we are trying to support folk, and what i think she mentioned yesterday in her remarks monday morning, are that there is an opportunity here that taliban should recognize that they can't wait a southcom and i think our actions on sunday prove that point. and that they should seek reconciliation among those guidelines. yes, go ahead. >> on bahrain, did you find out about the charges of the government is putting against a professional medical? >> yeah, thanks for raising that again. i appreciate it. i did get more details about that. i'd like to stress that we remain firmly committed to the principal of medical neutrality. weigel we are still continuing to gather information about this, we remain deeply concerned by the reports of defense that led to the injuries and deaths of civilians and the detention

of medical facilities staff and treatment being denied to those seeking medical care. we would just urge the government of bahrain to ensure the security of all medical personnel charged with offenses to conduct trials in a fair and transparent manner in full accordance with the law. >> the bahrainis are saying that some of these doctors, medical professionals were arrested because they made wounds far worse than they were or that they used people's injuries for political reasons etc., etc.. do you have any evidence to suggest these doctors were part of some iranian-backed plots to embarrass them? >> we don't, but as i said, we are trying to gather more of her mission about it. but again, what i think is the key here is that any of these allegations were accusations that they ensure both the

security of these personnel as well as any trial that might be conducted to be done in a transparent and -- manner that is in accordance with the rule of law. >> icc prosecutor luis ocampo says he's going to seek arrest warrants for three officials on the crimes against humanity. any reaction here? have you been in touch with him? >> i'm not sure we've been in touch with him. the secretary is on her way to the contact group meeting and will likely be a topic of discussion. we've supported all along the referral to the icc, and we have said all along the those who carried out human rights abuses and libya are going to be accountable. so we welcome it. is that it? thanks.

local transit officials told members of congress today that security improvements in their hometowns would not be possible without federal aid. the house homeland security committee representatives of new york city, chicago and san francisco as well as the head of speeding the transportation security administration. this is a little more than an hour and a half.

>> good morning. the committee homeland security is in order. we are meeting to hear testimony on the security of the mass transit systems. in order to identify with the progress is really is the terrorist attacks since september 11, 2001 and shortfalls' remain. we examine issues such as compared with the threat they face, information sharing with the federal government and the entities, the impact of the transit security grant program and extensive coordination between federal, state and local partners. i will now recognize myself for an opening statement. first of all, let me thank all the witnesses for being here today. this is a vital issue. i want to thank all of you for being here especially craig fugate who's doing a tremendous job in a very horrendous situation in the south and again

on to thank you for your service. on a personal note let me welcome commissioner daddario from the nypd who does a terrific job in new york and also a point of mentioning his father was a united states congressmen. thank you for being here today. again, thank all the witnesses for the work that you do. you are literally on the firing lines and mass-transit is a critical role in the nation coming from new york and serving to chicago, san francisco, appreciate it seems attrition. so much we do depends on mass transit. we have millions of riders every day and the reality is the mass transit is probably the most difficult part of our transportation system to secure. it's the most vulnerable, and having been to london and madrid and seen the damage done that was by al qaeda you realize that in some ways, the easier it is for terrorists to attack mass-transit and also how perfect the tragedy is when it

occurs. and so my point today above all is to find out what you think the level of security is, what more you think has to be done, what level of information sharing should be, but also to try to get a the debate going. we have to make cuts. there's no doubt they have to be made in the government spending has to be brought under control and we have to make sure not 1 penny or dollar is wasted the allocated to security. on the other hand, we cannot be achieving full economies by cutting areas for loss of human life which could encourage our enemy especially now in the wake of bin laden's death we have to assume that a al qaeda or its affiliates, al qaeda and the arabian peninsula, any of the offers come in the of the radicalized terrorists here at home, salles starters if you will, lone wolf's or organized terrorist operations in the country will launch the attack

and to me, clearly if we are talking about the potential targets, no one is more of a potential target than the mass transit systems. so, i would hope that again, we would look carefully at any cuts that are made. obviously the government agencies make sure every penny we spend but we cannot be making on believe false economies because apart from the loss of human life and the victory for al qaeda if it's a successful attack carried out, the economic consequences. you have one mass transit tokens in francisco, chicago or new york and the economic consequences would far outweigh the dollar amount of in the short term cuts made so that's where i'm coming from today. we know how real the threats are as we saw with zazi trained in afghanistan, came to the united

states, came back to the united states -- he grew up in new york -- and he was going to carry out a liquid explosive attack on the subway system. in virginia when we had what would be the attack on the d.c. transit system and we saw madrid and london and we have such a high priority of al qaeda and the fact again, you add bin laden's death, you had radicals in this country, the overseas attack what al qaeda has done before, no one is literally more on the fire lines than those who are responsible for the security of the mass transit system, so i want to thank you for all the efforts you've made and are continuing to make. i assure you on this committee on both sides of the ogle will work with you. the ranking member and on, whatever differences we may have on other issues certainly comes to security and the mass transit security, we for the most part

speak with one voice. with that i think you for being here today and look forward to hearing and i now recognize the ranking member from mississippi, mr. thompson. >> thank you very much, mr. herman, and i would like to ask unanimous consent mr. green, a former member of this committee be allowed to sit in for the hearing. >> i was going to object but i can't. [laughter] >> thank you. and for holding today's hearing on the surface transportation security. 34 million people view the nation's rail and mass transit system each day. despite this reality over my objections earlier this year the continuing resolution for fy 2011 which was passed by the house would decrease the discretionary spending for securing those modes of transportation by $4.4 million below last year's level.

23% the president's budget request. on the budget cutting regime, the transportation security program will be reduced by $50 million. but only about 1 dollar for each rider, the fund's purchase a great deal. transit agency use their money to hire law enforcement officers, acquired dogs and install explosive screening devices and to finance cattle projects to keep their riders safe such as hard and in the tunnels, installing surveillance systems and establishing parameters security controls. this 50 million-dollar cut would have an obvious and immediate impact on the security of the transit. unfortunately, mr. chairman, this funding is not the only problem facing the transportation security grant program. in 2009, the gao found that tsa

failed to incorporate vulnerability information in the program. although the department agreed with the recommendation and has not found a way to comply. i hope today if that compliance success in this information and let the committee to be provided that information. in 2010 the department inspector general found the field to collect and process to analyze programs performance measures without performance measures it is impossible to determine the effectiveness of the program and whether the grant programs are achieving risk reduction. if performance measures exist or would like for fema to provide them today. taken together these reports set forth in the need for program reforms the bring about

risk-based systems. finally look for to joining with you to restore funding to a this critical area. especially the osama bin laden killing. we had the chance to protect the mass transit riders who rely on it every day and i yield back. >> now i would like to begin the testimony of witnesses today. john pistole of the security administration. i first worked with mr. pistole when he was with the fbi, the dedicated public servants and

certainly he's been no stranger on the receiving end of the tax sources of the last six months and trying to get those jobs shows no good deed goes unpunished i'm privileged to have him here today. mr. pistole, you're recognized for five minutes. >> good morning, chairman and for the comments. ranking member thompson and members of the committee to discuss the efforts of the tsa partnership with fema and the many state, local and industry leaders to ensure the best possible mass-transit security and the president sunday night announcement that bin laden had been located and killed gets to the heart of a profound issue how to change the threat we face here in the u.s. as it relates to mass-transit. our efforts to combat terrorism go well beyond any one

individual which is why we remain focused on the critical mission of protecting the traveling public and the transportation system. tsa will evaluate and implement measures based on the latest intelligence. we ask the public to remain vigilant and report immediately any suspicious activity. today i'm here to focus with my fellow witnesses on the mass transit systems and faster railroads which include subways, commuter ferries, amtrak among others. the systems are critical part of the network tsa works in partnership to protect. they also unfortunately remain a target mr. chairman as you know having been the focus of numerous plots on the unsuccessful unfortunately as well as those successful attacks your note to overseas and others. a critical component of the tsa mass transit rail this our partnership, the partnerships we had in the industry and local and regional stakeholders.

the dhs transit security grant program is currently the primary vehicle providing funding for security enhancement to the which will transit agencies to bring the state and local government initiatives to improve security. we work closely with fema to fund projects that most effectively mitigate risk at the highest risk systems. in 2010 the dhs provided 273.4 million to the transit faster industry bringing the total of $1.6 billion since 2006. in addition to the grand founding tsa passenger rail systems by pulling visible prevention response teams to augment local security efforts. they currently have 25 dedicated viper teams in operation and other assets that perform the viper operations in the 2012 budget request funding for 12 additional teams. the team's work alongside local law enforcement officers and are comprised of personal expertise and inspections, peter detention, security screening

and law enforcement for the random and predictable deployment through the transportation sector with one goal in mind to detour potential terrorist acts. we can but nearly 10,000 operations in the last year for the more detail later on. we'll support from the risk assessments for the mass transit passenger rail and they would be on the emphasis of the 100 largest mass transit passenger rail systems in the talks for volume which collectively was 80% of all users of public transportation. among these assessments is the baseline assessment for security enhancement eric and country inns of security assessment two design 17 security emergency management action items that form the foundation of the effective security program. through the program tsa reviews the proposals, jointly develops that transportation at ta partners for mass transit.

these assessments help inform with the judgments and actions we should take in the partnership will for 115 agencies have participated in this program. we also work with other federal partners and others in terms of the other assessments and ways we can help inform not only our use of funds but their funds also. in closing mr. chairman car in the member comps and i want to thank you for your support and the support of the committee and i look forward to answering questions. thank you. >> thank you. our next witness is craig fugate a former director of the division for emergency management. in 2009 as we all know the natural disasters which struck the southern part of the country in the last several weeks he has been there directing the operations and a great distinction and employees to recognize the gentleman for

finance. ranking member thompson, members of the committee i serve as the administrator of fema but also in full disclosure when one of the 34 million people the right restaurants that. i write of the metro. i read the mature to go shopping and oftentimes my wife and i use amtrak to go home to florida. some of the customers of the full disclosure might benefit from a secure mass transit system. my partner here in the tsa and the administrator john pistole, we work with the local and the providers of mass transit throughout the country, and we look at this as a team effort. our job at fema is to support the dhs overall efforts and the safety security nation in a broad array of prepared programs and today the focus is on the transportation security grant programs. this is a partnership where it is the subject matter experts

and the grant at ministration to the programs work and to the state and local partners. it's cooperative management as the chairman as ranking member thompson pointed out inspector general found that we did not have procedures in place we didn't have agreements with tsa to the administrators programs i'm proud to announce taha et ms. reeder pistole and i have a memorandum that outlines the responsibilities as a team so that it's clear when we work with state and local partners how we are conducting our business. the transportation security grant funds can be used for capital projects as pointed out the physical hardening and other enhancements but also operational projects one of which many people have the right may be familiar with and that is we see something say something campaign, to incorporate and list the writers of the transit systems to report activities to the lord for said agencies. we also provide additional training exercises and drills

and a funding source for the visible law enforcement deutsch on the ground such as the k-9 police control as the administrator pistole point of our goal is deterrence. we want to be prepared, we want not to just be able to respond to these events but we want to be sure the threat of the terrorists attacking the mass transit systems. again, the programs as the administrator appointed out to provide funding what we continue to see the programs and we continue to work with our grant programs and applicants and i think one of the things i know that you expressed concerns about is the drawdown of the funds, why do we still see funds outstanding versus those coming down or are being drawn down i think it comes back to the type of work we are doing. but as we are doing capital projects as a state administrative agency i can tell you that in building and hardening the facilities that

construction and processing is working with the governments will lofton tames take more time. it's a draw them process for the work that's being done. those that are operational tend to be drawn down faster because those are funds expended for personal training exercises so the balance as i realize our concern that the are an investment in capitalization of the hardening of the facilities that oftentimes take more time than the operational and may be shoving as the funds are still there they may not be needed. as a restive and local governments are doing these capital projects as their obligating funds in seeking the reimbursement they are going as intended by congress to hardin and fortified the mass transit against threats. that completes my statement. >> thank you, administrator. mix with us as commissioner richard daddario, nypd commissioner daddario in the long record in the department as

