p. itself on the economy and the financial system from the combined impact of the broad strategies discovered and embraced. as you know, that strategy detailed and included very createive programs by the reserve and fdic, and tax incentives and investments that game in the recovery act, the support for fannie and freddie that was required to avoid a collapse alongside the t.a.r.p. programs. none of them would have been as effect i have without the overall package. monitor policy doesn't work without a functioning financial system. t.a.r.p. went out without the other instruments. that's an important thing to recognize. i think it's important to recognize that the shock that

caused this great recession and crisis was larger and more powerful and more dangerous in the view of economic historians than the shock that was precipitated the great depression. despite that, two years after the peak and t.a.r.p. was as -- passed, the economy has been growing for 18 months. roughly 1.2 million jobs more and more quickly than followed the last two recessions. household wealth has improved very, very substantially over this period of time. the tax package that was approved by the senate yesterday and based on the comments made by the house leadership, both the republicans and democrats likely to pass the house this afternoon, provides a powerful package of support for working class familiesfamilies very powerful packages for businesses which we believe and most of congress believe will add substantially to our prospects and more people back to work in

the coming two years. i think it's fair to say that the worse part, the most dangerous part of the financial storm has passed us. but the crisis has left a huge amount of damage in the wake. millions and millions of americans are still out of work and at risk of losing their homes. unemployment remains at average 10% and much higher and it's going to take years, not monthmonths of -- not months, years. including t.a.r.p., but not limited to t.a.r.p., were not designed and cannot solve all of the problems and cannot soft -- solve all of the damage. they did what they were designed to do, protect the value of america's savings to restore a measure of civility to the financial system at the edge of collapse, reopen access, and restart economic growth. and these programs did so much more powerfully, and much more

effectively, and much more cheaply, and much more quickly than i think really anyone including their architects thought was possible two years years. and you can see independent evidence. mark published the programs, and said without the programs, the economy would have been fallen 3.5%, and unemployment would be about 16%. we'd be risk of downward spiral of inflation. no one knows for sure. if you look at the shock that have caused the great depression and how that crisis turned out for the country, against the evidence that was provided in the brief period of time, i think you'd say it's a very good record so far, acknowledging that, the damage caused by the crisis is overwhelming still and

it could take years, years to repair the damage. now let me just review some of the other basic estimates that we use to judge where we were today. as many of you pointed out, these programs achieved to the objectives at a fraction of the cost that any observer predicted even as recently as 3, 6, 9, 12 months ago. the cbo estimates which we rely on said t.a.r.p. itself will cost $350 million. those estimates are now around 25. they are too high in my judgment. ultimately, they will be lower. the most important thing to point out is that the investment programs in t.a.r.p. means the combined investments we put in banks in aig. the support of other markets and the automobile industry. those investments together will show a positive return. the losses will be limited to the amount we spend in our

housing programs, the investment programs in t.a.r.p. will show a positive return. not a negative return, the taxpayers will earn a positive return on those investments. now if you look more broadly, as many of you suggested at the combined cost of everything the fed did, everything the fdic did, the losses that we still face because of what fannie and freddie did before the crisis and t.a.r.p. together on reasonable estimates about the future, those can be less than 1% of gdp, which is less than 1/3 of the cost of the savings and loan crisis which as you know was a much milder, much more limited financial crisis. and you if look at the cost of crises across many countries over time, the direct financial cost of the program, including the gse, the fed, and these programs, it's likely to be a small fraction of what we have seen anywhere in history over the period of time.

now we are moving very, very aggressively to exit from the government's investments from the guaranteed programs from the emergency crisis response as quickly as possible. we are way ahead of surgery in achieving the objectives. you know, we have been recovered in the very substantial fraction of the investment banks. when i came into office, the government innovated. they needed to do it. it was a necessary thing to do. they had invested in banks that represented about 3/4 of the entire american banking system. our remaining investments today are in banks only 10% of the american bank system. that's happened in just over 20 months. as you know, we're -- and i'm happy to go through this in a more detailed, we are along the road to the exit from the automobile industry, from aig, and, of course, all of the nation's banks. now as many of you said, a key test of crisis response is are you leaving the system stronger

stronger before the crisis? in contrast, the american financial system is much stronger than it was before the crisis. there's a very strong financial system, the weakness parts no longer exist. the remaining institutions had to pass a very rigorous test for market liability. they had much stronger capital provisions than before the crisis, and much higher than is true for the international competitors. and the dodd-frank bill gives us tools for oversight for crisis prevention, crisis resolution to limit moral hazard risk that will be the model for the world going forward and address the critical weaknesses that help cause the crisis. for those reasons, because the system is in a much stronger system than today. if growth in the future, economic growth in the future proves weaker than we would hope, it will not be because of

the remaining channels in the financial system. it'll be because this was the crisis caused by millions and millions of people taking on too much debt. and it takes time to grow out of this crisis. it will not be because of the financial system is providing a constrain on access to credit on the scale that will limit future growth. mr. chairman, can i make a few final remarks. >> yeah. >> we face a lot of challenges ahead. i'll list what they are. obviously, they are housing small banks, access to credit for small businesses in particular, the challenge that you refer to, mr. chairman, of winding down prudently, carefully to protect the taxpayers interest in what is the set of investments in the system, implementing dodd-frank, and laying out a broad reform from the season in the housing finance system. that's a lot of work.

overwhelmingly though, how to get the economy growing. that's the most important thing we can do for housing for small banks for access to credit more generally. that's going to have to be the focus of the congress' effort. i want to conclude briefly with two final remarks. it's very important -- you have been gracious. it's important to step back and give credit to my predecessor, henry paulson to the federal reserve board and staff. the minimal of the new york fed, chairman sheila bair, and i want to list them for you. lee sachs, irv allison, and matt baker. they designed a complicated set of programs in a short period of time for which there had been no president which is the huge

knowledge as a much more successful than almost anybody expected. of course, they did the necessary thing. i want to conclude by just acknowledging how important the work of this panel and the overnight bodies that were established to look at what we were doing. i think one the great strengths of our country is that we subject the judgment of public officials to very difficult rigorous, independent oversight. i don't agree with all the judgments that you have made, or the judgments that it's been faced with. but you have -- you play a necessary function. it's part of rebuilding confidence and public institutions in the united states. we have been very careful where you've made recommendation that we were confident. we have adopted those recommendation. we will, of course, continue to do that as we go forward. i welcome a chance to talk about these things with you, and look forward to respond to some of the observations.

