taken illegally across the border. in one case a 13-year-old girl was found with man who could provide no proof of relation. the girl was place inside the family tracing system, and her mother was able to come and provide proof that she was, indeed, related to the girl and had not intended for her to be taken anywhere, let alone out of the country. in this and so many other cases, the importance of documentation and officials implementing protection policies have meant the difference between a happy reunification and a life cut tragically short. just to conclude, the u.s. can and should play a central role in encouraging countries as they work to protect the most precious resource of their children. mr. chairman, last year you introduced a bill that is a prime example. ..

>> let me ask you a few questions, and maybe on japan be very specific. i note parenthetically that we planned on having a japan specific hearing, because i do think that, i can't say it's likely but it is very probable, or possible maybe that anticipation of the g8, maybe day before, japan will announce that they're going to sign the haig. and, of course, the big question will be one of the conditions, terms and conditions, the reservations. and as i think ms. apy you said

so eloquently, you know, there needs to be an m.o.u. drafted for an immediate protocol for resolutions of existing cases involving children alleged to have been abducted to japan, and abducted within japan as well as japanese children alleged to have been abducted to the united states. you and i when we were in japan made that argument repeatedly. we have done here. you may to, like i said, very eloquently. i wonder how our other witnesses might feel about that because my deepest there will be japan gets all of the accolades, praises, heaped upon them by the other g8 leaders for its commitment, and then when it comes time to implement all the existing families are left behind, and that which is agree to becomes swiss cheese, so to speak, because it is riddled with loopholes.

ms. wells, would you want to start or what you want to start on that, ms. apy? >> right. i think that there is a genuine concern given what i've seen as projected reservations, that if there is not some dialogue immediately generated and some objectives, assistance and criteria provided that, first of all, this process will go on without having a meaningful treaty relationship. if we accept their secession, given the number of reservations, it will effectively be different than the protections afforded by the treaty. i think that there are legitimate issues, that the japanese have to address in their own domestic law that are so daunting, that the advantage

of carving out an opportunity in an m.o.u. bilateral agreement so that some of those issues can be worked through, will not only benefit the united states relationship, but in the meeting that we had, this would be what i would close with, the meeting we had included representatives of other countries to japan, including the pacific rim and europe, all of whom were wildly positive on the concept of using an m.o.u. in this context in order to set forth reasonable criteria, an approach that on a multilateral level. so again, i think that, i think that by using that type of protocol, it could actually narrowed the number of reservations that the japanese would have to take and strengthen the possibility of true reciprocity.

>> i agree, as i noted earlier, that absolutely there has to be so agreement to handle existing cases. and in truth, when any country joined the hague convention, that's what we want to see, we know in particular because of the challenges in japan and how a tractable those cases have been, particularly important. i think that -- i should add come in the past i have testified that i thought the notion of doing mous with countries where we -- where we were having trouble making agreement is a good idea i censored the state department has felt that some of those images have not been as effective as they should have been. so i would urge the committee to look at the question of what makes the m.o.u. effective. and if we can get an m.o.u. and it might be the right vehicle, how do we ensure that it's one that will have the force and will secure the rights of these left behind parents and ensure

that their children are covered as we wanted to because if we can't get sufficient assurances through the hague process, that the government of japan may go through, you know, if it's something they don't want to agree to them until they really want to agree to it, they can do another agreement that doesn't have the force that we want it to have. so i just think it's a matter of, you know, i would certainly defer to ms. apy city because -- i've seen the potential reservations and she's much more closer to this issue. that might be the right way to go. i think look at how mous are working for the state department, and what would it take to make this particular m.o.u. effective. >> thank you, mr. chairman. i have no comment. >> let me ask all of you, our first, ms. wells, you mentioned in dual national children having dual national might be a more complicated factor. maybe you can elaborate on why that is the case did you also mentioned that the hague

conference, that there needs to be perhaps additional oversight and improvements. you have any specific ideas? ms. apy, i mean, three decades into the tree, hopefully there is a lessons learned area where upgrades can be made. i would just point out there and physically that i would agree that the state department people, oic and the consular officials in country after country are earnest. it's not a confidence issue. they are very smart. they need to be very intelligent, and they are well-trained. i would argue that the problem is primarily the fact that they don't have the requisite toolbox to do the work. one of the reasons why our legislation, h.r. 1940, has been introduced is to take a lessons learned from all the other human rights issues where we had been very ineffective, trafficking and certainly on religious freedom, and take those tools, those penalties if necessary,