prosecutor having jury trials are doing appeals and most recently prior to joining the nypd was the proof of justice at cache and if i may say on the humorous note, commissioner daddario as a look at other parts of the country if i do not pronounced your name first i just trumbull howard would be pronounced by some of the people in the other parts of the country. commissioner daddario, you're recognized for five minutes. >> good morning, mr. chairman, congressman thompson and members of the committee. thank you for the upper to needy to represent the new york city police department at the hearing on the subject of mass transit security. each year more than 1.5 billion people use the new york city transit system subway. it is an old system along and around which the citigroup. the life of the city depends on it. the metropolitan transportation authority takes care of the subway system's but the nypd has

the job of keeping the people who ride the trains safe. terrorism has made their job harder. under police commissioner raymond kelly's leadership the past ten years, the nypd found ways to reduce crime city-wide at levels few believed possible. but the possibility of a terrorist attack in the subway has required the nypd to commit enormous resources to safeguard the public read more than 2500 police officers are assigned to the transit bureau most of whom receive specialized training to recognize and respond to a terrorist plot. in addition practically another 1,000 officers are dedicated to the department's counterterrorism measure. the nypd has required advanced equipment to protect explosives and abbreviations courses and has begun connecting cameras in the subway system in the departments domain awareness system which integrates the public and private security

cameras, license plate readers, radiation detectors and other data. the conduct highly visible counterterrorism deployments in the subway system including random bad checks and consisting of emergency service unit officers with heavy weapons and tactical year, can line officers and detectives from the nypd intelligence division. all of this is necessary. before 9/11, hundreds of the acts of terrorism have been directed at the transit systems around the world including london, moscow, madrid and most recently new york city and the subway system. the transit system has been kept safe deutsch to the commissioner kelly's intelligent strategic commitment of resources through its protection. the nypd couldn't have accomplished so much without the support of congress and the department of homeland security especially through the transit security grant program. transit security grants as

supportive of the demand awareness system which will be integral to the protection of the transit hub at the new world trade center now rapidly taking shape. they also supported the central training for officers working in the subway system, paid for equipment and help cover the cost of the deployment. the trend that secured a grant express a commitment on the part of the federal government to protect not only the trains and the real and the stations that rise above them and the people to ride the trains there is the top of the target list for al qaeda and its affiliates and the support the strategy that combines technology and operational programs to protect the entire transnet system. funding to support operations makes this possible. olver currently legislation implementing the eighth implementations of the line of an act that sets the operational fund of 10% in 2011. however, understand that the

9/11 act contemplated the increase in funding of more than 70% between 2008 to 2011. that increase has not been realized. in fact authorized funding has decreased by more than 30% since 2008. accepting the fiscal year 2011 appropriation of $250 million for the transit security threat less than 25 million would be available nationally this year for vital operational programs both to the cougars to the nypd employee. if the cap was employed to be composed. in contrast 51 million was allocated last year to fund operational programs. to enhance the security makes good sense. but the right balance between capital and operations is important. the subway system is the fifth largest in the world and in the largest hemisphere the nypd is responsible for the safety and has worked long and hard to find a strategy that works.

that strategy demands the extensive commitment of police officers on the platform at the stations and around the station and the requires the sustained operational funding. again, thank you for inviting me to today's hearing and i will do my best to answer any questions you may have. >> thank you. the next witnesses present richard rodriguez of chicago transit valley prior to joining the cta and serve as the commissioner of the chicago the birth of aviation and as a long and distinguished career in various levels of the chicago government and with that mr. rodriguez i'm pleased to recognize you for five minutes. >> thank you very much, chairman king, ranking member thompson, the this when walsh from my home state of illinois and members of the committee for the opportunity to testify today on behalf of the chicago transit authority commonly known as the cta. ctr provides 1.7 million trips each week on the bus and not for

concluding the elevated rail service that has come to symbolize the chicago transit. as a second largest in the nation chicago transit authority continually examines ways to enhance measures for the safety and security of customers and employees to focus on three key areas come infrastructure improvements to the emergency communications kim and coordination i'm proud to report march of this year the seat he was recognized by the department of homeland security for achieving high scores in categories of the inspection program for transit. the baseline assessment for security enhancement known as base was developed as a comprehensive review of the programs and focuses on 17 categories identified by the transit community is fundamental for a sound transit security program. the categories include security program management and accountability, security emergency response training thrilled and exercises, public awareness, protective measures for the dhs threat levels, physical security, personal security and information sharing

security. we receive high scores across all these categories which very few transit systems have achieved. since 2006 and grants from the burden of homeland security have been so leave responsible for allowing the ctc to make significant upgrades to the security and surveillance network and the necessary security personnel and enrich the programs for these individuals so they are ready to handle the situation that may pose a threat to our system. our latest infrastructure initiative to combat crime and terrorism is the installation of high-resolution digital security cameras. the dhs funding is used to equip all when hundred 44 of our cta stations with multiple cameras at each station. the network camera allows the cta, chicago police department, chicago office of emergency management communication to gain a clearer picture of an emergency situation and respond accordingly. we also plan on richer for ncta fleet with security cameras. these are new cars on the order that will come equipped with cameras but we feel it's critical to have the entire

fleet retrofitted. all of the buses in the fleet over 1700 of them have been a quid with cameras since 2003. in the recent years the transportation security administration has provided additional resources in the form of visible intermodal and fiber teams as commonly known. richard licht on the airports and on the transit. they provide a random unannounced clearly visible supplemental security presence. ncta also received calls from the explosive detection team. the canines are funded through the dhs and part of the chicago police department transportation section. they are paired with canellos to protect the process it used to respond to reports of unintended suspicious items. they are trained to find in protest explosive devices and use on trains, buses, platforms and stations. the dhs funding allowed the cta to leverage technology to enhance the security but the human element is still critical. training for employees and encouraging the writers to be part of the security presence is always an important part of the

effort. they've launched a nationwide security awareness program called transit watch which encourages the transit passengers and employees to report anything suspicious or dangerous. the cta see something say something campinas similar to the transit watch program and provides information and instructions for the passengers and employees so they know what to do and whom to contact in the event of an emergency. this campaign was borrowed from the mta in 2002 and encourages the writers to report any suspicious activity the observed. in addition, we've participated and continue to participate in the training for a number of scenarios using a range of programs. we've increased frequency of the system checks, and access and continue to trim operations facilities and maintenance employees to recognize suspicious activities, packages or substances. ..

to its fiscal year 11 budget from 300 million to 250 million. fiscal year 2010, cta was awarded $6.8 million under his program to install security cameras on 400 rail cars. the ct plan to use at blyleven funding to complete the camera retrofit of the remainder of our legacy railcars in 2013 but the 16% cut will likely force the ct to finish installing these important cameras and 2014 or 2015 at the earliest. before a close i would be remiss if i didn't state how a heightened state of alert and pecks agencies like the cta. cta actively monitors terrorism related threats incidents and

events locally and nationally and internationally. and circumstances warrant the cta picks a number of steps to ensure employees and customers remain vigilant. steps include communicating with a federal state and local partners, reissuing security bulletins to remind employees about to look or and what steps to take shebang counter any suspicious or criminal act to be during the course of their duties and reminding our customers that vigilance and awareness of their surroundings is an important part around safety efforts and encourage him them to report unusual or suspicious activity to 911 or to cta personnel. trained assistance across the country are an inherently open environments designed to move people quickly to their destinations. at the cta or to denton to take take -- and continue providing ready transportation consistent with a commitment to safety. thank you again mr. chairman for the opportunity to testify here and i make myself available for any questions you may have. >> thank you very much mr. rodriguez. next witnesses daniel hartwig of the bay area rapid transit.

chief hartwig was positioned i believe six weeks ago and i congratulate you on that. it comes after 29 years of service and i thank you for your service and i'm pleased to recognize you for close to five minutes as you can be. thank you very much. >> good morning chair making ranking member thompson and members of the committee. my name is dan harward and i'm a deputy chief of police of operations operations of the san francisco bay area rapid transit police department also known as bart. on behalf of the board of directors of 3500 employees and their 350,000 daily riders i appreciate the opportunity to be given a chance to testify before you today. barts rule as a regional transportation network is borne out by what happens on a normal day and by what happens in circumstances that are atypical. normal weekday means providing on-time service for three and 50,000 bay area residents across

105 miles of track way 44 stations and for carriers between 26 cities. most often as a law-enforcement agency we provide a safe and secure environment for those within our system. the most recent atypical day we experience was november 3, 2010 when bart system carried customers to the san francisco giants world series championship victory prayed. the presence of a large crowd traveling through the facilities were special event such as the giant celebration presents a target rich environment for terrorists, tax and magnifies the risk and consequence of a terror attack that the transport systems-based daily. the attack in madrid spain on march 11, 2004 and the attacks in london and glenn on july 7 and 21st 2005 and the attack in mumbai india on november 26, 2008 illustrates with alarming clarity the vulnerability of public transit facilities. the united states department united states department of

homeland security warns the nation's mass transit systems which are considered to be a part of america's critical infrastructure are at a high risk of being targeted by terrorists from mass casualty attacks. soon after september 11, barts administration aggressively focused upon identifying targets vulnerable to acts of terrorism and the bart system. after completing vulnerability assessments with three government agencies and one privacy 30 firm early on bart identified a need to complete an estimated 250 million dollars in security projects. recognizing its most critical and vulnerable assets bart immediately invested capital funds to begin the process. on friday july 8, 2005 representatives from tsa knocked on bart store our free partnership and support in the wake of the tragic attack on london's transportation system thus beginning our partnership that continues to this day. beginning in 2003 and continuing

through 2005 urban area security initiative dollars help to fund this specific project to further harden the infrastructure within the bart system. receiving transit program funds in 2,062,010 that allowed for the expansion of the security projects to address and identify security needs of vulnerable and critical assets. today we continue to use transit security grants program funds as well as other local state and federal funds to strategically and methodically eliminate identify vulnerabilities from the previously mentioned threatened assessments. the engineering challenges to protect and mitigate the effects are greater than imagined. understanding the required expertise needed, we having continue to rely upon the department of homeland security and the transportation security frustration for support and direction. without their unwavering commitment to bart specifically and to our allies transportation systems are our ability to achieve success with the

extremely limited. due to the environment in which our system is located, the complexity of security projects has exceeded our local resources. and it is the support from dhs and tsa that enables us to build these security projects forward. as for passenger screenings, from the beginning was clear the post-9/11 ciccone measures developed in our airports would not work in the subway systems in america. artist dave rapid transit and if we lose its rapidly ceased to serve customers in the region. although bart is a fairly new system or infrastructure was not designed to accommodate the equipment required to screen large numbers of passengers and current technology cannot process large numbers of passengers quickly enough for the mass transit environment. further proof of the success brought to bart by dhs and tsa are the following projects and programs. financial support for major capital projects to harden barred critical infrastructure,

tsa explosive k-9, operational funding for critical asset patrol team assigned to her critical asset corridor, training for barts frontline employees on terrorism awareness and identification, viper teams to patrol critical assets and special events, real safe linking transit agencies across the country the same data time focusing on high visibility within transit properties. i would implore you today the funding source for transportation agencies to solidify their properties are needed now more than ever. we have failed in the past to pay close attention to a threat we consider to be -- we now know the same threats exist within our own homeland. as we approach the tenth anniversary of the 9/11 attacks we cannot allow complacency to undermine our efforts to keep america secure. chairman king, ranking member thompson and members of the committee on behalf of bart police chief kent rain and the san francisco bay rapid

transit -- thank you for allowing me to testify today and i'm also willing to answer any questions. >> thank you very much chief hartwig. i thank all the witnesses. our first question will be to commissioner daddario. the only time i've seen him show concerned with the night before the zazi was apprehended because the nypd knew the plot had become operational, that within 12 to 24 hours -- can you put into some context what that plan would have achieved if it -- zazi and his confederates, his co-conspirators -- co-conspirators would have carried to the planned the impact it would have had to the new york subway system? >> mr. chairman, all these attacks on subway systems are designed not to cause the systems infrastructure to collapse. they are designed to terrorize the public.

so as to cause people to have grave concerns about warding a train, going to work, going to visit friends, going about their lives, and that type of tear, if applied in any type of consistent way would in fact substantially diminish the economic life of a city, and vitality of the city and to a city of new york, if you do that to the subway system, you essentially are choking the cite city and you could potentially, and this is i think the part of the whole reason why you attack transit systems is you hope that it will bring the life of the city to basically kill it, kind of imposed a kind of level of fear over the population so that

all of the activities we need to engage in on a daily basis to keep the city strong, vital and alive would be substantially diminished. and that was the major concern about azazi. something like that has not happened in new york. we want to make sure it doesn't happen and everyone feels that they can board the trains, move about freely. i hate -- heard mr. fugate say how he'd use is the subway and goes on amtrak. he does so -- he depends on it. and he wants to be able to do that without feeling he is going to be blown up or have someone come in and shoot him to death. and, i think every member of this committee understands how important mass transit is, public transportation as to the economic life of the united states to the major cities and not just its economic life but his cultural life, its life. it is moving about is not just a matter finances and economics.

it is a question of how people live and what these terrorist attacks are designed to do is to really attack our way of life, to attack not just subways but all kinds of activities in the public sphere so as to, so as to bring life, ordinary regular life that people depend on to an end. so we feel that the investment that this committee has supported over the years is extraordinarily important and we depend in large part on federal funding to help us achieve the type of security we want and we know we have to continue the support of the committee, given current budgetary constraints, for the type of admission that we are engaged in and mr. fugate and mr. pistole and everyone here is engage in day-to-day.

