capital posing risk to the system as a whole. we have achieved that to give us the authority to apply those requirements for capital, restraints on leverage that our banks, like aig or investment banks or range of other institutions that we're not regulated as banks before, and add you said, resolutions authority which is like a bankruptcy authority for banks so that in the event in the future, a bank like that makes mistakes that cause it to fail, the government can step in and unwind them, butt them out of their -- put them out of their misery, break them up without risk in the economy as a whole. i think we're in a better position in the future to prevent crisis of these magnitude and manage them care fry. we'll have crisis in the future, but the reform bill to the credit of the architects in congress today will help us fix the fundamental failures that caused this crisis.

>> but as you said earlier, when you're in a situation of financial crisis, bankruptcy is something you really want to avoid. >> you can't have liquid dation being a institution. >> it's better to do it when it's not? >> that's right. >> thank you.

the presiding officer: without objection. mr. inouye: mr. president, last evening the senate made a

regrettable decision to defer action on completing its work on the fy 2011 appropriations bil bills. i shouldn't have to remind anyone that we are in mid-december, one week before christmas, nearly three months into the fiscal year. yet because our republican colleagues have decided that they cannot support a bill that they helped to craft, we now face placing the federal government on autopilot for another two months under a continuing resolution. a c.r. my colleagues should all understand the consequences of this decision. first, the c.r. does virtually nothing to accommodate the priorities of the congress and it abdicates responsibility for providing much-needed oversight

of the resources of the executive branch. each year, the senate appropriations subcommittees conduct hundreds of hearings to review the budgets of our government agencies. our committee members and staffs conduct thousands of meetings with officials of the executive branch, our states, our municipalities, leaders and workers from american corporations, and the general public. the committee relies heavily on the work of the government accountability office, the g.a.o., the congressional budget office, and outside experts to determine spending needs. tens of thousands of questions are forwarded each year to officials in the executive branch asking them to justify

funding requested for each respective agency. mr. president, it is painstaki painstaking, detailed work. it requires great knowledge of each of our federal agencies. the desire to dig into the knity-gritty details of agency budgets and question their programs and functions they manage. this annual review is conducted, mr. president, in a bipartisan fashion with democratic and republican members and staff working in close cooperation to determine how our taxpayers' funds should be best allocated. in these meetings, reviews and questions and deliberations together lead to the formulation of 12 individual appropriations bill. each bill is drafted by the subcommittee chairman and ranking member in concert,

marked up by subcommittee, and then reviewed, debated, and amended by the full committee. mr. president, a year's worth of work came down to a choice: would the senate acquiesce in providing a bare-bones approach to funding or would it insist on allocating by agency and program with thousands of adjustments that are the results of the good work of the house and senate appropriations committees? mr. president, to me, the answer was obvious. nothing good comes from a c.r. the congress owes it to the american people to demand that programs funded by thei rer-eard money will be the best we can recommend based on countless hours of hard work by the committees and their staff. some will point out that a

continuing resolution will result in fewer dollars being spent. mr. president, that is technically correct. a c.r. will include less spending than was included in the omnibus, but as the old saying goes, you get what you pay for. the savings in the c.r. come primarily by shortcoming and shortchanging national defense and security. under the c.r., the total allocated to the defense subcommittee for discretionary spending is $508 billion. under the omnibus bill, the total is $520.6 billion, so more than half of the so-called savings is really additional cuts to the defense department. for homeland security, the c.r.

would cut nearly $800 million from the omnibus bill. in fact, if we look at the funding for all security programs, more than $15 billion in cuts come from this sector. surely we could have all agreed that we shouldn't be determining our national defense and security funding on the fact that congress was unable to finish its work. who among us really believes we should base our recommendations for defense, homeland security and veterans on whatever level was needed last year? mr. president, this is no way to rurun a government, and the unid states of america is not a second-rate nation and we should not govern ourselves like she is second rate. a continuing resolution by

design mandates that programs are to be held at the amounts provided last year, regardless of merit or need. moreover, in the vacuum that this creates, it is left to the bureaucrats to determine how taxpayer funds are allocated, not elected representatives. and may i at this juncture suggest that we who represent our states i believe know more about our states than these bureaucrats. and, mr. president, i don't believe the people of hawaii elected me to serve in the senate as a rubber stamp. the alternative that i offered was a product of bipartisan cooperation in the senate. it represented a good-faith effort to fund many of the priorities of the administration