and apply them to countries. so it's a country to country fight, not an individual versus and in different or in neighboring country, or worse, actually, you know, very much on the side of the abductors, and to make it an issue where you could get resolutions. and i have found 31 years in human rights work, you don't get compliance without penalties. it doesn't happen. you might want to speak to that end of it as well. >> i would. let me talk about a precise example. in the david goldman case, the case was brought before the supreme court of brazil because there was a lawsuit filed why political party which sought a preliminary injunction repenting any child from any country being returned under the convention.

that was completely stopping all of the processes. the united states departed of state took the position initially that the hague conference should respond, because of the issues of enforcement, and some of the issues that were raised in my colleagues testimony. that they are a more appropriate global body to review the issues of enforcement. i had my doubts, and, in fact, what ended up -- because the hague conference has never taken a position that they will act as an arbiter of reciprocity. they are opposed to looking at enforcement in the context of the global reciprocity issues, as distinguished from enforcement of individual cases, and additional lead which were a treaty already that has already been drafted. and so we waited -- there was a 42 hour window in which the hague conference had to provide

briefing. and supported not just david goldman case, but also my situated children from all countries, with less than 12 hours before the filing they declined to file a brief. now, happily having anticipated this as a possibility, we prepared a brief with the able assistance of the consuls general of the united states and brazil, and that brief was filed as -- by the united states of america. however, it's a good example of the reticent, because of the policymaking and educational components of the hague conference. i respectfully believe that reciprocity is not going to be evaluated by the hague conference. i think they do not see that as their role and i don't think they're going to take it on. i think if we, as -- into the united states, develop and

objective template in order to did assess and inform on the issues of reciprocity, that will be endorsed and joined by other nations. very frankly, no one wants to act in a way that is not cooperative, get we just all get along. but the truth of it is that somebody has to take the step to lay out and call out the issues of reciprocity. our report on this subject is the only one issued by any country in the world right now. >> i certainly wouldn't argue with that. i think that she makes excellent recommendations, and my comments about oversight were mainly in response to some of the research and reading i've done on this issue. there's a very suggestions of how to solve it, but i think the practicality of how the conference actually worked and

this issue of, you, our country possibly being the one that needs to take a lead, and that possibly having other countries in the agree once they see our country taking that leadership role, that might be the most effective way to do it. there's also ideas of having an office that would do oversight within the hague, or have something like an ombudsman. i think all of those are areas that just need to be examined further, and i just wanted to certainly raise it to the subcommittee's attention. on the issue of dual nationals, you know, as i noted most of these cases become one of the dual nationality, often other countries as the united states will recognize and give national citizenship to a child of a parent born in that country. so if it doesn't happen before the abduction, it happens later. i think part of the issue that has come up in some of the test when and i certainly heard about

before is the issue of the indices giving new passports. and that's a real challenge for a state of our editors, it's a challenge for us as a country because we do need diplomatic relations with other countries of the world. and we can't have a situation where the united states can actually tells some country you're not allowed to issue passports, visas. they would do the same to us and then we will not be able to do the things we do outside of our own border. but i do think that that's something that, again, for the committee to look at and discuss with state department and other agencies, how can we talk to these indices better about their own processes and how can it be to explain our urge to them if we can prevent these cases are becoming cross-border cases in the first place, we can work with the government to come up with a fair resolution. so, you know, especially if it is a hate country, we don't

associate have to issue a passport. you know, if our courts review in a properly and that child residence is in a foreign country, that court will be given to jurisdiction to decide the case. so, on the toolbox issue i did just want to know one thing where i think one of the witnesses noted that the state department should be coming to congress saying here's what we need. i would only highlight i guess as a former staffer that i know sometimes that can be very competent to the agencies. as you know the ways our bureaucracy works, especially at a time of budget cuts and challenges, you know, part of what we are all talking about here is making sure this issue gets elevated but there are a lot of things the state department has gone to congress for. i think that one of the benefits of the way our system works is that as members and as staff, you know, your staff can raise ideas in meetings, and they can get filtered and bounced around,