>> thank you, mr. secretary, written testimony and member of the house is discussing the $25 billion number. are you comfort? >> i think it's high. it's uncertain. it depends on what happened to the economy and financial markets. but based on the things you can observe today, whether there's a market crisis for investment, and based on what's reasonable about the trajectory of our housing programs, i suspect the number will be high. >> you talked in the panels too about how well things are doing and the information system corporation and things like that. what do we do to finish this out and do the best we can. october 3, limited modifications. what's your thoughts on what you can do in the rest of the t.a.r.p. to get the banksbanks start lending more money? >> charge contribution to the financial -- to the remaining counsel is largely over.

we have authority still to continue this set of housing programs to make sure they reach as many people as we can. beyond that, t.a.r.p.'s contribution will be very limited. the principal thing we can do to help banks, make sure we are doing as much as we can. the burden for that is going to fall on the new small business lending facility that congress passed in september of last year. >> i mean, you basically say that t.a.r.p., there's the fact that banks aren't -- have all of the hours on hand and i want to use something that has to be dealt with in a different way rather than on the t.a.r.p.. >> you know, i think this is an important thing to look at. what matters in crisis response is to get credit flowing again. because it's the oxygen that economies require to to cover. how could you measure how effective they were? the only real measure is what

happened to the price of credit. how much it cost for a business to borrow -- for a person to send a kid to college, for municipal government cost them a mortgage. and all of those measures is a cost of credit. as you know, we're at panic levels in the fall of '08, and panic levels in the early of $09. if you look at how much banks are lending, lending volumes are lower than they were before the crisis. but that is necessary no surprise because this was a crisis brought on by the reality that people had borrowed too much. when the economy shrinks, the actual outstanding volume of loans is going to fall. but the test of whether credit is more available or not has to be mentioned in the price of credit. >> i got it. i understand. that's a major objective of t.a.r.p.. they talked about reception. when i traveled around, i talk to the people that go to banks. people not just in the home

business, everyone is like the banks won't lend me the money. now again, they say many times it's the regulators. i don't think it's the regulators. they don't want to lend the money. i agree with most of it, all of it, t.a.r.p., you did not feel there's any really -- again -- that's a good enough answer. how about now the other problem that we have, again, is not -- people are out there not having jobs. earnings are rough, and corporations on their balance sheet in cash. they go to the point of actually, you know, buying back their stock. and they are saying, hey, man, this is like lending me a cake. my point is there anything that you can do under t.a.r.p.. the reason that i raise it, everyone here, all six of us, we

have talked about t.a.r.p., successes, we've all said the same thing. the problem that we have out there now people don't have jobs and people can't borrow money. so maybe it's perfect -- the perfect answer is no. i'm just saying when you look at the corporation and where they are structured, is there anything that you can think of because it's important? >> i think the most important things for the government for the policy now is to put in place things that will help raise the rate of economic growth and speed the path of getting more americans back to work. but t.a.r.p. itself now has done what it had to do. which is to get the markets to reopen for credit. but the burden for achieving a more rapid pace of growth, getting more investment back to working in the united states is going to have to come through other policy instruments. >> mr. mcwatters, i'm sorry. >> thank you, senator. mr. secretary, when you consider

the potential legal and economic consequences in the falling five things, i'll read them, one is the foreclosure documentation irregularities, the signing problem, the failure of some securitization trust and others to obtain the notes to properly assign mortgages and trust that's required by local law. the challenges presented by the mortgage electronic registration, the exercise put by securitization trust as well. number five is the following wrongful foreclosures suits in other legal actions. are you concerned that any of the largest financial institutions will experience a solvency, liquidity, or capital crisis as a result of these items? >> no, i think they will pose very substantial problems to the system still.

i should acknowledge because of the seriousness of the problems, we have a task force chaired by myself and mr. donovan that includes 11 agencies, bank supervisors, fha, the department of justice, and the ftc that's undertaking a look at all of those concerns so we can get a better handle on the potential risk. more importantly to fix them and make sure that people are disadvantaged by the mess are provided some relief and make sure that looking forward homeowners still at risk are given a better chance to stay in a home they can afford and make sure we fix the system for the future. very substantial challenges still. the task force is likely to be in a better position to provide evaluation of where we are, and what's next some time in the first quarter, i hope early in the first quarter. but do you foresee having to

implement a program to purchase distressed or troubled loans from the financial institutions themselves? >> i do not. >> okay. as far as you can tell now, no t.a.r.p. ii. >> no. >> okay. what about rating agencies? do you believe that rating agencies themselves may take a different perspective and what's these particularly put in rights and exercised and judgments come down, the judgments may very well be large. do you think that rating agencies will react properly, over react, downgrade stock? >> i would never want to predict that rating agencies would act appropriately. by the nature, because the future is uncertain and is complicated, are, you know, -- not to be unfair, react slow and

late on these things. i wouldn't make any judgment on whether they are going to be wise or early or late on those things. >> okay. >> so to recap, there maybe some systemic consequences but they do not rise to the level of needing t.a.r.p. ii or across the board repurchase program. >> i didn't use the work systemic, i said they will present serious challenges to the system as they have for a long time. we are not first inning of the housing crisis. this started and peaked at the end of the 2006. and it's going to take some time still for for -- for investors, and rating agencies. the markets finding it's way now to feel more comfortable on the risk. it's going to take a little bit more time. >> do you anticipate the federal reserve may use t.a.r.p. and the funds to purchase some of these disstressedded as off of the

books of the financial institutions as much as the fed did in i? >> i'm very careful not to talk about that anymore. i respect the tradition is the secretary of treasury shouldn't talk about monetary policy. direct it to them. i shouldn't go further. you should direct the question to them. >> okay. my concern is in the opening remarks. that we in the fed was able to purchase the $250 billion of government for mortgage-backed securities was because of the bailout. fannie mae and freddie mac left to fail, they could have been did done qe i but would have been purchased a market place below face. >> can i respond to that? :