while ensuring it is the congress that determines how the people's money would be spent. mr. president, while the omnibus bill that we drafted providing more funding than the c.r., it is by no means the amount sought by the administration. earlier this year, more than half of this body voted to limit discretionary spending through the so-called sessions-mccaskill level, which in total is $29 billion below the cost of budget requested by the obama administration. the appropriations committee responded to the will of the majority of the senate and adopted the ceiling on spending. moreover, mr. president, we didn't use any gimmicks or tricks to hit this target. instead, each of our subcommittees was directed to take another look at the funds

that we -- that they are recommending and provide additional cuts. each was tasked to identify unneeded prior year funds and use those to achieve this reduced level, and it was not easy. many worthwhile programs were cut, but we reduced the bills reported from the committee by by $15 billion, enough to reach the sessions-mccaskill level while still fully funding and paying for pell grants and covering all c.b.o. scoring changes. the administration's top priorities have received funding , but not always at the level sought. congressional priorities were cut back, essential needs were met, but there were no frills. for many members, this debate

focused on what we call earmarks. here, too, the congress tightens its belt. as defined by senate rules, we have reduced our spending that was provided in f.y. 2010 by nearly 35%. less than $8 billion was recommended in the omnibus bill for congressionally directed spending programs as compared to more than $12 billion last year. my colleagues should be advised that since 2006, the congress has reduced spending on earmarks by just about 75%. in total, the omnibus bill recommended less than .75% of discretionary funding on these so-called earmarks. a tiny fraction of funds are

provided so all of you can support the needs of your constituents which are not funded by the administration. we have all heard those who said this election was about earmarks. mr. president, nothing could go further from the truth. this election was not about earmarks. my colleagues who went home and reminded the voters what they had done for them just with earmarks are returning to the senate. if this election was about public distaste for earmarks, why did i receive a higher percentage of votes than any other member of this body who had an opponent? why is it that virtually all of my colleagues who took credit for earmarks would be coming back next year?

mr. president, this election was about gridlock and partisan gamesmanship, and what we saw in the past 24 hours is more of the same -- endless delaying tactics followed by decisionmaking by partisan point scoring rather than what is good for our nation. mr. president, some of our colleagues have suggested that since this bill is 2,000 pages long, it is obviously too big. but, mr. president, as we all know, this is not one bill. it is 12 bills, funding all government agencies. of course it is 2,000 pages long. it is simply not rational to object to a bill because of its length, and that, mr. president, is nonsense. mr. president, too often our debates in the senate focus on

mind-numbing budget totals that are hard to grapple with. but when the c.r. is $50 billion to $20 billion below the omnibus, it is not just a number. it is specific programs that will be cut or eliminated. when we point out that congressional priorities were curtailed, these are real programs that impact the life of millions of americans. when we are talking about a bill as large as the omnibus, we are talking about thousands of such programs. mr. president, for example, in the defense subcommittee, we prioritize the purchase of more helicopters to move about the rough terrain in afghanistan. keep in mind there are thousands of men and women, american men

and women in uniform putting themselves in harm's way, sometimes being injured or killed. these funds were not requested in the pentagon's budget but were identified as a need by feudal commanders. and so the committee justifiably appropriated more than than $900 million to buy new helicopters, and this will be lost from the bill when we vote for a c.r. instead of the omnibus. we added $228 million for tests to procure the new vv-hull improvements to striker armored vehicles which will dramatically improve soldiers' protection. these weren't included in the

president's request. to support our wounded warriors, we added $100 million for life-saving medical research and psychological health and traumatic brain injury. under the c.r., funding for the threat reduction program which secures nuclear weapons and materials in russia would be reduced by $100 million. there are hundreds of additional examples which could be described in defense alone, from breast cancer research to additional f-18 jets for the navy which they have declared to be essential, but it is not just defense that will be impacted. similar issues will be found in every agency. it is evident, for example, that the threat to the security of the united states evolves every

day, as evidenced by a growth of home-grown terrorism such as the times square bomber, the new york subway plot, the fort hood shooting and the recent efforts to blow up aircraft over the united states, whether the christmas day bombing attempt or the recent attempt to blow up all cargo planes. it is critical that careful decisions be made on the allocation of resources through the department of homeland security, but, mr. president, a continuing resolution would not provide the transportation security administration with the resources necessary to enhance our defense against terrorist attacks such as northwest flight 253 and the recent attempts against cargo aircraft.