>> director pistole can you amplify more in the viper system how successful you think it has been, how accepted it is and do you see it expanding it all? do you see the man -- need to expand it? explain what it is so the members will understand what consist of. >> the whole premise behind the intermodal response teams is to provide an unpredictable deterrent to those who may want to cause harm so whether the 77 bombers in london, who obviously with backpacks or zazi with his confederates and how many of the people may have been involved the ideas if we can present a visible presence, police presence ideally with k-9 tv. we know from debriefings of people who have cooperated once they have pled that the three main deterrence are uniform presence of the police officer, k-9 and cctv. the first two are the best.

cctv is good if you don't have a suicide bomber but as we know the 77 bombers in july 21 of 07 they look at the cctv before going underground. the ideas to be a deterrent and a measure of success is difficult to quantify to say do we deter a terrorist attack today? the whole point is to attempt to deter and push off to another day, which gives the rest of the intelligence community, the law-enforcement community the opportunity to identify and intercept a punitive tariffs. >> thank you. ranking member is recognized. >> thank you mr. chairman. mr. fugate, you referenced mou that has been signed between fema and tsa. could you make that mou available to the committee? >> yes, sir.

>> and is it your testimony that it covers those items that previously had been identified as weaknesses in the system? >> yes, sir. in addition to that as you pointed out, the performance measures are being implemented to the 2011 grant cycle as recommended by the ig, so i think that we would be more than happy to provide that to you and your staff in the committee as a whole. the actions we have taken to address the ig and the gentle accounting general accounting office. >> thank you and i am convinced that is an important aspect. to the operators of transit systems, and we will start with new york if that is the right. if these funds were not available, to provide security enhancements, what with new york have to do?

>> if they weren't nate available, we would have to try to find money -- we would have to strip money away from other types of activities when we engage them to protect the public. the mission of the police department is to protect the public. >> thank you. >> if the money wasn't available, we would have to try to find money from other sources from state and local tax revenues to support our counterterrorism activities. some of what we do simply wouldn't be possible. the domain awareness system we created which is the fiber-optic link or the link around the city where we have computers, which gather up information from cameras, license plate readers and other data sources in real time. it simply wouldn't be possible without federal money for

example. some of our deployment that we have where we have really put enormous amounts of officers on the platforms would be very very difficult without federal money. i think it would come for my the level of security we have quite frankly. >> thank you. mr. rodriguez? >> yes, sir. the chicago transit authority, the only means we would have for actually finding additional funds separate from the department department of homeland security funds would be our operational funds. we generate half of our own revenues from fair boxes from our customers from advertisements and concessions. the other half comes and subsidized from sales taxes and small amounts of real estate transfer taxes both of which unfortunately given the economic condition of our country at been challenging for the last two years. the question you are posing as where we would find the money and the answer is operational funds. that would further reduce servers than what it started in them. and then. unfortunately the chicago transit -- transitory had to reduce 18% of our bus our

servers are basically cut service about 20% across not just the city of chicago but the 40 suppers we service well and 9% of our rail hours, the number of hours were provide service on a railroad as well. we have a downsized organization by 10% so we have taken significant hit in terms of the capacity and the service we provide. any further reduction in funds to the department of homeland security would impact that separate and apart from that. there is a $50 million in cta in the chicago police department combined spending annually on safety and security related expenses that are not reimbursed by department of homeland security. separate from that, there's a greater need as well. >> mr. hartwig. >> sir, without the ability to continue the partnerships we have developed to these funding sources located from federal sources i fear that we would cease to exist and cease to provide the local security we currently have. the restriction is placed upon state and local funding resources in the state of

california. they are extremely diminished. i would agree with mr. rodriguez that if we would refer to an operational contribution, which would further impact the services we supply at bart. the value of these partnerships and the value of the funds to complete the security projects, they did not exist, we would work with what we have and they would try to achieve more with less. we would not achieve the success levels we currently experience. >> thank you. the important point that you made is, given some of the challenges we are facing right now, i think it is inconceivable that we ought to as members of congress and this committee both to cut any transit dollars. some members of this committee already have proposed earlier in

the year to do that and i want to say inadvertently based on the testimonies of new york, chicago and the bay area, would be absolutely detrimental so i would just like to make sure the rest -- the record reflects that this testimony from people who do it every day as well as individuals who administered the program for us, that personnel, canine's and the other enhancements going into securing these facilities would need seriously jeopardized if any further cuts were made and i yield back. >> thank you ranking member and i would just add to that, i know new york and i assume the other municipalities too, new york it's a small percentage and reimbursement compared to what it spends on homeland security. so, as it is the situation is tough enough in new york with over 1000 police officers dedicated to counterterrorism

and a significant portion of that on the mass transit system. without i recognize the gentleman from alabama, chairman of the subcommittee. >> the only question i had was on the viper system for mr. pistole. are these vipers organizations or groups solely based on risk or is there another criteria? >> congressman rogers it is primarily based on risk. we are all busy trying to make sure we are in those locations and at those times which present the greatest risk. there maybe may be some other criteria simply based on some ad hoc requirements but almost always based on risk, yes. >> that is all i've got mr. chairman. >> the gentleman yields back and i recognize the gentleman from illinois, mr. davis for five minutes. >> thank you very much mr. chairman i want to thank you for calling this hearing and take all of the witnesses for coming.

mr. rodriguez, i know that your tenure is about to expire as president of the chicago transit authority, and i want to take this opportunity to commend you for your tremendous public service to not only the citizens of chicago but certainly to the nation. chicago as we know is the transportation hub and center of transportation for the nation, so the outstanding work that you have done as commissioner of aviation as well as the head of the chicago transit authority speaks volumes for what you have met to our city as well as for the country, so thank you area much for that service. you testified that the chicago transit authority had received high marks in all categories of security inspection and my

question is one, how did you manage to obtain that rating from homeland security and what is it that we need to do to make sure that chicago's transit authority can continue in the vein that you have led it? >> thank you very much for the kind words congressman. the two things that i can say to respond to both of your question number one is having attained a high grade above to my colleague mr. pistole here who gave us the award on having received high marks but the reality is that we have a great team. we have got a great person, amy who is sitting behind me the cheapest hd and security for the entire organization or goi give her full credit for having obtained the award that we received but more importantly to your second question is what it is that you can continue, help

us continue what we are doing is the funding issue. the final line is the funding issue. separate and apart from the grants we currently receive, we out-of-pocket $50 million per year both ourselves and combination of the chicago police department on transit security related services. so, any thought of producing what we are due received with the extremely detrimental to our system and again keeping in mind that our name is somewhat of a misnomer. although we are called the chicago transit authority we serve the region so it would be detrimental to the economy and the entire region if we have to somehow continue to reduce service to upkeep the other security initiatives we have in place. it is additional funding, sir. >> i want to thank you very much and i want to echo the sentiments that were expressed by the ranking member and by the chairman.

it appears to me that funding is absolutely essential, and that is funding from the federal government level. i don't see any way that state and local governments can provide what is needed. so, i again commend you for your outstanding service and mr. chairman i have no further questions and i would yield back the balance of my time. >> i thank the gentleman and i would ask the record to show that you showed restraint when he said chicago was the leading transit system in the city. thank you mr. rodriguez. i now recognize the gentleman from pennsylvania, mr. murray no. >> thank you mr. chairman. i can't compete with new york or other large metropolitan areas, but being a u.s. attorney i do understand what these gentlemen have to deal with on a daily basis and i certainly appreciate what you do. aside from the funding, and we

know that is the critical aspect here, could each of you take about a minute, because i have less than five minutes, and describe your relationship with other agencies, federal, state and local and how that is going? i'm not asking you to be critical that i'm asking you to state the facts and how thorough we are in exchanging information and cooperative from top to bottom and side to side. mr. pistole, please. >> thank you, sir. for tsa since i started last july 1 of the first things i learned is that tsa can't be all things to all people all places at all times when it comes to -- and not fully eliminate the risk that we can do a lot of things in terms of navigating the risk for coba best way we do that is through our partnerships and whether that is the through grant funding or joint training, think agencies who have trained together also will issue resiliency because unfortunately i believe it is not a question of if but when we will be

attacked from the homeland so how do we prepare for that attack and how can we respond to it? information sharing is a key part of that and i was ready keep lions are brief there. >> thank you. >> mr. fugate. >> as a grandmaster at her we work with a lot of partners but i have to for your benefit and for the chairman's benefit, i cannot express how glad i am that john pistole took the position as the administrator of tsa. i think we have a much stronger relationship. of as a lawyer working with are locals it is important dhs speaks with one voice and i think john has been a strong partner in improving that relationship. i cannot give him enough credit. he was instrumental in helping us get the mou with tsa people to make sure we are serving our local states with one voice from dh is. >> thank you, sir. [inaudible] we have an excellent

relationship with tsa and fema. we also have a close relationship with federal law enforcement intelligence communities and we have over 120 detectives and other officers at the jttfi new york and also have offices officers here at lx one and other federal agencies and law enforcement and public enforcement agencies. we have a very good relationship with the mta, the metropolitan transportation authority and the port authority, amtrak, long island railroad, new jersey transit and a host of various meetings that coordinates rail transit safety and security issues and we also have very good relationships with local law enforcement offices in the region through various programs. we have outreach and liaison relationships including joint training operations with other law enforcement offer -- offices so offices on several so i would say overall we have excellent relationships with with both federal, state and local. >> i would echo the same sentiment. the amount of communication we

received in our location. we work very well with fema, with illinois emergency management agency as well. with the city of chicago is done well for the past number of years as we have what is called the office of emergency management and communications and it is a hope for federal agencies and state agencies and city agencies to communicate about any type of disaster preparedness for the city of chicago and its regions. ..

those meetings is invaluable. that said, we will celebrate this cummings of timber a 11th the gentleman at this table and the ladies and gentlemen in this audience provide support to my assistance specifically we are basically in the embryo stage of the transportation business. i meet many phone calls. i have a lot of people that point me in the right direction to the context created through the opportunities again are invaluable. without the support of these agencies are presented here today we would struggle.