>> when you look at the overall cost of the crisis, you have to look at two things. one is the direct cost of the programs, fed, fdic, fannie freddie, t.a.r.p., money guarantee fund, ect.. you have to look at the economic cost too, and the overall of cost revenues, unemployment insurance and things like that, but on the that broad measure of direct financial cost including the interventions of fannie and freddie, the overall costs will be incredibly small in comparison to almost any experience we can look at in the united states or around the world even in much less damaging crisis and that's because of the effectiveness of the overall response. >> okay. i agree, all factors should be considered, but sometimes those factors are not mentioned in the sound bites. that's all. >> thank you. >> thank you, mr. chairman, before i ask my first question,

i think you mischaracterized my opening remarks making me more of a critic than i am. >> i didn't mean to. >> i think it's clearly stronger. i think it's nonetheless weak. now, mr. secretary, in our last hearing, your colleague appeared before us and gave me concern about the policy on foreclosures. i think i took that concern more out on her than perhaps was warranted than given it may be more warranted to be taken out on you. >> i welcome that, and she's excellent at what she's doing, but she can take it too. >> mr. secretary, i concur with your judgment on phyllis, but i wanted to raise these matters with you directly. in her testimony, ms. caldwell stated in foreclosures, slowing

them down "may exert downward progress both in the short and long run." mr. secretary, i'd like you to respond to the simple question which is in the view of administration. do more foreclosures equal lower housing prices or higher housing prices? >> can i ask you a question first? >> sure. >> just for context. do you support a compulsory moratorium? >> do i? i personally support a moratorium as part of a larger solution. i think by itself, and here we may agree, i think by itself a moratorium is not an answer. like any kind of delay, it doesn't get you where you need to go. i have felt for years going back to 2007 as we mentioned, that a moratorium would be a helpful incentive for the parties to

reach private solutions, but the question is, i'm happy to answer your question. it's my turn to ask questions. which way do housing prices go, up or down? >> well, i don't think that's quite the way to think about it. you're right. if you could prevent or if you can slow the pace of avoidable foreclosures as we did affectively through these programs, that was one factor that contributed bringing a measure of stability in house prices when most people thought house prices would fall 20-30%. that's not the right question right now. the right question is would a broad comprehensive mori tomorrow yum -- >> that's not the question i asked because actually i don't see the moratorium as -- the moratorium is a subset of a

basic question that i think the administration's statements over the last few months have clouded which is are foreclosures good for our country or not? >> no, they are not good for the country. >> and are they not good for the country because they raise or lower housing prices? >> again, let me try it this way. if you were to stop foreclosures from happening and suspend the process nationally for an indefinite period of time. that could hurt house prices. people were unwilling to buy and people sitting in neighborhoods in homes where at the een center of the foreclosure prices might see prices fall further because it's a much longer time to work through this process, so there is a reasonable -- >> mr. secretary, isn't that only true at the end of the day everybody gets foreclosured on? >> no, that's not true at all.

let me say what i think the right approach is. i think that, and we have made this very clear and i think we'll be successful in achieving this. we did not believe that banks should move to initiate a foreclosure process or continue it if they cannot be certain that or have the legal basis for doing so, and if they have not given that home owner every opportunity to participate in a mortgage modification program. now, that approach -- >> but, mr. secretary, that approach appears to me founded on a belief that foreclosures all other things being equal, more foreclosures are bad for the economy. i don't understand why the answer is not simply yes. they are bad, and one of the reasons they are bad is because they lower housing prices, and if i might refer to the testimony again, in her testimony she said that 25% of current home sales are out of foreclosure. that would appear to be a poe tent downward force on housing prices.

do you disagree? >> i disagree with your assessment in the merits of that approach. yes. >> you disagree with the notion that 20% of the total sales in the housing market is foreclosures? housing prices are down. how can you disagree with that? >> that's not the right way to think about that. >> i don't understand why this administration can't answer the question of whether foreclosures drive prices up or down. it seems to me you're covering for something, and my time has expired. >> mr. chairman, you know, you're asking an interesting economic financial question, it's a question for economists. you know both sides of the argument. it's clear on one side and understand your position on it. the question we face though 1 what is the most effective responsible thing we can do as a country to make sure the people at risk of losing their home but have a chance of staying in their home, have the chance to do so. that's the basic objective.

now, we have a lot of other things to worry about too, cleaning up this necessary for the future, but our overwhelming occupation now is what can we do to make sure we help people stay in their homes and make sure we get through the damage remaining at least risk to the innocent who suffered so much in this crisis. >> we'll take that up in the next round. >> thank you, mr. silvers. >> mr. secretary, so in my opening statements i read a quote from professor ken on how a proper assessment would be conducted that needs to price the risk taxpayers took during the financial crisis, so begin that, i guess i'd like to get your thoughts on what the professor said, the importance of understanding we put a lot --

the entire financial, you know, all of the financial risk, you put a lot of taxpayer money at risk, and how do we assess that and think about that as a cost? >> i have a huge amount of respect for the professor, and of course what he said is right. you have to measure return against risk, and there is is a very thoughtful set of questions one should ask whether we price this investments appropriately, and looking just at the financial return independent of that is not a fair way to evaluate whether we got that balance exactly right, but i believe we did, and let me tell you the basic theory on the approach we offered some evidence for that suggestion, and this is not -- it's oversimplifying a little bit, but in a financial panic, in a financial crisis, what you want to do where you have to make energy assistance available, you have to price it below the cost of credit in the market of that time because credit is not available.