this omnibus bill provided provided $375 million above the continuing resolution for t.s.a. to acquire 800 explosive trace detection units, 275 additional canine teams, hire 31 additional intelligence officers and strengthen our international aviation security. this omnibus bill provides provides $52 billion above the continuing resolution to deploy radiation portal monitors where vulnerabilities exist, such as airports and seaports and for radiation detection pages and backpacks used to detect and identify nuclear materials. because we have chosen not to enact an omnibus, we will miss

an opportunity to address cybersecurity at the department of transportation. the department recently assessed the security of its computer system and found it sorely lacking. security gaps at the department are putting at risk computer systems that manage our air traffic and monitor our national infrastructure. the department requested requested $30 million for f.y. 2011 to fix this problem as soon as possible. an omnibus appropriations bill would have provided this funding, but the c.r. will do nothing to address this urgent problem. not passing this omnibus would halt new national security enhancements intended to improve the f.b.i.'s security,

cybersecurity, weapons of mass destruction and counterterrorism capabilities and assist in litigation of intelligence and terrorism cases. the f.e.i. will not be able to hire 126 new agents and 32 intelligence analysts to strengthen national security. mr. president, the omnibus was better for our brave men and women who work as members of law enforcement to make our streets and everyday lives of our constituents safer. without an omnibus, the department of justice will not be able to hire 143 new f.b.i. agents, 157 new prosecutors for u.s. attorneys, target mortgage and financial fraud scammers and schemers who prey on america's hard-working middle-class families and devastated our

communities and economy. mr. president, when it comes to the health and well-being of our constituents, it is clear that passing an omnibus has just been a fallacy. again, we are talking about redirecting our resources to address today's needs, not last year's needs. specifically, the omnibus bill included $142 million in vital program increases for the indian health service that are not in the c.r., which includes includes $44 million for indian health care improvement fund, provides additional assistance to neediest tribes, additional additional $46 billion to a contract health service and and $40 million for support, as well as support for new initiatives and drug prevention, chronic disease prevention and

assistance to urban indian clinics. this omnibus bill would continue the strides that have been made over in the recent past to significantly increase funding for the indian health service and thereby provide more and better medical care for our native americans and alaska natives. this c.r. will bring that to a close. mr. president, there are hundreds more examples of what we will not be done because the congress will not pass this bill. however, because the c.r. turns over the decisionmaking to the executive branch, we can't even tell this body all the things that the bureaucrats won't do that are important to members of the congress. and to our constituents. the bill that i would have

brought to the senate represented a clear and far superior alternative. it better protected our national security. it ensured that the congress determines how our citizens' funds will be allocated as stipulated in our constitution. it was written in coordination with senate republican members. it was not a perfect document, but it represented a lot of compromises. it made $29 billion in reduction from the president's program. but, mr. president, it was a good bill which ensured that the programs important to american people will be funded. it assumed responsibility for spending decisions that i believe are rightfully the duty of the congress. mr. president, we find ourselves

where we are today because we are unable to get this message across. in many respects, it was a failure of communication. we were never able to adequately explain to everyone what the good things in this bill would have accomplished. and so, instead, we are now faced with placing the government on auto pilot. our republican colleagues will a lout administration to determine how to spend funds for another two months rather than letting the congress decide. and in the two months, we will very likely find ourselves having to pass another 2,000-page bill that will cost more than $1 trillion or once again abdicating our authority to the administration to determine how our taxpayer funds will be spent.

mr. president, i wish there were a better way, but the decision by our colleagues on the other side who helped craft this bill have left us with no i thank the senator from arizona. mr. mccain: mr. president? the presiding officer: the senator from arizona. mr. mccain: mr. president, i have a parliamentary inquiry. what is the parliamentary situation as it exists on the floor at this time? the presiding officer: the treaty is pending. mr. mccain: and is there not other business before the senate at this time? the presiding officer: no, there's not, senator. mr. mccain: what about the filing of petitions for cloture on both what is known as don't ask, don't tell, and what is known as the dream act? the presiding officer: that's in legislative session and we're in executive session, sir. mr. mccain: so that is part of a legislative session and we are in executive session? the presiding officer: correct. mr. mccain: but the -- time is