>> ladies and trustees six >> i thank the gentleman and recognize the gentlelady from texas ms. jackson lee for ten minutes. >> thank you very much, mr. chairman, and for this hearing. i think the more frequently we address our responsibilities and oversight and security the more effective and important to our committee comes in light of the recent incident that showed how great american is, and i could not be in a homeland security hearing without expressing again my appreciation to all the national security teams including the united states military for historic efforts that resulted in the demise of the face of terrorism, osama bin laden. it doesn't diminish the responsibility of those at this

table for the general responsibility of your job in chicago and i believe san francisco and then the administrators here in washington we now have the responsibility to be ever ready for the potential of collateral damage. and so this hearing is enormously important for the grants focused on the infrastructure of transportation and how we are continuing our protection. let me also acknowledge my concern and sympathy for those in alabama, my colleague and chairman of the committee serve as ranking member of the committee impact and i know that we are forever vigilant on being able to help the people of the region that suffered the massive tornadoes. mr. fugate, i would appreciate your returning my phone calls on the issues i've just expressed

and i would look for just getting a meeting scheduled. i would also like as an aside an update on the response of the fires in texas, so if your staff can get with my staff i would appreciate it. i do not add my appreciation for the immediate work for fema that i perceived as this tragedy moving forward. let me ask quickly what is the role of fema and the transportation security grant very quickly because i want to speak to mr. pistole, please. >> yes, ma'am. the role is to minister the grant programs to provide the oversight and monitoring of the performance of the grants the subject matter expert is with the transportation security administration. >> let me say you've done that well and my next .1 to be a reflection how fema handled it. let me, mr. pistole, focus on

something i'm particularly concerned about. you are quoted that you are the jack of all trades, and if you believe that they are specialists enough would you call the experts, would you call the surface of specter sector do the experts and so what experts are they, what is their educational background and years of experience in terms of the people you how your because i think this is a part of the grant and what kind of training is provided for the surface inspectors, what is the duration of the training and how often is this type of training occurring? i would also ask why we don't her merge the whole process under tsa because fema certainly has a lot of other responsibilities. but the main issue was the training of the service

inspectors and what kind of individuals do you select? and how many hours do you believe they should be in training? >> the general construct is all of our surface inspectors go through a five week basic training. to basic training is to insure of we have a surge capacity meeting the area that whether it is cargo come aviation, whatever it may be they have the ability to assist of that. those who want to specialized training than continue with this one, two, three weeks schools without will continue the course of their career. in terms of the baseline qualifications, the class of 22 that i just met with ranged across-the-board most from the industry themselves so they have a good experience work so when

things are not working right what can be done to address and remedial those problems. i can get the exact statistics or figures on the demographics in terms of work experience and all those things, i was struck by by the wealth of experience they've brought to the table. it's been it's come to my extended legal attention is only one week surface on transportation, so i need you to explain that and how much training do you think they need to become experts? i think we have a training achilles' heels. >> the more training they can receive and the better on the job experience and training before coming are all critical factors, so we are looking to expand the training to specialize so one of research is

expected to have a broad base and it's a question of how much can we do while they are also been the critical function we asked them to do. >> mr. chairman -- >> of italy where question on the record in writing? mr. pistole, would you provide me with the staffing that are your closest advisers and the diversity and the numbers of years and months that they have been in tsa? i would like him biodiversity and as well male, female, etc.. and ethnic diversity. you're key advisers, please. >> the gentleman from pennsylvania and the chairman of the subcommittee on terrorism. >> i think you passed over one of the more important

requirements or qualifications as i used to take the subway to work and when i worked as a u.s. attorney in philadelphia is why it rashid tremendous challenges all of you are facing. we discussed the issue of funding and certainly always a battle and i also appreciate some of the important oversight responsibilities because there's nothing worse than sending money down the line that isn't all spent but if there's an issue with money that's still out there and by reporting to a gao report mr. fugate that discusses that in only 3% of the funding from to the some 52007 and the study found its way down the line. my understanding is that as of last year or early this year we're still looking at only 13% of the funding which is already been put in place and that's available in the line and being spent. where's the problem, what can we

do to fix it so the money that's been appropriated sitting there is well used? >> i think there's several pieces of the sea and the challenges, i served as a state administrative agency and whenever we got into a capital project what we were going to do construction, we not only had a great program of self we had our own state and local regulation to work through bids, construction and as it is first grants some of the project take multiple years to fund a and complete but we also recognize there's something we can do about the lack of drawdown and that is to bring visibility to the balance is that the states have that they are clear to bring and seek reimbursement for. oftentimes as we go through the local to state reimbursement process and getting the funds drawdown by showing those outstanding balances to many of the senior leadership is hard to move those dollars more rapidly. they are making their requests more timely and again - this is part of our challenges recognizing that unlike

operational costs such as killing units and other things to spend as much and seek reimbursement in that calendar year these construction projects have taken longer but we think that one of the steps is to show the remaining balances, and that is causing a lot of the senior leadership to recognize the urgency of getting the dollars not just obligated, this is what we ask the obligate the dollar's, but actually to draw them down as they compete to work rapidly so we can show that those funds have been received by the state and locals. >> is that where we are largely seeing these things focused on as construction projects right now as opposed to operational? >> the operational we see those coming much quicker began as these work up through the system we are looking for bottlenecks often times through the reimbursement process and we actually show the terminology drives me nuts but the term obligated means we've spent the

money against that grant but if you haven't drawn the dollar's down it still shows an outstanding balance so we are trying to move past just merely obligating isn't addressing the issue, we need to have those dollars that have been spent to be drawn down to reduce those outstanding balances. >> but we have to get the minute project doing something as for instance enhanced camera security. the essence is to get these protections on the line. let me ask a question maybe mr. pistole you can participate in the answer as well to the extent we are making these, how do we look to assure what funding is put is tied to the vulnerability assessments so these dollars that we get are being spent and the weight of the professionals believe are going to have the greatest impact on preventing some deals from carrying out an act of terrorism and transportation system. spearman we work with the intelligence community, law enforcement and industry to identify what we collectively see as the most vulnerable point

in the system. so, for example, whether it is between new jersey and new york it's something catastrophic happened to one of those, would be the impact largest to the loss of human life that the economic impact as a was described earlier? a thorough assessment is done, there is a ranking that is close hold, they don't publish that obviously but it is available so we look at that and say how can we use and invest those funds in the most prudent way to buy down the risk? so we can't just spread out money everywhere across the country. through my home town in indiana there's been all the years i've been doing this there has never been anything in the identifying that home town as a target so we try to look at those areas where there is the greatest risk and vulnerability and how can we apply that money in the court in fashion. >> when closing comment. i know in the aftermath of a

very wonderful evens that happened just the other day i know we are also quite aware of the potential for the repercussions in one of the first places we all look for the transit systems and i want to express my appreciation to those of you on the front lines. i know you're already beginning to work in a collaborative fashion to try to strengthen the utilization and resources we have dedicated to keep them safer at this sensitive time, so good luck to you. >> thank you. as the gentle lady from new york is recognized for five minutes. >> thank you very much mr. chairman and to the ranking member. let me also thank our panelists for bringing their expertise to bear on this very important hearing this morning. my question is to those of you who operate transit systems as has already been stated by a number of my colleagues in the wake of the demise of osama bin laden we must all prepare

ourselves for possible retaliatory even come and i want to use this opportunity to applaud all americans to remain vigilant and remember if they see something to say something. the mass transit system like other modes of transportation are often times targets of attacks. new york city has one of the largest subway systems in the world as well as one of the most complex and intricate networks. millions of people ride the systems every day. the plot to attack the new york city subway system in the september of 2009 and the metropolitan transportation authority has worked hard to keep the passengers safe as i know how or other transit systems have. my question is how would these cuts in the transit security and

transit security grant program potentially hurt your progress made in training workers, equipment upgrades and repairing the system? i personally believe we must support the maintenance of effort in terms of funding but at best we should consider a line-item funding from our federal budget that would keep ever nation's mass transit system and a forward leaning posture. i want to ask that of you and then if you could in the remaining time also address what your agencies are doing to exercise the evacuation plans? the public doesn't hear enough about that, and i know that having witnessed what took place on 9/11 this always mass hysteria so i'd like to tackle both those questions. >> thank you, mr. chairman.

>> congresswoman, certainly if there's a reduction in funding it will compromise to some extent the security of the transit system. there will have to be reductions in training, some of the deployments we use, and quite frankly it would be impossible to compensate the loss of the federal money from local revenue. i just think that's common sense tells you that. with respect to the evacuation plans, we have evacuation plans for each bureau. we also have i believe the office of emergency management has a working right now with federal dhs money a catastrophic study which involves the evacuation as well. the department will start and we will begin working on that as well.

so, from the new york city police department perspective, there is we think we have a sound evaluation plans in place. >> to answer that question the city of chicago as i mentioned earlier the office of emergency management communications is basically the centerpiece of not connecting any type of evaluation and the subway systems and across the city itself so they pulled together the chicago police department, for your department, federal agencies as well and we don't exercise basically evacuate in downtown areas completely in case of an emergency and that is something of the mayor has done aggressively in his tenure. the cta and our network has been used basically to commute and move everyone else if that is the case. in terms of those evaluations, those continue and are funded with the department of homeland securities of the would be a blow to us. a separate and apart from that, i would very much welcome a steady stream of ongoing funds

because the reality is again taking the camera as a topic as we've been discussing we have the continuance on the formal cameras and subway systems and throughout the entire network we would have to delay the process and it's not just a one time installation, technology changes. we have to continue maintaining and we have cameras that are analog the or fight-year-old technology with high-definition nec technology available now to install one camera in the place of five old ones so as technology continues to advance we have to continue making that investment, analytics which require much less fuel and monitoring of the camera, so as technology and the answer is it's an ongoing assessment, a line-item as you say would be very much welcome. >> congresswoman, again on the funding issue, the boats on the ground uniforms come people in my system that have received

training about her was awareness and recognition will serve them forever. that's a given. but what we will fail is the have the ability to enhance leaders of security and have a serious cost of them within our infrastructure? technology. am i property has a unique location. the second longest underwater in the world. the design process alone is a huge challenge. how does that translate into what we look at? 1989 earthquake we represent earthquake country in northern california to read our e evacuation plans are directly tied to the office of emergency services. and it's kind of a unique system when you look of the transportation agency its to first give the people but of the transportation location and control the chaos. we have witnessed it. we've been very lucky.