this would be below that, but it has to be more expensive than credit would cost in normal conditions, and the virtue of doing it that way is as things normalize, you're more easily to wean the dependents of the market from the programs because your investments will then become extensive relative to the market. there's no perfect place between those two things, but you can't say because we price our investments below the cost of credit available in a market at a time of a financial panic, that we underpriced those investments. that's not a fair way to evaluate or a sensible way to run a financial emergency, and in this case, i think, we passed what, you know, what the central banks call classic lender last resort doctrine, and the best test of that is how quickly we've been able to get out of the investments, how quickly, for example.

the feds program were wound down and the emergency guarantee programs. they proved to be expensive as growth started recovery and credit market started to reopen. >> next, i certainly, i guess i agree with you certainly that the study is the most comprehensive study out there on the impact of the financial crisis. i guess my own reaction is i consider that to be very disappointing begin that i would -- given that i feel it's a fairly short study, a 9-page paper. i usually make students write much longer papers. it's hard to see how in nine pages you can do a fair job of evaluating this complex situation. i think they provide little documentation of the method they use, they make fairly strong assumptions and consider what i feel to be a faulty methodology,

and so in my opinion, we need a much more comprehensive -- we need more comprehensive studies, and again, i think part of that is going to be a function of the information that's out there that is made available. in my opening statements and as we've said a number of time, we pushed treasury to provide more data and many data and collect more data, the most recent report continues that. i guess, you know, give me your thoughts about -- your efforts to do that and to do a comprehensive or to allow a comprehensive analysis of the financial situation to be done. >> i completely agree a necessary condition for people to evaluate is better data. we've been fair on the programs and you can judge the market impact very easily, and i'm happy to continue to look at ways to get more data out there.

the financial reform legislation does establish within the treasury and office of financial research with very brord authority to improve the overall data availability to markets going forward, and again, i'm happy to look at other ways to get better data out there. there's much more out there than there was before we came in on all these programs that provides a rich body of evidence to evaluate their effectiveness, but i'd be happy to do better. >> my time a up. thank you. >> thank you. mr. secretary, as you can tell in my opening statement, i spend a lot of time focusing on the nonhit modifications, the mods performed by banks and services outside of the program. six months ago when you were here, we discuss the the same topic, and you agreed this was an important part, and i think

because of the additional information that the treasury has shared since that time, we now know it's even more important. in fact, 70% of the modifications are now in nonhamp mods three to one. do you agree that -- what's your assessment? are these the way forward? are they sustainable, and what's your assessment on these proprior tear modifications? >> i spent time for this hearing on these questions. how much do we know about those mods and the quality is not so great so far, but i think the general sense of my colleagues is that the majority of those modifications are lowering monthly payments quite substantially, and the -- one of the most valuable things we did in setting an industry standard for modifications is

give a bar people couldn't sort of drive practice too, but i would like more data on that, and we'll look at ways to do that. >> you're right. eng the information coming out about reduction and modification payments is out there, but isn't the heart of the issue the stainability and the length of the modifications under hamp. those modify cases are five years, and then set to the low rates of today. we doamentd know the information -- we don't know the information. >> i agree. the three measures to look at are what is the magnitude of the repayment reduction, how long is it in place, and what is left in terms of the remaining balance of obligations after the modification period expires, and, again, as i said, we'll look for ways to get better information out there to asees those -- assess those programs. >> the hamp monthly reports have

been improving month after month and now have greater information distinguishing the performance by servicer. last week in the "new york times" a big story focused on large servicers, nonhamp modifications and highlighting the differences so in the cases of borrowers who were denied a hamp modification only 14%, for example, received a nonhamp mod, bfa, but over 40% received a nonhamp mod at wells fargo. how do we explain these differences? >> i don't actually know. it's a very good question. i'm happy to pursue that with my colleagues to give you a better sense. >> yeah, to the extent that this type of data, and we had the same discussion with phyllis caldwell saying a lot of this information is held by supervisors, and to the same

extent that this data has been voluntarily provided with respect to the hamp mods and i think the information with the to with respect to the nonhamp mods would be helpful to the program. >> as you noted one of the things we've done is put out very detailed metrics of individual servicers under hamp, but under a whole range of other measures and if there are other ways we can improve the quality of information out there, that would be good, and it's valuable not because it gives a chance to look at it, but it changes behavior. >> yeah. >> it serves as a conscious. >> i think what i read in the times article may be misinterpreted. it doesn't mean wells is three times better, but the portfolio itself has characteristics that may drive those. we talked about in the past also

a need for a performance mortgage system, similar to the origination side. do you have a, you know, a view as to the need at this point? do these types of data needs demonstrate the need for a national reporting requirements for reference data? >> well, i completely agree that we can do a much better job with much better data that's out there for the world at large, and again, i'm happy to look for ways we can do that. >> thank you. >> thank you. looking forward, and you know, trying to figure out what to do in the remaining days and in your written testimony you talked about the second lien program and unemployment program. the second lien is a major promise. we have a servicer as a second lien, and a bank as a first lien, and the servicer won't want to make a modification. it's been around for awhile now, and based on the data we see,

it's not what we all would like to see. i think i can say everybody. do you have any thoughts on getting this second leenl program up and running and moving? >> it took a very long time to get up and running and only been in place for a very short period of time, but i think it's very promising in the sense it achieves the simple em -- imperative. if the first is modified, the second has to be modified. we have the capacity to do that and now better incentives to do that so i think it's very promising, but it will take time to evaluate that. >> do you have any idea on how much money is in that program? >> i thought you would ask me new estimates on what we spend. >> i look at this as a way, i think the panel does too, that this is a big problem. i also realize this is extremely complex problem and getting up to speed will take a long time.