still pending on the matters in legislative session; is that correct? the presiding officer: the time for cloture -- the time for cloture motion is ripening but we are in executive session, sir. mr. mccain: i understand. so here we are, the date is february -- excuse me, friday, december 17, and we are on the start treaty, a treaty that -- any treaty is serious matter before the senate. this is of the utmost seriousness. meanwhile, there is a cloture motion -- and may i please, parliamentarian, correct me. these are both that are -- the time is running on are both privileged messages, which means that there is no vote on the

motion to proceed; is that correct? the presiding officer: there is no need for a motion to proceed with the house message, sir. mr. mccain: so really what we are about six weeks after the last election in a -- now discussing the start treaty, and i'll have an amendment that i'll be proposing in a moment that i think is important. meanwhile, two other issues, both of which are very controversial, cloture has been filed on and the clock is running. there's also threats that we may have again other votes on things like the relief for the new york 9/11 people, the firefighters issue, and a couple other -- on-line gambling has been

mentioned in the media as one of -- as one of the majority leader's proposals. so, again, here we are, the people spoke clearly on november the 2nd, and it was, in the words of the president of the united states, a shal shallacki. so what are we doing on december 17? we are in one session of the united states senate, the executive session; meanwhile, the legislative session will go on, and who knows -- who knows? -- what issue the majority leader will bring another issue before the senate, maybe get a couple more privileged messages from the other side, file it, run the clock, 30 hours, and then force the members of this body, of which there will be six -- five additional members beginning

january the 5th. and at the same time, my friend from massachusetts and the president of the united states and the proponents of the treaty are saying, put partisanship aside, put your concerns aside, trust us because this is very important for the nation. what possible good does it do when the majority leader continues to bring up issues and force us to have votes on them which are clearly in keeping with the majority and the other side's political agenda? it -- it -- it's really kind of a remarkable situation. i've been around this body for quite some years and i have not seen a degree, an intensity of partisanship that i see today in the united states senate. all of us want to do what's

right for the country. so that's why this start treaty deserves serious consideration, and it deserves serious consideration by itself. but this body operates in an environment of cooperation and comity. that very much is not in existence today. so we will then tomorrow, i take it, on saturday, we will go off the executive counsel on to the legislative counsel, force votes on these two very controversial issues, and then maybe -- maybe, if it moves him so, the majority leader will bring up another issue, as he has in the past, to force votes, most of which those votes he knows very clearly will not succeed but will give him and the other side some kind of

political advantage. that -- that wasn't the message of the -- the last election. so i -- i think that a number of us are growing weary of this on this side of the aisle. we're just growing weary. and we believe that the people of this country spoke, in the words of the president of the united states, a shellacking, and we ought to, we ought to perhaps keep the government in operation, go home, and in less than two weeks -- or a little over two weeks, let the new elected members of congress on both sides of the capitol address many of these issues. now, i don't know if we will get through all of the amendments and all of the debate that a

solemn treaty deserves before the united states senate. i really hope that we can. i would also remind my friend from massachusetts that my colleague from arizona, certainly the most respected person on this issue on this side of the aisle, has offered a date certain of january 25, with a final vote on february 3, to the other side. that obviously has not been acceptable to them, and by the way, that would be with the input of the newly elected senators, not of those who are leaving. so i look forward to continuing this debate and discussion, and who knows? who knows what other issue they -- the majority leader may bring before the senate. it may be a privileged message

again, which would only then require one cloture vote, and we will then force to be taking another politically motivated -- politically impacted -- impactful vote. so, mr. president, i tell my colleagues that we are getting tired of it. we grow weary. and it's not that we want to -- quote -- be home for christmas. i spent six christmases in a row away from home. but what it is about is responding to the american people. now, the american people yesterday in a resounding victory for those who voted on november 2 rejected the omnibus appropriations bill. i believe that some of the issues before the senate deserve the participation of the newly elected members of the united states senate and house.

so, mr. president, at this time on behalf of myself and the senator from wyoming, senator barrasso, i'd like to call up amendment 4814. the presiding officer: the clerk will report. the clerk: the senator from arizona, mr. mccain, proposes amendment number 4814, in the preamble to the new start treaty, strike "recognizing the existence of the interrelationship between strategic offensive arms and strategic defensive arms and this interrelationship will become more important as strategic nuclear arms are reduced and that current strategic defense arms do not undermine the viability and effectiveness of the strategic offensive arms of the parties." mr. mccain: mr. president? the presiding officer: the senator from arizona. mr. mccain: i would like to thank my friend and colleague from wyoming, senator barrasso, dr. barrasso. it's been a great privilege for me since he has been a member of