the lessons learned from those opportunities are to enhance those evacuation plans. we train on a regular basis most recently three weeks ago with all of our local first responders in northern california and specifically the city of oakland not just police and fire fighters but medical office emergency services, those drills go on a regular basis. i think that we are well prepared to train a fully funded resource as well. we need those funds to continue to provide lawyers of security, training. estimate your time is expired. the gentleman from illinois for five minutes. >> thank you mr. chairman and ranking member and all the guests who came to testify. mr. pistole, quick question to the tsa has more than doubled the size of its inspectors and its surface transportation security inspection program in the last few years. explain how tsa assesses how this increased number of

inspectors is actually improving security and what are the most needed? >> thank you, congressman. there's a number of areas i will highlight the most significant. one is in our certified cargo screening program so we use inspectors to go in and actually inspect 031160 companies to do screening of cargo and most on the passenger planes so as opposed to the tsa to do that all of ourselves we try to assure that cargo was being properly screened especially given effect last october that allows us we need to verify any since we need to inspect each of those to ensure they are doing it to our standards. i will note we have found several instances where some of that some of the screening was been falsified and so there are ongoing investigations and civil and criminal with individuals who have certified there during

the screening was and what doesn't been properly done. there are other areas but that is one of the biggest areas as we continue trying to promote the free flow of crips and commerce and people with best possible security. estimate to the guests operating in the transit system, quick question about training groups. what sort of training do your workers received when it comes to security matters and do we distinguish between ticket agents and mechanics and the various types of training they receive when it comes to secure the issues? if you could each touch upon that. >> the police department provides security through the police officers, so the training is primarily provided to police officers and they receive a range of training including how to utilize equipment, detection equipment to detect terrorists'

activities whiteaker how to respond. in the right type of training of the type, and much of the training is provided with transportation security grant money. >> mr. rogers? >> similar to what has been said we look to the chicago police department and those agencies to respond when there is an actual and she wore matter at hand when it comes to the customers and actual employees we have campaigns as the one mentioned to see something and say something for the customers, but the employees or customers maintenance and as you mentioned a variety of different job descriptions throughout the authority. we have seen the basic training on how would is to remain vigilant. we put notices out to the employees, systemwide all 10,000 of them notifying them they are to remain alert and insure we are assisting customers. so the campaign process is what

we used to notify everyone through a system but we also do mcginn do individualized training on the job description. >> to the point where if a ticket agent sees a suspicious looking package, is he or she trained in the procedures? >> absolutely. we have what is called the cultural center operations center. everything goes and flows through the information center there. through that we of individuals from the chicago department at sit and visit as well and the federal agencies of the communication gets spread out, but individuals are notified they are immediately to contact the control center and we began to work with experts to address the issue sending whatever teams need to be sent in to address the issue be it identified oftentimes things that occur more individuals that are basically sometimes tourists who love to take tons of pictures of

the systems. we are not big fans of individuals taking pictures of the systems, so they are trained to identify the tourists from iman tourist. >> mr. hartwig? >> recognizing information from the tsa specifically in 2007, we took advantage of the funding source that trained the front line employers and the system service workers. those people to interact with patrons on a daily basis, the police department recognized if we want true information the best people to receive to work in the system on a daily basis, operations from the training since, operations from the police sense often dynamically oppose each other. the relationship that we now have with our operations department is true partnership and rely on those employees. the distinction between a suspicious package and a mcdonald's bag or newspapers, there's a big difference, and our agents have learned what it

is. it's an ongoing yearly certification program and the police department provides updates, but again a source provided by tsa. >> thank you, mr. chairman. >> i recognize the gentleman from massachusetts for five minutes. >> thank you, mr. chair. first i would like to acknowledge the willingness of mr. pistole but fatta to help in the year for securing the perimeter and the tarmac issues and i'd like to acknowledge that. my question is more general and i think it would be directed at mr. pistole, and that is there is in discussions this morning of the increased threats relating to the event of the last few days and the killing of osama bin laden. but it was just a few weeks ago that the secretary of homeland security told us that at no time since 9/11, prior to the more

immediate even, no time since 9/11 has this country and in greater danger, and i wanted to ask you if that includes as well these increased threats, does that also include threats of mass transit, my concern is in light of what is going on in the rest of the world with increased bus, rail and other factors, so i wanted you to just address from your perspective in the mass transit is that consistent as well or is it greater even in terms of the secretary's remarks of the greater threats we are facing right now? >> thank you. i think we are in one of those periods of time where there are so many unknown variables that we are all trying to ensure we are vigilant as to those things that haven't come up on the intelligence or law enforcement community radar whether it is a lone wolf as was mentioned

earlier or somebody who may be either inspired by what happened in this past week to take action on their own without going into detail there are no specific threats to the mass rail transit right now in the u.s.. we are very mindful about what has happened in the world particularly since the madrid bombing so we see the ball early and what is happening in moscow and of course the other places already mentioned, so i think it is a relative trend or assessment is to are we more vulnerable now or less? the bottom line is we are concerned today just as we were yesterday and will be tomorrow that terrorists are trying to hurt and killed last in any means they can and recognizing transportation is one of the key

vulnerabilities that we know both the al qaeda, decorah al qaeda and bin laden and elsewhere. theaters and the arabian peninsula as we've seen in the cargo plots coming out with of the keynotes they're trying to affect mainly the livelihood and administrator fugate mentioned about the terrorist impact, but the economy we saw from the magazine $4,200 the cargo plots and get the billions that could impact the global supply chain. there's domestic base threat we would seem mass-transit targets would be easier for lack of a better word for domestic base threat than others. with that is a greater threat and that's been consistently told to us there's concern for

domestic based terrorism. is it a feeling of yours that you are a higher level target is a result of the domestic base threats. >> not just looking at those coming from overseas and maybe more or easier to identify but over 300 million people here on my experience of the fbi and investigations we have on people are wrong grown or facilitators, enablers, providing material support data up and going back with timothy mcveigh and the bombings in the south, the unabomber. we had people born and raised here that have caused harm and killed hundreds of people so that is of equal concern. >> i yield back the rest of my time. islamic thank you. the gentle lady from california is recognized for five minutes. >> thank you, mr. chairman and

to all the witnesses for spending your time with us today. last december the inspector general released a report on the jews of the recovery act funds by fema for the tsgp and i was late because it was discussing the same thing about recovery dollars. the report provided to charts one indicating the amount of the dispersed for the capital investment and the other owsley in the amount of jobs created directly correlating the fund allocation. some of the mass transit agencies that receive funds didn't reflect any job creation numbers while others the receive less were able to create jobs. can you explain how fema creates metrics through which allocates and can be measured to effectively mitigate threat and in the case of stimulating the economy by creating jobs? >> thank you for the question. this goes back to even further originally findings from the

general accounting office of inspector general we didn't have strong performance measures tied to the grant programs. in the case of transportation security grant program we are implementing it for 2011 petraeus we still have to go back on the recovery fund and try to get the information and show those connections and look at what was created. and i think that you've pointed out that there was not equal as we saw others. some agencies to create a lot of jobs in the present to the capitol improvements that maybe were not showing those jobs so we work to collect the information for you but we are working to build the tools into the 2011 grand cycle. >> mr. pistole, january 22nd, 2009 and spoke at the headquarters and stated the we want to put some focus on the surface transportation real and transit and the like and turn to the following area and in my follow-up question is what actions have you taken since that speech to focus resources

within the tsa for the programs to suffer the mass transit security? specifically in reverence to your speech what did you do differently? >> you said the speech was in 09? >> january 26, 2009. >> i started 2010, so it may have been a different context or something so i'm not quite sure what that statement was. that being said, what i've been focused on since i became administrator last july is ensuring we can leverage strategic partnership giving the funding that we have based on the tsgp and other pertinent is for training whether it is a number of different programs like to go into, different intelligence sharing mediums and mechanisms we have used but the key is the partnership between the industry, state and local how we can best leverage those limited frankly funds that we

have had in the most informed fashion that again reduces or mitigate the risk without trying to eliminate risk. >> and a little whisper in my ear tells me that was 2010. >> janaria 26, 2010. >> we can follow-up on your speech. administrator fugate and mr. pistole, the transit security administration has proposed changes to the transit security grant program guidance for 2011 which we have a detrimental impact on the transit authority and partnership has been developed since the program inception. i've been informed these changes are needed in order to be able to provide quantitative results in the tsgp by focusing on a majority of the funding on a 62 distinct assets meaning bridges, tunnels, stations, etc.. this could potentially limit the flexibility. i have a two-part question which essentially is can you discuss

how you develop the list of the 62 assets and number two, do you see the changes, however i rephrase it? do you think it fails to recognize the nature of the risk associated on the transit system and failed to acknowledge that transit is a system of systems and for you mr. pistole i would like to know were you involved in mr. fugate's as the changes were proposed? >> thank you. a multi part question and let me address looking at those critical infrastructures that the intelligence will enforcement community with the industry that we assess is most vulnerable so it gets back to the issue how to best investor. dollars with state and local dollars to buy down the risk and if there is a critical infrastructure how can we best leverage our assets with state and local in terms of what

you're doing with it is on that particular target or through additional k-9 or patrol officers and things like that so those are all part of that. the mof to that the administrator mentioned earlier and to the next level and they make informed judgments about where we can best invest the money to the congress provides to us. are you working with him directly on that? >> yes. yes, congressman. their relationship with tsa identify, prioritize what the threat is based upon the interaction that the administrator talked about responsible for that and ensuring we have the administration but also building as you point out the metrics on how we measure the performance. and again, we understand as these decisions are being made our ability to communicate and implement that as we go in cycles are key to that success but it means working with tsa as an expert on what is and how to

prioritize that as experts to conform that threat. >> thank you. i yield back the balance of my time. >> thank you for your service and to members of the committee and we ask you to respond to them in writing and leave the record open for ten days. without objection the committee stands adjourned. >> [inaudible conversations]

in a few moments treasury secretary tim

now treasury secretary tim geithner on the u.s. and global economic outlook. he was at the annual meeting of the investment company institute and association representing the financial industry.

this is a little less than an hour. [applause] good afternoon to you all and welcome to this general membership meeting. let me thank greg johnson and ed fervor for the messages delivered the outset of the conference and for the leadership. once again this year we are pleased to start the meeting with a policy for, and i really can't think of a bitter guest to help us grasp policy challenges we face as investors as an industry and as a nation. timothy geithner was born as the secretary of treasury in the first week of the obama administration. even before his appointment he was deeply involved in critical

economic issues as the president of the federal reserve bank of new york where he had a leading role in investing the financial crisis. mr. secretary, i think if you have had so historic and consequential tenure the federal treasury as you. you might wish it had been less historic and consequential sometimes. but you have spent most of your career in public service. a graduate of dartmouth and the john hopkins school that fans international studies. you began your government were to the treasury in 1988 and worked through three administrations. you also served at the international monetary fund is the director of policy development and review and psychiatry geithner has a distinctly international background as well - studied japanese and chinese and having lived in east africa, india, thailand, china and japan. so it is an honor and pleasure indeed to have you with us. one of the things that i had

done before this session is invite members of the board to submit questions. the one thing they would like to ask the treasury secretary. some of what follows will reflect their concerns and their thinking but i'm sure this first question is on literally everyone's mind and that is the economy. in the first seven quarters of the recovery, growth averaged about 2.8% annually. but i'm sure that the unemployment rate remains far too high at 8.8%. how does the administration choose between the stimulus policy to generate a stronger recovery and job growth on the one hand and the need to address unacceptably high annual deficits on the other? >> that's an excellent question, a good place to start. let me thank you all for giving me the chance to come to talk to this group about the challenges we face going forward. of course i had my year what to do and want to particularly say that it's nice to be you've mary podesta who i've known a long period of time and i admire

greatly. >> if you step back for a second i think the three big economic financial challenges facing the country are how to make sure we are growing. we are growing as readily as we can largest in the near term to get people back to work quickly but to make sure we have better fundamentals for stronger growth in the future. and that is enormously important, probably still dominates every of your concern and objective facing the country. we also of course have this very complicated question of repairing, restructuring and reforming the system which we are making progress on and have challenges ahead and of course we have to take the steps to bring our fiscal balance fiscal deficits back towards balance taha could very important and we are now at the point where we

think it's the right time and the necessary time to try to build a bipartisan consensus on fiscal reform that will again get our debt on a path where it's falling as a share of the it's important we do that because confidence in recovery over time or the ability to invest in things important in future economic growth like education or innovation or infrastructure, the capacity to meet the commitment and what is a very dangerous world of the ability to make sure we can meet the obligations we have met. we need to the seniors disabled to the poor to be able to do things, we have to be able to demonstrate we can live within our means to provide the room for protecting which we should protect for investing all we can. and that isn't something we can just delay and put off because we are living with a very high deficits which are the consequence of the crisis but

also a bunch of choices made in the preceding decades, and it's very important we take this opportunity right now to try to lock in some reforms in the fiscal side of the restored balance going forward. and if we do that we will have more flexibility and ability to do as much as we can in the near term to strengthen things that will matter for how we grow in the future. >> or industry manages about $6 trillion in fixed-income securities on behalf of 70 million investors. and for many of these investors the rate of inflation is the key variable. immediately after the financial crisis many people fear deflationary. more recently as you know, we have seen higher prices for energy and food, rising commodity prices and increased headline measures of consumer inflation. all of those stifel omans plus

the stimulus and monetary policy prompted concerns about inflation. how do you weigh the upside and downside risks to the general level of prices on the economy? >> also excellent question and i want to be carefully answer this because we have a tradition in the united states which the secretary treasury and presidents don't talk about the monetary policy to protect the independence of the bank and the fed's job they will achieve this as they have. their job is to make sure they preserve confidence that inflation will be low, the prices stable over time. i think if you look at the world today, and in different places you have emerging economies like china, india, brazil, korea, turkey and many others and growing rapidly and the early stages when to be very long run