is there anything we can do or you or anybody to get this program to be all it can be? >> we're doing everything we can with a tremendous talented group of people who are on this all the time. we'd like the reenforcement, and the more we shine a light on pempers the better we can do. on the cost investment, i don't know how much we'll spend on this, and we're in the process of another reevaluation on how much we'll spend across the programs. we aren't in a position to reveal that until the budget, but you'll have a chance to look at it then. >> good. right now, it's not budgeted for money because there's no incentives, yet clearly, we start on the hamp program, we were not beginning to have unemployed, but that shows the difficulty of the program. now, when you have someone to look at the debt on income ratio and people who needs modifications the reason is because they are unemployed. a second lien program is really

key to making this whole thing work. what are your thoughts about the unemployment program? >> i agree. servicers are required 20 provide a three month fore barns. that comes later in the individual and comes months five to eight in their period of unemployment, so it has more value than people think. the other program we have, of course, is the programs with a variety of housing agencies providing resources to help them run programs to help the unemployed, and you made that point that the principle factor which is driving foreclosures today is not what was at the heart of foreclosures of being in a crisis which is as you know a set of broader lending practices. now it's really about unemployment and that's why it's important to emphasize that the most important thing that will affect housing prices and the number of foreclosures and lay

lowing people to -- allowing people to stay in their home is what the government can do to get the unemployment rate down quickly. >> t.a.r.p. is ramping down and hamp is ramping down. do you have any thoughts on the programs and this is an important issue and so much has been learned on this. is there some suggestions you could come forward, you don't have to right at the table, but i think this is a subject of legislation, you know, a new program funded, this is still a problem, and said it and i agree this is a program years out and it's key to the recovery, and, you know, we've learned a lot in the t.a.r.p. program, but now we're not making modifications. if you have thoughts, i'd like those, but also a statement on paper. >> i'd be happy to think about that, come back to you a enmy colleagues can talk about that in detail. i think it's important to recognize.

the -- there have been a lot of capable people spending a lot of time looking at broad different strategies to address the housing crisis, and there are people in this room and people around the country who have suggested much more dramatic departures of approach in the past. this would all require legislation and some require substantial additional resources, be -- but i think the fundamental question is really a different question which how many people do you think you can reach? the principle gap between the roughly 5 million americans today that are late in their loans and the number of people likely to get a modification ultimately is really about the following, and just looking at those numbers in broad terms. of that 5 million, roughly 2 million are now potentially

variable for hamp and the modification programs. the other 3 million americans late on loans fall into different categories, but many of them are individuals who took out loans for houses that are expensive, above $625,000 or whose mortgage burden today is below their income meaning they can stay in their house or were investors who had a second home. now, that's not all the 3 million. some of that 3 million is from loans with services who don't participate in our program, some it is a people who there's no economic case for helping them stay in their home. it's better to help them through other ways, but thinking in a dramatic approach to reach millions of americans, you have to decide whether you want to extend the benefits of the programs using taxpayer's money

to the class of the americans who fall into those categories, and that's something we looked at very carefully. we did not think this that was a reasonable policy choice and not a good use of money because a substantial fraction of those people were investors who were in a second home or an expensive home or who can't clearly afford to meet their payments. >> there's still, you talk about 3 million people out there who are not in that situation who need help who we've learned about how to deal and the services and second liens, we learned about the unemployed, we've learned about all these things to get those 3 million, and they are extremely important to whether we're going to deal with what everybody on the panel here said how are we going to get out of this and if housing doesn't start being more productive, we're in deep trouble. there's a combination of people that kind moral obligation to

help who are not subprime people, people who do it right, got unemployed through no fault of their own, about to go belly up, we have an obligation to help those people morally, but what makes it binding is to do it economically to get the economy moving and move on to the next step. no one, you know, my mother had a safe nothing worthwhile in life is easy. this is very, very, very difficult, but it's also very, very, very important. >> i agree with that. our work is not done. the government's work is not done. the damage is still profound and it's going to take a long period of time, and again, the most important thing for governments to understand in financial crisis is you have to keep at it, keep working on it. you can't stop -- >> right. >> you can't stop too early, and as you know in looking at the foreclosures at risk still and unemployment at 10%, we have a lot of work to do as a country.

>> one of the things to do is to put it together so next time this happens, god forbid, and some way to have an approach to deal with the whole thing, but in interim, we're still here as you said in a deep hole, and, you know, anything that we can use from what you've learned and what you people learned from hamp, we shouldn't just, you know, say, okay, it's now april 3rd, good-bye in terms of anything. >> we're going to be at this for a longer period of time than that. >> as you said, there's lots of things hamp can't do. i'm sorry for taking so much time. >> thank you, senator. mr. secretary, in your opening statements you said that the financial institution were basically stronger today than they were a few years ago, that they have stockpiled around a trillion dollars and excess

reserves earning 25 basis points so approaching the question of lending, it's not a question of insufficiency of supply. there's a trillion dollars they can loan tomorrow if they wanted to, so there has to be a problem with demand. why is there a problem with demand? i mean, from my perspective over the last two years there's been a great amount of uncertainty interjected into the economy to people who sit around their offices drinking bad coffee out of cups who really make decisions on hiring one person or two people at a time has simply said, you know, i think we'll hold off on that decision. what's going to change in that perspective over the next six months to a year? >> i think the principle source of uncertainty remaining is uncertainty about what is going to be the pace of growth and demand for someone's products? as principally a question about how fast is our economy in the