the united states senate to be with him side by side in a number of battles. i am particularly proud of the work that senator barrasso continues to do on the issue of obamacare. if anyone wants to really be brought up to date, i would commend his website, second opinion, that dr. barrasso has, and he continues to be credibly knowledgeable and effective, not only here in this body but with the american people. as a member of the foreign relations committee, dr. barrasso has taken on this issue as well, and i'm pleased to be joined with him, and i'd say to my colleague from massachusetts, the distinguished chairman of the foreign relations committee, i know there are a number of senators who want to speak. i will try to get those lined up and time agreements so that we don't take an inordinate amount

of time on this issue, and i think we can do that, say, within the next hour or so. but this is an important amendment. this is really one of two major issues that concern many members of this body and many americans. one is the modernization of our nuclear inventory, which i think continues to be a subject of discussion, agreements, some agreements that is important, and my colleague from arizona, senator kyl, of course has been following that issue since the 1980's. i know of no one who has been more heavily involved in that side of the issue. the other, of course, is this whole issue of defensive weapons , and how the provisions of the treaty affect the entire

ability of the united states, unconstrained by this treaty, to move forward where it deems necessary to put defensive missile systems to protect the security of this country. now, i'd like to remind you how vital this is. we are living in a world where the north koreans have nuclear weapons and missiles. the iranians have missiles and the ability to deliver nuclear weapons. the pakistanis have nuclear weapons. other countries throughout the world are developing nuclear weapons and the means to deliver them. so our concern is not so much what the russians will do in the form of offensive nuclear weaponry -- and i would be glad to discuss about russian -- media reports about russians building a new missile and

moving icbms to the borders of europe and all that, but the main problem here is can the united states under this treaty have the ability to put into place defensive missiles which will protect the security of the united states of america? we all know that proliferation of weapons of mass destruction and the means to deliver them is one of the major challenges of the 21st century. so i think it is vital, it is vital that we make it perfectly clear that there is nothing in this treaty that constrains our ability to pursue that aspect of america's defense. and so it is deeply disturbing to so many of us when the preamble of the new start treaty says recognizing the existence of the interrelationship between strategic offensive arms and strategic defensive arms, that

this interrelationship will become more important as strategic nuclear arms are reduced, and that current -- and i'm going to emphasize that word -- current strategic defensive arms do not undermine the viability and effectiveness of the strategic offensive arms of the party. operative word there, my friends, is current. i have been around long enough to have lived through the history of missile defense. it's not that old of an idea. in the middle of the last century, the idea that we could develop and deploy strategic defensive weapons sounded like science fiction and wishful thinking, and for the most part it was. a few decades later, it was with this view of missile defense's fantasy that opponents of the idea mocked president ronald reagan who was more committed than any american president before him to the prospect of developing viable missile

defense systems, what president reagan called his strategic offense initiative which -- strategic defense initiative which became known to all of us as s.d.i. you know, this idea scared the soviet leaders to death because they realized how serious he was about it and because the idea represented a threat to the very balance of terror that threatened all of mankind during the cold war. arms control theorists saw this terror stabilizing, mutually assured destruction as stabilizing and believed that missile defenses could therefore be destabilizing. as a result, a key pillar of cold war arms control was the established interrelationship between strategic offensive weapons and strategic defensive weapons. this linkage was codified in the antiballistic missile treaty, among other treaties and agreements. it established an effective missile defense if developed

could threaten the strategic offensive capabilities of the united states and the soviet union. for that reason, it limited the development and deployment of such defensive weapons. ronald reagan believed that viable missile defense systems in particular s.d.i. held out the opportunity -- yes. the presiding officer: the senator from tennessee. mr. alexander: i thank the senator from arizona for his extreme courtesy to interrupt just for one minute so that the senator from new mexico can be recognized to -- on a matter. the presiding officer: the senator from new mexico. mr. bingaman: mr. president, as if in legislative session and morning business, i would ask unanimous consent that the commerce committee be discharged from further consideration of h.r. 5116, and the senate

proceed to its immediate consideration. the presiding officer: the clerk will report. the clerk: h.r. 5116, an act to invest in innovation through research and development to improve the competitiveness of the united states, and for other purposes. the presiding officer: without objection, the committee is discharged and the senate proceeds to the measure. mr. bingaman: mr. president, i would ask unanimous consent that the rockefeller-hutchison substitute amendment which is at the desk be agreed to, the bill as amended be read a third time, that a budget paygo statement be read. the presiding officer: without objection. mr. bingaman: i would also -- would the clerk -- the presiding officer: the statement will be read. the clerk: this is a statement of budgetary effects of paygo legislation for h.r. 5116, as amended.