of growth and require a lot of resources and they are seen a pretty material rate of acceleration and they are going to have to tighten policy concede that tightening policies to mitigate the risks and to do that to continue. we see parts growing very slowly. very different from their rates of inflation. we're sort of in the middle. we are growing more rapidly than japan and many parts of europe and we are a much more dynamic resilient economy and in a position to prove you're seeing in china and asia but because as you begin as you said the beginning we still have very high unemployment, at the moment, the increase in gas prices you're seeing, they are putting a lot of pressure on working families of the united states but it's not translate

into higher overall rates of inflation or a rise in inflation expectations and that is because the economy still is digging out of its deep hole crossed by the recession. and the balance of risk across the united states and focus of policy i think is still going to be and should be on how to make sure we have in place a sustainable expansion and for that to be voluble the fed has to do its job on inflation, which it will, and the congress and the executive branch be to make sure they put in place a framework that restores balance to the fiscal position. >> let's turn to that subject. when i asked our board to suggest questions for the discussion nearly every member the level of annual spending and deficits, debt, and i'm sure that doesn't surprise you. president obama recently laid

out a framework to reduce the deficit over the next 12 years. can you tell how that addresses the challenges that we face? >> absolutely. let me say again this is an important dillinger of the fiscal position unsustainable. not just over the next five to ten years of course but in the decades beyond as more americans retire because americans are living longer because it's more expensive to live longer the costs of health care and retirement security rise substantially in the out years so we have an unsustainable fiscal position and it's very important we start to put in place reforms dow will bring more balance to the commitment and resources. >> with the president proposed to get bounced approach. we propose specific targets for savings across all the functions of government for medicare to

medicaid to other programs of support like why won't detail them but also defense and parts of the government that we call discretionary nondefense. what we propose is a level of savings across all of those basic functions of the government and we work with congress on a comprehensive tax reform plan that will help contribute to this burden of bringing down deficits over time. that framework is very close in the basic concept to what alan simpson proposed at the end of last year. it's similar to the free-market discussed by the bipartisan center is now. all of them share this common feature which is the recognition that to do this in a way that is sensible it doesn't damage the future growth that is judged fair to people. you need to take a comprehensive

mix to the comments of savings and revenues, and people have a different approach to what's balanced but in the president's proposal, it's roughly $3 of spending cuts for every dollar of revenue through tax reform. two of those dollars in spending cuts or spending cuts of all the reduced interest payments over deficits but that's the balance we need and it's important to recognize the hard thing is not deciding how much debt direction you have to do or how low to get the deficit because if you look with the house republicans passed or their present and proposed everybody is recognized the certain magnitude you have to do to restore the sustainability. the challenge is how to do it in a way that doesn't weaken the capacity to grow or doesn't jeopardize the secretary of the security or access to health

care for people who need it in a better incentives and things like that. these are important to protect. it's not a challenge of math or accounting is in designing a strategy that has the right composition with the right balance of spending and saving and tax reform and don't hurt future growth prospects. >> the president's plan is very welcome indeed but when you look at the budget reductions in spending ranging between 22 to 24% of gross domestic product well above the historic average which is 20% and its historical less than 18% of gdp that is a huge between the two and as you know they're remains the concern we as a nation find that the local will to bridge the gulf and its notable the standard issued its warning about

america's inability to address the problems after both the president and republicans and address how they approach the problems. here's my question. a key participant in the process date today for evin minute jimenez -- even minute to minute what would you have for the 90 million people invested in funds to assure them the political system can get the problem under control for their sifry to -- before there's a train wreck? >> he wanted see what people do and not just what they say. the test of leadership and politics is whether you can successfully build a coalition large enough to build a legislative reform and restore the sustainability in a way that doesn't undermine the capacity to grow in the future and that is the basic challenge, and i think if you listen carefully between the rhetoric and this is a very hard place to read from a

distance is a complicated place and we are in a moment the country is deeply divided on lots of things in the rule of government and that makes it more important particularly given the damage and the confidence caused by the crisis that makes it more important that our elected leaders recognize to begin this process of restoring and again if you listen carefully to what the republican leadership said to the president put out to with the various and bipartisan commission had to look at our suggesting you can take more confidence in what you agree on. but me just give you an example. everyone is talking of roughly $4 trillion in deficit reduction in the next decade or the present proposal to take longer, 12 years to achieve that.

everyone is saying that the minimum test of credibility is to get the deficit down to the level where the debt burden is falling as a share of the of the economy. it is the right objective. if you look at the proposal out there on spending for example for large parts of the government what he's proposing is close again to with the commissioner suggested so it's to try to block the reforms in with a set off a clear and explicit targets to a month president to use it as a debt feel the state within an enforcement mechanism and the framework of constraint and agreement on spending savings were we've identified that. we'd like to lock in the tax reform that contribute to the challenge and raise other things to recognize is we can't let the

deep division between the parties on exactly what to do on taxes or how to make sure the medicare and medicaid are sustainable because we are going to disagree on those. we can't let them stand in the way of beginning this process of restoring the balance to the fiscal position and we don't need to because again, when you want to do for the confidence and credibility is to take off the table the risks of the disagreements on things like the sheep of the tax reform will force us to live with unsustainable deficits that's not a responsible path. you have to take off the table and one of the printable virtues of the strategy to put in place with a set of caps on deficits that force them down over time and hold them there with specific spending reforms and tax opponents if we can do them is that you lock the political leadership into something that

will demonstrate more confidence investors and the american people we're going to live within our means again. .. >> at think they have changed the debate fundamentally and again if you listen carefully beneath all the political rhetoric, and there will be a lot from here to eternity, you

are seeing the president of the united states, the house republican leaders to pass the budget embracing the imperative of starting this process now and locking into a set of targets of fail-safe spending cap with an enforcement her as much as we can. >> one of the things that alan simpson has been saying is that you have to slaughter of the sacred cows. in the mutual-fund industry manager -- >> his talents. rhetoric is not my thing. >> he says he is the color. >> we manage roughly four and a half trillion dollars of assets in individual retirement accounts and defined contribution employer plans, about half of the assets that are invested in that area. making sure that these retirement plans are successful

is hugely important to our nation, obviously. one key factor in that context is that tax incentives that are provided for contributions and earnings. lately, as you indicated, we have heard as tax reform proposals are discussed targets will include tax incentives or what some in washington with called tax expenditures. these incentives that we have for retirement saving are, of course, just one in a long list of such tax provisions. if you were to rent various tax expenditures how much priority would you place on preserving tax incentives for retirement savings? >> well, excellent question. you're right. a lot of things in the tax code that we call spending or special tax incentives or expenditures are things that are very

important to how we grow in the future, incentives for capital formation. it's why i like to emphasize all the time this thing about physical -- fiscal discipline and responsibility is not fundamentally about accounting with the math but designing a strategy that preserves incentives for future growth. we all know that one of the things that determines how well economies function over time and again how attractive it is to come and invest in the country, though the business, expand a business. in need to be a will to the finance investment savings. as we look at this we have not begun to explore what exact mix of provisions we can ultimately support. as we do, we want to keep reminding people that you have to focus on incentives for savings and for capital investment. this was a crisis because in carson because the world finance

, i huge increase in borrowing, through borrowing, a huge expansion investment in things that did not have a very high return. for economists to function while you have to make sure the financial system of the united states will do a better job of allocating that savings of americans which you would like to be higher. investments and the biggest return. you guys are at the center of this basic judgments. i agree the emphasis he puts on the fact that, ultimately for us command we are making a lot of progress in this direction. he will have to make sure that the basic shape of the american economy has a better balance of savings by individuals. if elected where we have come before the crisis we had negative personal savings. now there are between five and 6% which is pretty good, pretty

good improvement, predicted change. we would obviously like to build on that. >> let me shift basis here for just a second. i first got to know you and you get to know us back in the clinton administration when you spearheaded treasury's successful effort to persuade japan to open its asset management market to u.s. firms. that was one of the first of many trade agreements that have been able. many of the firms to develop a global business. that me thank you on behalf of our industry for your on those issues. let me ask hal if all of that -- has the trade agenda for treasury changed over that time? are you more focused now on currency reform in dismantling subsidies? >> rudd, i said a bit of this yesterday. the chinese are coming next week for another round of broader strategic and economic dialogue.

in the context of china as a set yesterday what we are trying to do is encourage china to let the exchange rate move in response to market forces more rapidly, open up more opportunities to american producers, goods and servicers, and to make more progress on the next page of their financial reform. on the financial side that means opening up the market for financial services, financial products that, let more competition end, have more depth in their corporate bond and equity markets and raise the return to savers so that enterprises are not living with the low cost of capital that gives them an advantage over global competitors. so in general we tried to look at the broad set of reforms that are necessary to advance our overall economic interest.

our interest as a country is making sure we will be able to execute more than american firms in a larger share of the growing demand for products in those markets. the financial system as a whole is working in favor of that objective, not against it. i would emphasize that our big challenge is trying to make sure that the u.s. financial system emerges stronger in not weaker. i think we have a very good chance of coming out in a much stronger position already because we are so aggressive in how we respond to the financial crisis. if you look at the court, much more equity, much higher quality equity, much stronger position than it was before the crisis. we really tried to of, how should i say, watch out, but out of their misery the weakest parts of the system so that what is left is much stronger. it's very important to the functioning of the u.s. economy

to businesses across the country that we have a system that can do a better job of financing future growth, allocating investment, and i think we have a very good chance because we are so aggressive so early and so far ahead of the reform and putting the financial system in a preeminent position. that is a necessary condition for making sure u.s. institutions can be a big part of the financial growth and deepening in the most populous parts of the world. china, india, brazil, except truck. you need a strong foundation and domestic financial system if we will benefit. you can be good at negotiating trade agreements like that, but if u.s. firms are strong enough to take advantage they don't do enough for you. again, our focus will be to try to make sure we get this economy moving again, make it much stronger in the future and have a financial system that will once again be the model for not just innovation efficiency, but

more resilience and stability. >> you know, the price -- the crisis that we have been through have led some to question a lot of fundamental assumptions. i know better than to ask you about the dollar because, like any good treasury secretary you will have an answer to that question and stick with it. let me ask you a different one. china, brazil, russia, other countries are increasingly talking about developing an alternative to the dollar as a global reserve currency. how serious do you feel that talk is over the next decade? what are the prospects of, i don't know, the euro or some other currency assuming the status equal to the dollar? what would that mean for our country? >> i don't think there is any realistic prospect of a really dramatic or substantial change in the global monetary system in

the next decade or two. i think that over the longer-term as these economies get stronger if they really open up the financial systems as currencies are flexible, as they dismantle controls on capital movements, integrate more fully, then it's possible that you will see more significant shift, but not until you see those changes happen. we are at the very early stages, let's take china for example. very early stage. so i don't think that's going to come very rapidly. i think the important thing for people to understand about this is that ultimately what matters most is our capacity to aaron the confidence in the world that this is a good place to invest your resources. the balance of safety, liquidity, and return will be higher here than in many of the alternative places you could put your money which requires, again, particularly because of the damage to confidence caused by this crisis that we worked

very hard, do a better job of turning that confidence, rebuilding where we need to which is about growth fundamental for, the basic integrity and strength of your financial system and fundamentally getting ahead of the fiscal problems. if we do as we have always done in the past, if we are able to get this political system in washington to do a better job of delivering policy in those areas then we will be able to continue to earn the confidence that you see reflected in u.s. financial markets today. >> let me talk a little bit about dog-franc on some many people's minds. you are the founding chairman of the financial stability oversight council. >> alas. >> one more opportunity to excel, i think. [laughter] one important question facing you --