global economy going to grow, there is more uncertainty about that than is typical because of the scale of the damage caused by the crisis, and the basic shoal -- shock provided in the confidence in the depths of the panic. those scars last a long time. that's understandable. people are still economically secure today in terms than they were at any time really in generations in this country because the crisis was so severe. that's going to take time to heal, but it is healing. the best measure of getting better again is what's happening to the underlying pace of the demand? what's happening to forecast of demand? those show gradual healing, and looking at how companies are behaving, is suggests optimism. i'll give you some measures of that. as i said, the private sector job growth is faster, stronger than have been in the last two

recoveries, and business investment spending in equipment and in software ran at a rate of about 20% for six months of this year, about 12-15% in the third quarter, and still looks quite strong, so businesses are spending again because they want to make sure they have the ability to participate in the recovery that's coming, and that's encouraging, and again, that's going to take a little bit of time to heal still, but i'd say the best thing to say is gradual healing, gradual healing in confidence, but ultimately, what's going to generate more confidence is just the reality of growth getting gradually stronger. >> okay. thank you. november 17th, the federal reserve announced another round of stress tests, but for reasons i'm not sure i fully understand that the stress tests are kept secret and will not be disclosed. i doubt that you made that

decision, but can you comment on it? i guess i'm troubled that somehow transparency in this is not complete. >> well, i think as you know, i am a very strong advocate and principle architect of the decision in early 2009 to force our major institutions to go through the stress test and disclose the results in enough detail so investors could assess on their own whether they were realistic, and that was a remarkably affective approach because the firms raised capital earlier, and if you contrast that experience with what europe is still going through, you can see the benefits of having a very detailed level of disclosure on conservative assumptions about potential losses. it's a very good strategy, and i'm very confident that a regular part of risk management in the future in the system will be regular public disclosure of stress tests by major institutions.

i can't speak about what the fed announced recently, but i'm very confident looking forward we as a country will go through regular publicly disclosed stress tests of our major institutions. >> yes, i know though, but every day we read in the papers about rides, lawsuits, signing, and a lot of these stress tests, i think, were initiated based on that. i think it would be helpful to disclose. let me ask another quick question. do you believe that fannie mae and freddie mac should ride down in the participation in the fda's short refinance program? >> there are, you know, we have a principle reduction program in our treasury housing programs, and we, and the fha's what's called in shorthand, short program, both those things we think have a lot of benefits and

we can use a pretty good economic case for fannie and freddie to participate in those programs, and we're in the process of talking to the fha about those, about the merits of those programs, about their concerns, and i can't say at this point whether they're likely to adopt them or not. again, we want to understand their concerns, and they have a different set of objectives and in some ways different constraints, but i'm hopeful they find a way to participate in as many as these programs as possible. >> okay, i need to finish up. if you are successful in helping them, and i think they are pressured, what is your objective cost of doing this, riding down those loans? >> there's two ways to think about the costs in this. remember, fannie and freddie an the government own all the risk today, so if you do things that improve the odds that house prices will be higher in the

future, that defaults will be lower in the future, then you're going to improve the overall quality of the portfolio and entities of government. think about the financial imp cases of the program through the broader prism which we do and we want to encourage the individual agencies to do that as well. >> okay. my time is up. thank you. >> thank you. mr. silvers. >> i appreciate your answers to the questions. i found both the ma crow part and the financial answer to the gse issues, i think you're spot on. i'd like to follow-up more on the question that my colleague raised about nonhamp modifications. first, let me ask you this. cbo as part of the $25 billion number is projecting on the a $12 billion expenditure out of a potential 7 a 5 --

75. do you agree with that? >> i think it's bad news, but i think it's low. it's too low, too pessimistic. what we set aside was more like 45 or 50. they expect we spend 12. that's too low. but we're going through an assessment, and we'll share that with in the sometime in the first quarter. >> you're not satisfied with the type of overall impact that projection would appear to presume? >> look, my obligation is to make sure the programs reach as measure people as possible, and the more people we retch, the more we will be spending. -- i think it's a good use of the limited resources we have in the country because of the returns in helping the country in the housing crisis are very high overall. >> i want to say one thing in response to the question about how you evaluate risk and return these things, and i think it's

straightforward. you have to look at, you know, we got a 20% return on some programs relative to what risk, but, we're the government. we're not an investment, not a hedge fund, not a vulture fund, and the impact of the funds should be what did you do to overall growth access to credit as a whole. when you think about the return of the taxpayer, the most important return is not the financial return to the treasury and up vestments, but about the broad impact. >> no, in fact, mr. secretary, your remarks are helpful to me. i wanted to ask you about that precise issue in relationship to the term you used several times around foreclosure -- mortgage modifications which is the question of what the homeowner can afford. can exactly do you mean by that term? do you mean what the homeowner can afford consistent with

what? because if -- to be more precise about this we know what the -- it may be that there's a gap between what the homeowner can afford and what a financial institution views as the point at which they would start to lose money on the mod. why don't we think of the gap in light of what you just said about the larger negative foreclosures which is what i was trying to get at in my earlier questions. >> well, no perfect answer to this. ed standard we use in the -- the standard we use in the programs is we want people's payments to be reduced to 31% of income. why? because on a bunch of evidence, that's something that suggests people can sustain over time. >> that's not what i'm asking. i know what the number is, but when that number supports a payment that's here, right, and the npv model, the model that

supports the bank, shows a number here that the people can't afford. that's a gap in the bank's interest and homeowners' interest. in that gap means that you go to foreclosure, then all that negative stuff on our economy you described earlier happens. now, in order to close that gap, you've got to take a hit to principle, right, and the bank takes a hit if they don't like, is that -- it seems like we're basically saying when that gap opens up, we basically let the bank make the call. am i right about that? why does that make sense? why shouldn't we be asking the banks to take something of a hit so we get more of across our whole real estate market better outcomes? >> it's a very good question, and you're right that part of the difference between the number of people we've reached

through permanent modifications and those we haven't is because it's a relatively small amount of people where the npv return is negative. let's think about what you're suggesting. i think to decide that we're going to take the taxpayer's money so that people can afford to stay in a home that is really beyond their capacity to afford because we want to avoid the broader negative consequences, clat raj damage -- collateral damage. >> yeah, but i wasn't asking about the taxpayer's money. i was asking about the bank's money. >> this is a broader question that your chairman raised earlier is we do not have the legal authority to compel certain types of performance by banks in this stuff.