and sometimes whether they are liked or not they may be the right thing to do. but i do think that the nature of the king occasions between congress and state department might make it hard for some of the people in the agency who know what they need to be able to come forth and say this is exactly because it is a lengthy process they would have to get that clear. >> let me just conclude and ask unanimous consent to include a brochure from back home bring abducted children back home, although contest that one of our previous hearings, makes a number of point. he returned, japan must provide unfettered action to our rushes children and three, japan must enact retroactive laws. they have a very good series of recommendations with regard to japan's hague and limitation legislation must be the spirit of the hague, and really come down very hard on the fact that

allegations of domestic violence must be a company by rules of evidence, that here's a has no place, even access to a left behind parent. japan must define the best interest of the child and then very important, all important, japan must really look at our missing children, and the name, as was mentioned earlier, there are a number of american children have been abducted or wrongly detained are unaccounted for and his present location is unknown since the earthquake, tsunami and the ongoing nuclear disaster. adding incredible pain and agony to existing pain and agony, they don't know what has happened to their children. mr. payne. [applause] >> thank you. ms. wells, ms. apy, either one

of you, i wonder if you can tell us what impact, if any, has the united nations convention on the rights of the child or its optional protocol on the sale of children had on preventing international child abduction? and do you think the convention is a valuable mechanism for addressing this issue? >> i'm going to defer to ms. apy on this. >> okay. >> so i did to the question, you were referring to the united nations convention -- >> on the rights of the child, or its optional protocol on the sale of children. >> the optional protocol certainly has had an extraordinary impact on international law. of course, i feel the need to respond, and that is quite a sticky question, congressman payne, because the united nations convention on the rights of the child, of course, has not

been ratified by the united states of america. and so i can assure you, when i stand in another country, as i have often, and begin to litigate the case, if the child is considered a dual national, you may be assured that a judge glares at me over their glasses and says, could you please explain to me why the united states congress takes a position that it does with regard to the united nations convention on the rights of the child. i will also tell you that having written on this subject and spoken on it, that i personally take the position, and this position is a policy of the american bar association as well, that the united states should, in fact, be a significant to the on the right to chuck him and his this would be yet another example of why. because i would not want the argument made as is often made, there are protections associate

with the u.n. convention that are somehow broader than protections provided under united states law. and as a result, the child should not be returned to the united states. the area of customary international law in child rights issue is complex. i assure you that in the most recent meeting at the hague conference, which dealt with child trafficking, that very issue was raised, particularly as it related to the protocol, particularly as related to child trafficking in the context of adoption. and i begin is a sophisticated interplay of international legal issues that weigh heavily on countries in africa and central and south america. so, again, i think it is a huge issue. to some extent beyond the scope of our discussion today, but a discussion that needs to take place. >> could you tell me what other countries have not ratified the convention?

there aren't many. >> this is the second question the judge asked me, by the way. it's equally uncomfortable. it had been somalia, and that's it. >> okay. well, we have to be careful about the company we keep, right? >> indeed, sir. >> how about, you know about the landmine treaty off and? i know we haven't had -- do you know how many countries have not ratified that? >> i don't have that information. perhaps my colleague. >> about combat for children soldiers, the under 18 military. we haven't ratified that even. >> no, sir we haven't. >> i think there's only one of the country, to be i just bring it out because we are land of the free, home of the brave. we are the leaders of the world, no question about it, the greatest place in the world. however, we lead ourselves criticism when they go into the

national courts, and we haven't even ratified a fundamental thing, protocol like. i'm sure there's some legalistic reason why, first of all, many people just don't like treaties. i was glad that mother's day came up years ago because we had to bring it through congress, maybe it might not pass because we don't like it, it was international. so we do really have too, i think, work more on our own image as we argued these very sensitive issue. let me just ask. have parental up to auction -- to what extent do you think this is an issue for u.s. policy? >> it's a good question, congressman payne. i'm not sure the exact sisters

and. we definitely do the cross-border movements. for instance, encourages where you have a refugee population, in a particular country, so if you have sudanese living in uganda, or, say, sierra leone and living elsewhere, there have been cases where you see a parent take a child across the border leaving another parent hundred and certain of the role that the u.s. place there, but we know that it does happen and it is equally tragic there. >> also, we do know that in some countries, sub-saharan africa, you do have some traditions where you have this hereditary servitude and adoption into slavery where the practice, for example, as i mentioned before, the people that were put into