>> like a room of lights. if you will be given responsibility, you want to be given authority. the way many committees work -- and should not say this. keep going. [laughter] >> one important question you are facing now is how this councils should use its power to designate non-bank firms as systemically important financial institutions or washington's favorite parlor game, speculating. fdic chair she liber recently said that this designation should be used very broadly to ensure that any institution posing systemic risk is covered. by contrast federal reserve officials including governor daniel said that designations should be used nearly. just so you know where we stand, ici believes the public debate

has overemphasize the designation process. there are many products and services in which they might identify risks that can be dealt with by primary regulators through normal regulatory processes and would offer money market funds as an example. i know this is an ongoing rulemaking which limits your ability to reply, but can you share any thoughts at all with us about how and when designations should be used with a broadly or narrowly? >> did question, and in some ways it's the central choice of the heart of financial reform. again, how do we get to this mess? i think the central vulnerability that was revealed by this prices -- crisis was that we ran a system where we applied a set of quite imperfect constraints on leverage, finding on banks. we left a large parallel system

with a great diversity of other types of institutions that we are essentially engaged in the business of banking without any meaningful restraints. the reason why our crisis was so severe is because we had this parallel financial system. there were essentially banks. i do not mean investment managers, i mean banks. very leveraged with a huge amount of funding risk. when liquidity been turned that system came crashing down, put overwhelming pressure on the rest of the financial system. and so the central imperative in financial reform is to make sure we have the authority, not just to get the shock absorbers in the system better absorbing future risk, more conservative, but to make sure we apply those to institutions that are engaged

in fundamentally similar activities. i don't think the broad, narrow debate captures the choice we are trying to make. the choice we want to make is just to go back to this diagnosis, we want to make sure that where you have institutions that played the same kind of critical role in the financial system, exposed to this same risk of finding liquidity that our leverage, they play a critical role in the payment system. the failure or risk of failure would be substantial due to the collateral damage, we want to make sure those institutions are subject to reasonable constraints on leveraged. that is really important. if you don't do that we will recreate again the basic owner ability that was the heart of the system, and we are not prepared to do that. the debate should not be about broad versus narrow but making sure that where institutions

convey and have that same unique in the inherent risk that comes with, you know, what you call bank maturity transformation, borrowing short so that you can invest longer-term on a size that matters with a connection to the payments system and funding market so critical, you want to make sure those institutions are subject to reasonably designed constraint on leverage. we have already by virtue of the two things that happened in the last two years substantially expanded the scope of those constraints. as you know, what we used to call the investment bank's we will now regulate for leverage as banks. that means that we have already taken in some ways the most important step to make sure that we can limit the future system a vulnerability to the system. so, we are going to try to provide as much clarity to the

framework as possible as quickly as we can and move ahead to go through this as an early as we can. but realistically and tell we define precisely and explain the institutions we need to have these constraints on leverage, you are going to be still somewhat uncertain. i would not cast this as brown versus narrow. it should be cast as how you make sure that where institutions need, where the system needs, the economy needs limits on leverage and risk that we have the chance to apply them to be read your right to say that there are lots of different things you have to do along side this to protect the system. you don't one of the burden of stability or systemic risk to apply in this one because there is a whole range of other things that we're doing to make the system a little safer. we will try to take that integrated approach.

>> what i hear you saying is it is not a big bang, but an ongoing process which you have to look at this as not something that you can lock in and never change because the markets will adapt. one way you will adapt is if you set the framework here you will see people just at the edge of that framework, institutions designed to take advantage of those constraints. you need the capacity. just to use an example, we had a system where you could be a bank one day and then decide you're going to flip and be a thrift because the regulation was later and the constraints leveraged were weaker. so, a bunch of risk migrated to that weaker system of regulation. not a responsible way to run a financial system. we have to have the capacity to make sure that for institutions that have this unique risk it is fundamentally what you might

call a bank by any definition that we are able to apply those kind of limitations on leverage. that is something very important to the basic integrity of the financial system. now, as i give you a long, complicated answer designed not to answer your question in detail. >> i did notice that. >> i want you to understand what is guiding this reform and with the vulnerability we are trying to address. >> thank you. i would like to follow that up with a question about money market fund. as you know, i see i members manage 650 money market funds with assets currently totaling about almost $3 trillion. these funds hold almost 40 percent of the austin in commercial paper, one-third of outstanding repose, 10 percent of short-term treasury debt. obviously the financial events

in the fall of 2008 exposed weaknesses in the money markets generally, certainly vulnerabilities in money-market funds and particularly prime money market fund. as a result, our industry recommended very specific ways to try to address those. the sec acted fairly promptly to tighten its rules. we have continued to work hard on ways to make these bonds even more resilient in the worst market circumstances. our focus has been on steps that would address the remaining risks of preserving the characteristics that make money market funds so important and valuable to the economy and investors. obviously, making these bonds stronger raises a very difficult set a policy challenges. after all the experience and the input we continue to be puzzled that the voices out there seem to be advocating ideas that would frankly and money-market funds as we know them. for example, requiring them to

the banks. how can we preserve the benefits that money-market funds bring to investors in the economy while improving the management of the risks in the very worst market condition. >> said the key said that very right, very well, and your friend the joyce while. all i can say is that i think mary schapiro and her colleagues are doing a very careful and thoughtful job about how to figure out how to bring a little bit more resilience in to that system without depriving the economy of the broader benefits that death provide. it is hard. your right to say that, you know, you -- it is okay to have a concern about something. it is one thing to have an objective to make it better, but until you can look at this is the -- specific consequences, you cannot be confident.

again, you know, across all these days, these are complicated things to do. we want to get them right. we want to bring clarity as quickly as we can to dispel uncertainty as we shape rules to mall but we are not going to rush agreement where we are not confident that we have a good balance. one strength of of our system is we run a pretty transparent process. relay up proposals, let people comments, and that reflects the recognition. we are better making sure that people who make policy understand that a very specific level what the impact on markets will be so that you can reduce the risk. again, you get the run balance of benefits versus consequences. she is working through this, doing a pretty good job of listening carefully to people in the market, but also to our colleagues in the council.

i can't remember the time frame. we will do it as soon as we have funding. >> certainly we commend the sec work on this. i want you to know that your own team at the treasury department has been excellent in terms of our opportunity to brief them and express our points of view with them as well. >> again, we are not going to make everybody happy, but we try to make sure we listen carefully thanks for what you said. a very talented people. a lot of people with a lot of advice on how to do these things. they're trying to figure out what the best thing for the country is. >> i could extend that to your former colleagues at the fed as well. >> no doubt. >> one of the things that the president's working group report raised, in this contract -- context or concerns. if you applied the wrong concerns it could drive

investors out of sec regulated vehicles in into products and funds that face far less regulation. some of those might be funds that are even beyond the reach of u.s. regulators. we certainly share those concerns proposals that would bar regulated u.s. money-market funds from using this table $1 asset value per share. that would impose banking regulations. how concerned are you that changes in this area would divert flows into this less regulated environment. how does that concern or shape you're thinking? >> i think if you step back for a second on that specific idea, there are two really difficult challenges you face. one is that the risk moves again to institutions that we may not know exist today that can get around the particular constraint. they moved outside the netting states.

both those risks are problematic. some people think it does not matter. they think that if it is risky, why should it be here? but i think that is a very short-sighted approach. in many ways this crisis was a global financial crisis, much more severe frost because before the crisis is all lot of risk move outside the united states to institutions where the regulatory departments were more permissive or there were bigger gaps in the system, and that is partly why you saw the crisis spread contagion so acute. the global dimension of the crisis so severe to be very important to us that we set these new checks and balances in no way that does not, you know, shifted risks somewhere else requires that, again, if you think about how you get capital requirements right, similar problems elsewhere. you want to get them conservative enough that our banking system can absorb the

shock like the one we just went through without having to go to the congress or treasury or fad for assistance. that is a reasonable standard to try to achieve. you don't need to go beyond that. if you go beyond that in you magnify the risk that the stuff moves to other institutions are outside the united states. that will leave us not better off as a country in that context. but we are trying to do is bring to all of these choices about regulation the balance that leaves us safer, starter, and more resilient as a system because, again, the failures of this crisis or incredibly damaging in the collateral damage caused by institutions, prudence institutions. you want to get that balance right, but not at the expense of what would ultimately be a weaker system are much less innovative and efficient system. >> you know, it is hard to the think about this, but as you

know, in 2006 at least before august of 2007 the burning question in financial regulation was how to ensure that the u.s. retained its preeminent role as a global financial center. obviously the financial crisis supplanted those concerns. as we look developments like the potential merger of the new york stock exchange let me ask you three questions. you touched on this earlier. in this area, first, how important is it for america to retain a leading role in financial innovation? second, as recent legislation and legislation strengthened or weakened opposition in that regard? if we are losing ground what needs to be done to retain or regain our? >> very important that the u.s. establishes -- reestablish is, rebuilds the strongest financial

system in the world. very important for our economy. it for the world. we are not going to do that without making sure we fixed what was broken and have a tougher, smarter, more modern, less antic which it, but to designed set of checks and balances on rest. again, the strength of our system was we had the highest industry disclosure, best enforcement deterrence against fraud, abuse, manipulation, and a better balance between stability and resilience, get shock absorbers, and requirements for the type of innovation and efficiency that we need to be confident that savings are going to go where they can be used best. we have that balance, lost it because a bunch of decisions made in washington and across the finance committee over a long time, we have to regain that.

we are not going to be, we are not going to have a strong yen system unless we get that balance better going forward. if we do it poorly, if we overdo it, if we are not careful and smart we will lose it to. it is very important that we put our financial system in a position where we can be a big part of the future growth of the american economy and a big part of that growth is going to come from making sure that we can play and participate in the parts of the world that are growing most rapidly. just remember these basic facts. you live in this world. we are about one-fifth of global gdp, 1/5. by percent of the world's population. the growth is going to be strongest in the emerging market economies, and a lot of the hope in you as future growth rests on demonstrating that we can have a

strong foundation to participate rapidly which requires making sure we have a stronger financial system. i am very confident that we will come out of the stronger because we were much more aggressive, much earlier in recapitalizing our system, restructuring and in laying out a basic set of reforms. a better balance of oversight checks and balances. we have to deliver reforms that meet the basic challenge, but we are in a deposition because we move aggressively. i think it is worth noting again the basic lesson for the financial crises, a bit like the overall cost of the direct financial intervention is that we undertook, we shaped and designed all across from federal reserve to fannie and freddie. we are going to deliver an exceptionally positive result for the american taxpayer and the american financial system.

way better, hundreds and hundreds of billion dollars better than anybody expected in part because we decided on the strategy that would force a lot of restructuring early and try to maximize the chance that we cripple private capital in quickly to recapitalize the financial system. because we are so aggressive return things much earlier than many other countries. much of the world is years behind us in that context. by moving quickly to set the strategy for financial reform globally we have a much better chance of making sure the terms come out in ways that are going to be good for us, good for our institutions and good for our systems and play to our strengths. ..

so we put the debt on a balanced path of the economy. that's something we can do, that's the challenge of the united states. we've got to do it carefully. but we can't put that off. >> you've been very generous with your time so let me just ask one final question. you've had a pretty extraordinary career becoming a member of the senior cabinet while you were still in your 40's. >> karina's but i'm not interviewing him. [laughter] i would be happy to do that. [laughter] >> when you were in school, you obviously have a strong sense of the future concentrating on the

east asian studies which are somewhat of a focus force today. you're also the father of two children who will soon be going out into the workplace. what advice would you give to young adults, their young people today about a equipping themselves to deal with the future other than investing in natural fund. [laughter] >> i may be would give you this great gift as a child which is i left around the world and had a great chance to get a feel for the rest of the world and look at the united states through the eyes of the country and that it led me to want to work for my country, to help to make sure i can contribute making sure we can do a better job the government have to do and it is a remarkably rewarding experience and i won't try to

shape -- amount try to affect what they make but i think the country would be stronger if we can be successful in attracting people to come spend part of their lives in public service because again the economic challenges we face as a country depend a lot on getting better understanding of economics and finance and better policy from the government and that depends on getting politicians ready to meet tougher choices but also the also people in these jobs to our talented and willing to come again and give part of their life, you don't need to spend your entire life doing it but it's good for the country to get people to bring this and i hope -- i guess i would say learning about the world, make sure you try to understand the basics of economics and finance because it's critical to everything, and at some point come work for your country some time because it's an incredibly rewarding thing to do and part of getting better

choices of the government and depends on getting people to come to these jobs. >> think you mr. secretary for the challenge the you've brought to the service of the country. thank you very much. [applause] [applause]

mali discussion on education policy with indiana governor mitch daniels, the indiana legislature recently approved his education plans including bills supporting future merit pay, collective bargaining restrictions, school vouchers and expansion of charter schools. governor daniels is considering a 2012 presidential run and says he will announce his plans soon. the american enterprise institute holds to the coasts this 50 minute event. >> good afternoon, ladies and gentlemen. i'd like to get started. i'm president of the american enterprise institute and i'm delighted to welcome you to this address by governor mitch daniels of indiana entitled creating first-rate education. one of the most important things great leaders do is remind us of important issues in the midst of every day year urgency.