now, congress had decided to give it to us, i suspect they would not, they could, but that option is not an option available to us at this time. >> mr. secretary, i mean, i disagree with your characterization of the leverage around the question which i think is implied by your statement about not having legal authority. i think the web of rips that -- relationships that exist with the gse's fed, and the like give you a fair amount of ability to open that question up. i want to take you one last place with the chairman's permission. given the fact this is a difficult problem and what is clearly a matter of numbers, the increasing reliance of nonhamp mods across the market to drive the mods, i'm puzzled by when i read, and maybe i read incorrectly, the treasury's opposition to having the state

agencies among the uses of the money that they've gotten from hamp use that money to help homeowners get counsel so they can then have a better shot of negotiating mods. >> you're referring to legal aid? >> yeah. >> that's a good question. we spend a lot of time looking at this, and of course, we do provide resources to help homeowners decide eel jilt for the programs and participate in the programs. the question congress raised is can we use this authority to help provide more financial assistance to legal aid itself, and the way the laws of the land are written, we cannot legally use t.a.r.p. or hamp resources for that purpose. there's some amendments pending before the congress and legislation pending that would change that. >> how did you come to that conclusion? >> very carefully. >> under whose advice? >> we consulted with a broad

range of lawyers across the government, and i'm confident their judgment is right, and that's recognized -- >> the reports you -- >> that's not true. we would never do that. we have lawyers at the treasury and justice department. >> you did not ask -- it's a false report that you asked a particular law firm, give me a moment, find the name of it. it's a -- it's just false that you asked -- i think i can help you. >> what's the name? >> i have no idea. i'm sure we asked people across like you'd expect us to do. but the judgment we rely on is the judgment of the response of the people in the executive branch, and i think that legal judgment is the correct judgment although i'm not a lawyer. >> the letter from your counsel

says that legal aid services are not necessarily or essential to the implementation of a modification program. is that the core of your finding? >> no. i don't think you're reporting the letter in full. >> i'm not. that would take a long time. >> i'd have to read the letter again, but can i make a simpler legal argument? >> i want you to address -- >> congress by statute authorizes and provides funding for a particular function of government, then the general judgment of lawyers is we cannot use another source of funds to supplement or enhance that separate -- this is understandable judgment by lawyers. >> wasn't that particular authorization passed after the decision not to fund? >> i don't believe that's the case, but i'd be happy to respond in writing to anymore question about the legal basis for it. i want to say that i think you were right that there's a very good public policy case for

using resources to help people take advantage of government programs, manage through a very complicated difficult modification process. there's a good case for doing that, and i've been very, very supportive for more government resources for counseling for legal aid generally, and where we had the authority to do that, we have made funds available, but there's a legal constraint to use t.a.r.p. on legal aid directly that law would have to be changed to rely on. >> mr. secretary, it puzzles me when hedge funds get money, i believe they pay for lawyers, and it puzzles me a vast amount of t.a.r.p. money has been expended on legal counsel for the benefit obviously of the government. it seems as though lawyers are understood to be a necessary and essential component of all the transactions that t.a.r.p. and hamp --

that t.a.r.p. undertakes except when homeowners need lawyers. >> that puzzled me too when i was first confronted with it, but i'm very confident the judgment our lawyers made is the right one. >> i appreciate your engagement with me on that. thank you. >> thank you. >> mr. secretary, switching gears here and talking about cars here for a little bit. so as you're aware in december of 2008, the decision was made to use t.a.r.p. funds to provide financial support to the general motors and chrysler. would you have done that? would you have reached the same decision if you had been secretary at the time? >> it was not my decision to make as you implied, but i was aware of the merits of the choice at the time, and i thought what my predecessor did

what was the right thing. >> i guess essentially this was to avoid going into bankruptcy which i think that was the alternative at the time. you've alluded to the estimate that a million jobs would have been lost through bankruptcy, so firms as large or larger than general motors have gone through bankruptcy as did lehman brothers, and our economy survived, so would the world really -- would the world today really have looked much different had general motors and chrysler gone through bankruptcy in 2008? how different would the unemployment picture be, and tell me why whether you think that's true and what you base that decision on? what are your thoughts on why it would look different? what's different. >> look, market economies require failure. they don't work unless you allow firms to be failed when they cannot make things people want

to buy. in normal recessions even, not just in normal expansions, bankruptcy is an essential part of the functioning of an economy, but everything is different when you are in a financial crisis like what we faced in the great depression or what we face in this basic crisis, and in those circumstances, bankruptcy itself cannot provide an affective way to protect the economy from the failure of major financial institutions or even in the auto case, the failure of a concentrated number of major providers, and i think that -- see, you have to think about those two different worlds. in a crisis you have to do things you would never do in a normal recession or certainly wouldn't do in an expansion. bankruptcy never works without there being a source of lending better in position of financing

because companies need to fund to go through that, and in a financial crisis, there will be no source of debtor position financing on a significant scale, and so in some cases, the government has to step in to provide that temporary financing, and what matters most in the auto case is if you do that, you have to do it on the condition that you bring about a restructuring to allow the fund to reemerge profitable and that's what the auto piece of the strategy was able to achieve. unemployment would have been much higher, millions more jobs lost if we had not gone through that, and i thought that was a very well designed use of government resources in an acute crisis. >> let's talk about gamc a bit and the exit plan. the government's plan with general motors shows a lack and the management team discussed publicly the idea of a 2011ipo.