total budgetary effects of h.r. 5116 for the five-year statutory paygo scorecard zero dollars. total budgetary effects of h.r. 5116 -- mr. bingaman: i would ask that the reading of it be dispensed with. the presiding officer: without objection. mr. bingaman: i would ask that the bill be passed, the motions to rebe laid upon the -- consider be laid upon the table, any statements to the bill be placed in the record at the appropriate place as if read. the presiding officer: without objection. mr. bingaman: i join my -- my colleague from tennessee in thanking the senator from arizona for his courtesy and ask that this activity not interrupt his comments in the -- in the official record. the presiding officer: without objection. mr. bingaman: i yield the floor. mr. mccain: mr. president? the presiding officer: the senator from arizona. mr. mccain: mr. president, i guess i -- i guess i'll just start all over. mr. kerry: mr. president, we ask

unanimous consent please spare us. mr. mccain: president reagan believed that viable missile defense systems in particular his strategic defensive initiative, held out the opportunity to eliminate the threat of nuclear holocaust and thereby render nuclear weapons irrelevant. president reagan was one of the leading proponents of a world without nuclear weapons, and he believed that it was missile defense, not just arms control agreements, that would make that world possible. and my friends, if i may take you on a trip down memory lane, the debate on that subject was spirited, it was passionate and it was a fundamental debate that took place in this country during the 1980's. and that's why, that's why at the reykjavik summit of 1986

when soviet premier mikhail gorbachev cited the a.b.m. treaty as legal grounds for imposing what president reagan believed was a critical limitation on the strategic defense initiative, the president broke off the negotiation and walked out. one of the most remarkable acts in recent history. and you can imagine the initial response of the media and others to president reagan walking out of arms control talks. with the end of the cold war and the collapse of the evil empire, the united states and russia were no longer more tall enemies with the means to threaten one another's very existence. for the proponents of missile defense, this was an opportunity to break once and for all the long-accepted linkage, the interrelationship between strategic offensive and defensive weapons. in a recent op-ed in the "wall street journal" -- and, mr. president, i ask unanimous consent that the article

entitled "new start ratified with caveats" by condoleezza rice be included in the record at this time. the presiding officer: without objection. mr. mccain: former secretary of state condoleezza rice explains why breaking this linkage between offensive weapons and missile defense was so important during the post cold war. i quote from condoleezza rice's article. "when u.s. president bush and russian president putin saoupbd the moscow -- signed the moscow treaty in 2002, they reduced -- addressed the nuclear by reducing weapons as their predecessors had. the moscow treaty was different. it came in the wake of the 2001 withdrawal from the antiballistic missile treaty of 1972. for the first time the united states and russia reduced their offensive nuclear weapons with no agreement in place that

constrained missile defenses. breaking the link between offensive force reductions and limits on defense marked a key moment in the establishment of a new nuclear agenda no longer focused on the cold war face-off between the warsaw pact and nato. the real threat was that the world's most dangerous weapons could end up in the hands of the world's most dangerous regimes, or of terrorists who would launch attacks more devastating than 9/11. since those very rogue states also pursued ballistic missiles, defenses would, alongside offensive weapons, be integral to the security of the united states and our allies. this brief background helps explain a key concern i have with the new start treaty as it relates to missile defense. that because of one clause agreed to by the parties in the treaty preamble, the russian

government could use the treaty in its present form as a tool of political pressure to limit u.s. decisions about our missile defense systems. i followed this issue of missile defense pretty closely while the treaty was being negotiated. and as i have said before, i am concerned by the series of events that led to the treaty's handling of missile defense. first the senate was told that this treaty would in no way reference the development and deployment of u.s. missile defense systems. here is what under secretary of state ellen tauscher said on march 29, 2010, and i quote, "the treaty does nothing to constrain missile defense. this treaty is about strategic weapons. there is no limit on what the united states can do with its missile defense systems."