in the midst of today's political chaos about fiscal issues, about the budget, if we stop and ask ourselves what are the most important public policy issues that we think about in our private lives and come they are not always revolving directly around the federal budget. they are related to them to be sure, but i can tell you in my own home the most important public policy issue we discussed the today's education. the reason is i have a house full of little kids. my wife and i are talking about education constantly, about what's going wrong with education. and mostly help my children are not performing in the way that we would like them to in the education system. while governor mitch daniels indiana has wrestled with fiscal issues during the recession and turned his state into a physical wixom clark, a hero to the citizens of his state, he's never forgotten the importance

of education and that's what what he's here to discuss today. mcdaniel says a longtime friend of the e - and shares our philosophies that are truly prosperous nation have to be centered on the cultural freedom, opportunity and entrepreneurship. he's put his politics where his mouth is for the benefit of indiana and the future perhaps for the nation as well. mitch has many admirers and fans starting with me. governor daniels. [applause] >> arthur, many thanks, friends of aei. first thing you'll need to know is you are here under false pretenses. i just came for a meal. literally. [laughter] i had an invitation for this evening which i decided to

accept as always to get out the file of standing up to opportunities and try to spend a productive day and calvin coolidge once said a man has got to eat somewhere. so i came to aei. we said yes and 24 hours later, some i don't know, pajama boulder turned it into a major policy address. [laughter] so maybe that is where you will get. we will see. [laughter] i don't come to town the often. it took me a moment to realize when i saw all the flags at half staff and then it hit me, hubert schlafly -- the teleprompter died last week and by the president obama is grief-stricken at the news. [laughter]

when i innocently said that on what -- has always do, love to drop by a e.r.a. and i always learn more than anybody in the audience and probably will today, someone quickly followed up and said so what are you going to talk about? this was, i don't know, a couple months ago. i don't know. i said best guess the education because that day will be just three days after the close of the indiana general assembly, in which profound changes we have proposed we thought profound changes in k-12 education in our state, and i knew that i would be here either to report on our failure or a breakthrough. the life of either one -- it was as timely as anything i could think of a moment. as it happened there were some breakthroughs at least by our likes and i'm going to share them with you.

and i'd be glad to take your questions on that or any other topic for that matter. the oldest education joke on anno has to do with the mother who yells out one morning "billy, get up for school." i don't want to get up, get up it's time for school. third try, no answer. finally, billy yells give me two good reasons. the mother says it's monday morning, the first day of a new semester and you're the principal. [laughter] and the reason that came to mind is, and i will illustrate this i hope before we are done, those who try to make changes in this particular area of american public policy and public life we do have to be prepared for some mornings you would not rather get help and would rather go to

school, figuratively speaking. it can be a difficult process, but i want to tell you after years of working on it and making only partial progress that many of us in indiana are very uplifted this week. we believe we have done some things that make a profound difference in the lives of children in our state, will make a significant difference in the economic prospects of our state if we can implement them well. and i would like, with your permission, just to do with lazy and in due and show you a slide show in lieu of that major address somebody misled into expecting. let me see if i can -- maybe i should summon some help to do this. can i do this? >> is it idiot proof? [laughter]

>> those things we've just done, they travel in four separate pieces of legislation, each of which i think might fairly to have been considered a landmark, but they organize themselves more lesson to three buckets, teacher quality, freedom to lead, described here as an administrative flexibility responsibility and options for families and options for children. teacher quality, the experts of aei and other places have taught me over the years to not merely be the leading variable and educational outcomes, it is the dominant variable. some have quantified as 20 times as important as what ever is in the second place, things like class size and so forth are trivial by comparison to this. and so we worked on this and azo

were sort of first goal. in indiana and until now, 99% of our teachers are rated if they are rated at all, many of them haven't had an annual review or any review in a long time. if they are rated 99% were rated the effective. this is interesting because only one-third of the students can pass the national standard exams. from now one there will be annual teacher evaluation, at least a significant portion of it will be based on whether the children learned, did the children grow. what we will measure and ask every district to measure is improvement. the teacher we seek to honor, protect and reword the most isakson ackley the teacher who takes the toughest class with kids from the most affordable homes, the homes where education hasn't been a focus and catches

them up. hiring promotion, salary, everything will be based on performance and not seniority or paper credentials. no parent must accept the assignment of their child to an ineffective teacher the second year in a row without the option of moving them. we will publish teacher evaluation by schools. this last one may interest you. we moved there were state assessment tests from this ball to the couple to the spring. will be given at the end of the school year, not the beginning of the next. you're asking yourself why would anybody send a child to school for a year, take the summer off and then take the test? i was baffled by this, too until it, the scales fell from my eyes when someone informed me it's because now under the system they moved it to the fall so no child score could ever be

associated with the teacher. so you teach a child and third grade, they are assigned along with all of your children in my fourth grade class if the score is bad we can't figure out who taught them the previous year. so we move that back and we will now be able to associate student outcomes with teacher assignment we will now be greeting all of our schools on an a-f basis which isn't novel as it started in florida and i hope will become much more common. there's been a nomenclature, don't ask me to tell you what it is, it's education speak and impossible to tell what mant want, but a-f we all understand. we took down bookshelves full of regulations, a teacher certification. we already changed this by administrative action. young people or inspiring

teachers in indianan no longer get a license with an education major. they will have to -- they can minor in education that they have to actually studied the subject they hope to teach. so you want to teach math, we've got the idf you might want to know some math. [laughter] limited a collective bargaining to the wages and benefits, collective bargaining has its rightful place, always will. but to extend which i'm going to illustrate in just a second. leadership in indiana, the principles, the school boards, the superintendent we are determined to hold accountable for student growth have been hamstrung and prevented from doing that in a myriad of ways, and many of them stemming from the contracts that the school board's signed with local teachers unions. i will show you this in a minute. we need to create a method to intervene the chronically failing schools.

let me point out most of what i talked about so far and much of what i was strongly supported by the yet administration. i salute the president, secretary duncan, they are right about these things. they've had the courage to many times to some of their allies. this is a great example. we have 23 schools in indiana failing now for decades really come in. the lives of the young people we have assigned to them and we now have a system for stepping in and bringing new leadership to bear. and here's another little calendar that we just moved the school board elections from the spring to the fall. some tests from the fall to the spurring come elections from the spring to the fall, what's up with that, you want to know? spring is when we have primaries and nobody votes. it's a lot easier to dominate for a small interest group to dominate the outcome in an elected school board. in the sparsely attended primary

election. so now we will have more of the public at least eligible or at least on hand to take part in those elections. we will see if it makes a difference. school boards are often handicapped or frankly have tied their own hands and here are just some examples. i don't know if everyone can read them. i've got pages of these and i ask and i hope somebody did i ask that they be available outside. anybody interested, i got several pages of examples, real world provisions in the indian contract the range from things estherville ads, with the humidity should be the teachers lounge should be painted, not making this up. [laughter] to more troublesome things like the principle can only cold staff meetings once a month or can only hold them on mondays to still more trouble some things like the teacher will be required to spend more of an x hours with students on to

perhaps the most i think concern of all the bottom of the slide in many of our schools and a teacher can be observed in the classroom by the principal without a pre-conference and two days, three days, five days notice. that's all over. this is a summary of that. the second one if you don't know the term evergreen or status quo clauses, this is a provision that has been in indiana law for long time now, and what it means is when a new contract cannot be agreed to or there is an impasse nothing can change without the permission of the union, without the concurrence of the union which means nothing can change. so the contract when finally agreed to can only get better, sweeter, never moved in the other direction. that's now been repealed.

and no spending, no contract beyond the two-year term of the state budget. so that the school board cannot commit itself to spending out in the years where there is no idea how much money it may actually have. you may think these changes are welcomed by school boards to pad the table so adversely tilted for a long time, will reopen most cases but not all. and we found as the bill moved near passage school boards in some cases were rushing to finalize contracts before the law was effective. we cut a lot of them off the pass but here's some examples. including a ten year contract in the city if anderson which has one of the most feeling records that we have, very unfortunate. now, the third and fourth hilboldt with options for family

but before i talk a lot of them i want you to know we already achieved something in indiana that we felt was an essential component of the system in which every family of whiteaker station in life, would defer income level has the same full range of choice as wealthy people and that is that we already had become in the last couple years a full public choice and i will take you through the details unless you're curious, but simply all it means is that any student in indiana, any family in indiana can seek to enroll their child in this kind of neighboring or different public school district without being charged tuition. and it's happening. i just mentioned anderson indiana. lots of students from that district we found in the neighboring small towns and suburban schools'. we have had a delightful citing

of billboards and direct mail pieces from one public school district into the adjacent one bragging about test scores, bragging about touting better graduation rates and welcoming additional students and the dollars that come with them. so we had already a strong measure of choice available to every family. but we had a regime that attempted to choke the charter school infant in its cradle. we discriminated against charters in many ways, had a growing movement despite the fact they got their money, they got fewer dollars per student at the front end, they were made to wait six months for money that the traditional public got right away. they had to scratch away for space. we had districts like some of the inner-city districts with more than 20 vacant buildings

having shrunk substantially, for which they had no conceivable use who refuse to even discuss selling them to charter schools. i said sell them? give them to them, the taxpayers paid for them once already. it will now be made available. we have more charter schools because we have more of the losers than before including i don't know how common this is or isn't including private universities and i hope many of them will choose, this will be a noble project, a great project for some of our many great private universities to give birth to a new educational opportunity somewhere in their vicinity. then finally, the fourth of these bills will make of indian of the first state of universal private school choice.

it's available in all places but it's means tested. roughly the lowest income 60% of hoosier families will be eligible and the lowest income brackets 90% of the amount of the state stands to the christians in the base for the students at the top end of that range 50%. this is enough money to enroll a child as far as i know in any elementary or middle school and that we are aware of, and a significant part of the cost of a high school. there are a couple of parts of this that are worth noting. three bullets of on the bottom. as the bill was finally crushed the, the public schools will get their shot at every job. it is to say the family will only be eligible if the child spend at least two semesters in a public-school.

you may agree or disagree with this, but i think it's a worthy inclusion into this piece of legislation. in other words, the public school, if the public school delivers and succeeds, no one will see seek to exercise this trace. but neither will be we incarcerate anyone in a school they don't believe is working having tried it at least one full year. this package of bills we believe, we see as a mutually reinforcing whole. if one or more had failed we would obviously have been happy about the ones that made it but we think it was extremely important that each element of this past and we believe the collective bargaining reforms

strengthen and protect the teacher call with the reforms from being undermined any contract and applicable to the charter schools and any nongovernmental school that accept the vouchers to attend as well. they will have to use the state test parents and potential parents will know whether the school is delivering or not. they will be held to the same standards which we think is entirely appropriate. obviously no non-governmental school has to enroll in this program or take part in the program if they are bothered by any of this and my sense is almost all well and enthusiastically sell. i would hazard a guess, this last element quite naturally is going to attract i suppose the largest share or large scale of