given that the company is reported three consecutive quarters of profits, what is the timetable for an ipo? >> quickly as possible. if you look at what we've done across the board, and we're way ahead of anybody's expectations, we're going to move as quickly as we can to replace the government's investments with private capital, take the firms public, and exit as quickly as we can, and we're working hard with the board of gmac to achieve that outcome. i don't know how quickly, but it's going to be much sooner than we thought six months ago. >> change subjects again and talk about executive compensation. when mr. feinberg testified before our panel, he stated that is the culture of pay on wall street has not changed in the wake of t.a.r.p., i think our work has not been successful, and it's not -- and if it's not being followed,

it is a problem. do you agree with him? >> if that were the case, i would agree with that. >> do you think that's not the case? >> very good question and a good time to be asking that question, and i guess i would say the following. we did two things over the last six months or so, # one in the dodd-frank reform act and another enactment for enforcing to bring about very substantial changes in compensation practice looking forward. first was a requirement for disclosure and give shareholders the right to vote on compensation packages, and the second is a set of standards on the design of compensation incentives at the federal reserve and bank supervisors are responsible for enforcing, and we'll know more about the results in the early part of next year. to date what you can say is there's been a substantial shift in compensation so there'sless

in cash -- less in cash, more in equity, invests over time, more at risk of being clawed back if firms don't perform as well as people have hoped. that's very good, but i would say you cannot say today, and i would not claim we've seen enough change yet in the structure of compensation, and that's important to achieve because as you know, those incentives were so skewed to encouraging risk taking that they played a material role, i think, in what caused the crisis itself. >> thank you. >> thank you. mr. secretary, i think you may have anticipated my questioning around servicer performance because you may have preempted me by characterizing this as dismal in the last exchange, but i do believe it deserves further discussion. in fact, speaking pelosi who appointed me to the panel made

public a letter that she sent along with other members of the delegation, to the department of justice, to the fed, and to the occ, a letter that describes in 20 pages excruciating detail of examples of real stories from homeowners in deals with servicers. it demonstrates their frustrations and clearly despite a good faith effort on the part of the homeowners, failures by the servicers. you know, it highlights areas to respond in a timely manner, the timeliness of proceeding with foreclosures while at the same time proceeding with modifications as well as a continual evidence of losing and misplacing documentations. do we need national standards for mortgage loan servicers? >> i think we do.

there are a number of states including new york that have models out there. we over two years ago have put them in place, not only a registration of mortgage servicers, but one of the most comprehensive in the country that poses duty of care, specific rules of conduct with fair dealing with customers, with homeowners in requiring modification, requiring trained personnel, and requiring a data reporting requirements. is this something that could serve as a model at the federal level? >> i think it could. i'm not familiar in detail with new york, but i know a number of people think very highly of it. we'll look at that model and others, but i think you're making the right point. >> in your efforts to stand up in the ktpb, do you see this as an early priority, one of the areas that's a mandated

statutories for rule making? >> i'm not quite sure how early that will come realistically, and as you know, we're focused overwhelmingly on that we're fixing the problems in performance and making sure we reach as many people as we can in terms of modification programs, but it will be a very important priority. as you know, we have a whole set of complicated work on defines new underwriting standards, defining what the residential qualified mortgage, what should be the basic future of the housing finances, and more generally, looking at these things together, not that we want to take too much time, but we have some time. we got this terribly wrong as a country. we want to make sure we get it right, and we'll do everything we can to get a durable set of fixes. >> how do we proceed to avoid a 50 state proceedings down the road requesting data from servicer in 50 different

formats. does this not have to be priority? >> it will be, i just don't know yet. i can't be honest with you yet in if it's something we'll have a proposal in six or 12 months. i just can't tell you, but it's absolutely important, and we'll look at the model in new york and other states in the best way to proceed. >> with respect to the cfpb, do you sigh a new era of cooperation, my reference to a cooperative federalism between states and the agencies? >> i think we do. you know, we'll going to have a test of that in how we deal with these broad set of mortgage documentation problems that have been the subject of many of your earlier comments where we have a broad task force of agencies looking at this and working closely can the states and a standing mechanism called the financial fraud task force working closely athe counsel established by law to give financial stability gets a seat at the table with insurance and

banking regulators. we're a country and we have a national financial system, and so if we're going to do a better job in the future of preventing crisis, we have to make sure these entities are working together. >> thank you, my time expired. >> thank you. just a big question. what's the current systemic risk of assets in banks? how do you see it? >> i believe that the u.s. banking system has a very substantial amount of capital on their books today in the form of common equity against the assets they hold and the risks their taking, and i am much more confident today that we made the right judgments in forcing that much capitalism earlier, and that will give a reasonable

process of coming out of this stronger. i think what matters is the capital relative to the potential exposures still, but firms are working down those assets, and most measures you see of performance of those assets now are improving and have been improving for some time even in mortgages. >> the financial system may be stronger, but we still have more concentration in the banking system. what's your opinion on dodd-frank, and what's happening more and more people are saying discussions in the hearings here and everything else, assume we're in trouble if a bank fails. what's your feeling on increasing concentration of the big banks? >> of course you're right that the system is more concentrated today than it was before the crisis, and that's an unavoidable consequence in a crisis. >> exactly. >> we still have roughly 8-9,000 banks. that's a great strength.

we want to preserve that. >> we got a few banks that are extremely big. >> we do, but not to underestimate the consequence, but they are much smaller of our country that is true of any other country too. look at canada, u.k., western europe, japan, even our largest banks are smaller relative to the size of the economy that is true to that as a whole. if you look at the top 50 of the world, the u.s. banks are in the dwieshed on that list in terms of size. that's not to say that's not a big -- >> aren't they so closely aligned with the government? >> we would not want to be like them. >> exactly. the resolution sport these are still banks -- >> you know, the most important things that dodd-frank did were to give us the authority -- >> right.