but then for some reason, after being told that this treaty was not about missile defense, the senate was then told that there would be a reference to missile defense after all. but that it would only be in the preamble of the treaty which, of course, is not legally binding. this was -- that was worrisome enough, but then we saw the treaty and not only was there a reference to missile defense in the preamble, but there was also a limit taoeugs our -- limitation to our missile defense deployments in the body of the treaty itself in article 5. this may not be a meaningful limitation, but it is a limitation nonetheless and a legally binding one at that. this sets a very, very troubling precedent. but what i want to focus on this morning is the reference to missile defense that appears in the preamble this afternoon. what i want to focus on this afternoon is the reference to

missile defense that appears in the preamble, because that language carries a lot of historical significance and strategic weight. and it has been the root of mine and other senators' concerns about how the russian federation could use this treaty as a de facto veto against u.s. missile defense systems. this is what the eighth clause of the preamble says -- and i quote from the preamble -- "recognizing the existence of the interrelationship between strategic offensive arms and strategic defensive arms that this interrelationship will become more important as strategic arms, nuclear arms are reduced and that current -- current strategic defensive arms do not undermine the viability and effectiveness of the strategic offensive arms of the party." there are many problems with

this statement and more that stem from. first, it reestablishes -- it reestablishes, after what i told you about happening during the reagan administration, it reestablishes, because we worked very hard over the past -- over the bush administration, i say reestablishes because we worked very hard overt past decade to decouple these two concepts. our offensive nuclear weapons and our missile defenses. during the cold war the soviet union was always terrified of the prospects of u.s. missile defense. ever since president reagan proposed the strategic defense initiative, the russians have sought to limit development and deployment of our strategic defensive arms because they knew they could never compete. they sought to find our actions on missile defense through legal obligations and treaties. and when that didn't work, through political commitments or agreements that could citeed to

confer future obligations and thus transformed into a political threat. in short, the russians have always understood that u.s. missile defenses would be superior to any defensive system the russian federation and the soviet union before it could ever deploy. so they have been relentless in trying to block it. it's for this reason, and because the bush administration worked so hard to break the lynchage between -- linkage, that former secretary of state condoleezza rice conclude tphad recent op-ed which i cited earlier with the following counsel to this body -- and i quote -- "the senate must make absolutely clear that in ratifying this treaty the united states is not reestablishing the cold war link between offensive forces and missile defenses. new starts preamble is worrying in this regard as it recognizes

the 'interrelationship' of the two." the reestablishment of the interrelationship is one problem with this clause in the preamble, but there are others. a second problem comes in the next line which states -- quote -- "that this interrelationship will become more important as strategic arms are reduced." this is only enhancing and strengthening the linkage between our offensive nuclear weapons and our missile defenses, because this treaty will modestly reduce our strategic nuclear arms. and if the president is serious about his vision of a nuclear-free world -- and i believe he's serious -- then the importance of this agreed-upon interrelationship will only deepen in the years ahead. this takes an already problematic idea and makes it even more potentially damaging. the third problem and the one with potentially the most direct

consequences comes in the next line which states -- quote -- "current strategic defensive arms do not undermine the viability and effectiveness of the strategic defensive arms of the parties." this clause lays the groundwork for the political threat the russian federation wants to hold over the united states with regard to its missile defense deployments. by saying that current missile defenses do not undermine the treaty's viability and 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 events compel us for the sake of our national security and that of our allies to qualitatively and quantitatively build up our missile defenses to improve our current systems or develop and deploy new systems to counter a new and far greater threat than we expected. and then imagine that the russian government tells us that if we consider taking these actions, that we deem to be in our national security interest and such an action to improve our missile defenses would undermine the treaty's effectiveness and viability. this is an unacceptable constraint on u.s. decision making. as if to drive home the large potential problems that stem from this clause in the

preamble, the russian government issued a unilateral statement at the time the treaty was signed. i realize this statement is not legally binding either, but it certainly adds to the political commitment that the russian federation believes the united states has made on limiting our missile defenses. this is a remarkable statement and it deserves to be read in full. and i quote -- "the treaty between the russian federation and the united states of america on measures for the further reduction and limitation of strategic offensive arms signed at prague on april 8, 2010, may be effective and viable only in conditions where there is no qualitative or quantative build-up in the missile defense system capabilities of the united states of america. consequently, the extraordinary events referred to in article 14 of the treaty also include a

build-up in the missile defense system capabilities of the united states of america, such that it would give rise to a threat, the strategic nuclear force potential of the russian federation." that is a very clear statement made by the russian government about the linkage between defensive missile systems and offensive arms. this is the russian interpretation of what our two governments have agreed to in the preamble. they explicitly draw the connection between strategic offensive and strategic defensive arms. they explicitly state that the united states is limited in its development and deployment of missile defense systems. they explicitly refer to the language of the preamble about the -- quote -- "effectiveness and viability of the treaty in order to claim that any build-up of improvement on u.s. missile defense systems that would

undermine the treaty. then they go one step further. they draw a logical connection between what was agreed to in this clause of the preamble to article 14 of the treaty, which establishes the rights of the parties to withdraw from the treaty and the conditions under which they may do so. in short, the russian government has effectively turned a nonbinding political agreement into the pretext of what it believes is a legal obligation under the treaty itself. you don't have to take my word for it. just list ton what russian leaders themselves -- just listen to what russian leaders themselves have said. here is certificate guy laugh -- here is sergei lavrov. "the treaty and all it contains are valid only within the context of the levels now contained in the sphere of strategic defensive weapons." here is foreign minister lavrov

again on april 6, 2010 -- quote -- "russia will have the right to exit the accord if the u.s.'s build-up of its missile defense strategic potential in numbers and quality begins to considerably effect the efficiency of russian strategic nuclear forces. linkage to missile defense is clearly spelled out in the accord and is legally binding." i would remind my colleagues, that's a statement of the russian foreign minister. and here is everybody's favorite president, dmitry medvedev, speaking to the russian parliament on november 30. november 30. quote -- "either we reach an agreement on missile defense and create a full fledged cooperation mechanism. or if we can't come to constructive agreement we will see another escalation of the arms race. we will have to make a decision to deploy new strike systems."

final hreurbgs here is my favorite, prime minister putin speaking on larry king live on december 1, 2010. "i want you and all the american people to know this, at least those spectators who will follow our program here. it's not us who are moving forward on missiles to your territory. it is you who are planning to mount missiles at the vicinity of our borders, of our territory. we've been told that you'll do it in order to secure against the, let's say, iranian threat. such a threat as of now does not exist. if the countermissiles and rudders will be deployed in the year 2012 along our borders, or 20 15rbgs they will work against our nuclear arsenal, and certainly that worries us, and we are obliged to take some actions in response.

unfortunately at the time the treaty was signed, after agreeing to this problematic cause in the preamble, the u.s. negotiators did not use the opportunity to make a unilateral statement of their own, to decisively discredit the russian government's claims. instead this is the statement that the united states government issued in response to the statement that i read, the signed statement. quote -- the united states of takes quote. the united states missle defense systems are not intended to affect the strategic balance with russia. the united states missle defense systems would be employed to defend the united states against limited missle launches. the united states intends to continue improving and deploying its missle defense systems in order to defend itself against limited attack and is part of

our collaborative approach to strengthening stability in key regions. my friend, i understand diplomacy and i understand statements that are equivocal. that certainly stands out as one of those. we could have stated that the development and deployment of u.s. missle defenses are in no way limited by the treaty, its preamble or anything the russian government says about them. we could have stated that the united states does not recognize decisions about its missle defense systems as a legitimate and valid reason for the russian federation to withdraw from the treaty as is its right under article 14. we could have stated affirmatively that the united states will continue to make both qualitative and quantitative improvements to our missle defense systems regardless of whether the russian federation threatens to or chooses to with frau the new

start -- withdraw from the new start treaty. we could have said that, instead we took note of what the russians had to say and spoke passively of our intentions without addressing the heart of the matter. what does all this mean? what it means is that the senate needs to fix the problem presented by this clause in the treaty's preamble. one way to do that, the easiest way is to strike the eighth clause from the preamble text and that's what this proposed amendment would do, would remove any recognition of an inner relationship between offensive nuclear weapons an missle defense and it would undercut the logical and political foundation of russian unilateral statement as well as the clearly and repeatedly stated russian position that this treaty imposes a legally binding limitation on u.s. missle defenses. i see that i'm joined on the floor by my good friend and cosponsor of this amendment, the

senator from wyoming. and, again, i want to take this opportunity to thank him, taking the lead -- taking the lead in offering this amendment within the committee on foreign relations during the markup of the resolution of ratification. i've had the opportunity to travel overseas with the senator from wyoming to iraq and afganistan and pakistan and many other places. i appreciate his consistent leadership on matters of national security. i would ask unanimous consent, i would ask unanimous consent,

[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]st 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.