into into into the servitude by the cartoon government of the north. have you gotten into discussion with regard to customs of countries where, for example, haiti, a person who is very poverty-stricken may turn their child over to a wealthy haitian to simply work as a servant. which is not abduction. however, it's not nice either. have you dealt with any of those issues? i think they call it -- >> yes, we have in both sudan and in the haitian. it has been an incredibly pervasive and harmful practice. that we see in haiti. and the main way that we address that is working with the family

that finds themselves in such desperate situations. so often in cases of extreme poverty a child can become either a source of income or a drain on income and sometimes the parents make, are doing their child a favor by deliver him over to a wealthy family, assuming that their child will receive education in exchange for doing some kind of domestic work. sometimes that's exactly what happens, but far and away the majority of examples show that these children are taken, they're kept against their will. they are forced to work long hours, often doing dangerous work and sometimes they're even sexually exploited as well. so we work with those, those poor families to ensure that they have the ability to earn an income that can allow them to educate their own children and protect their own children. because i think as we've heard time and again today, the best place for a child is in the parents loving arms. >> running out of time, but i

know there was a lot of controversy with madonna's adoption case, recall several years ago. and you have people on both sides of that issue, of course. and actually about a week or so ago we had a hearing on china, and one of the international organizations said that he would urge the ending of adoption of chinese children, because he felt that some of them might be abducted or taken away from families and, therefore, improperly put up for adoption. and so i know this question of adoption becomes a very sensitive -- you hear some people say if they can get a better life somewhere, why not? either safety be taken out of their own culture, better for them or not.

so i just wondered to what extent are there concerns related to international adoption, in your opinion, or from any research? for example, pertaining to fraud, ms. identification of children as often for selling children to adoption agencies. >> congressman payne, we believe adoption can be a very beautiful and wonderful thing to happen. one thing when we talk about international adoption, wheels want to make sure that indeed that that is the only option of able left to the children oftentimes we have found that if the our one or more parents still living, working with the family to see if they can still care for the children if that's not an option, look to see if there's another family member to take care of the child and then look to foster care and then adoption. if that won't be the best interest come in the best interest of the child then you

look at for international adoption which like i said can be a wonderful thing for all parties involved. what we've seen is that oftentimes, especially unwittingly on the half of americans may adopt, the case of adoption could be a case of unknowing abduction. and there can be fraud in the process. and so that's why it's so important that the safeguards are in place. in countries all over the world. it's important for the processes to work effectively, and efficiently. but always looking to ensure that the best interests of the child are placed first and foremost, and that whatever they end up they'll be in a loving, caring environment that will allow them to live out their life. >> thank you very much. >> mr. payne, i want to thank our distinguished witness. i have additional questions but there's a vote on. there will be a series of votes. i will announce again that what we will have -- that we will have a whole series of issues,

hearings on this, hopefully a market in the not-too-distant future, h.r. 1940. i can guarantee you i will not see snort of those who support the legislation until it comes into law. about how long it takes. and don't matter how much pushback we get. i would also note we will have a japan specific hearing, especially surrounding the issues of haig and whether or not in the small print there is simplicity. and especially to address the left behind. to would be left out once again, should they not be included in m.o.u. or some other mechanism to provide conclusion. and resolution. would like to add anything very quickly before we close? >> no, thank you. >> thank you for your service and your leadership. i would also just ask for additional statements, that individuals have requested be submitted for the record be made a part of the record. and if left-behind parents who

are here would like to submit their testimony or statement, we will include that as well. but it needs to be done rather quickly, and it needs to be eight pages or less. and, finally, we will be reaching out to you again for another hearing, because this issue has to rise in its visibility and not and/or diminish. thank you. [applause] [inaudible conversations] [inaudible conversations] [inaudible conversations] >> while on this friday morning the u.s. senate is about to gavel and four in pro forma session, yesterday they passed a

measure extending certain provisions of the patriot act that was set to expire at 12 '01 a.m. issued a press obama's signed the bill into law late last night in order to prevent a lapse of antiterrorism authority. the senate is not in session next week ally neighbors to spend time working in the home districts. and now to live coverage of the u.s. senate here on c-span2. the presiding officer: the senate will come to order. the clerk will read a communication to the senate. the clerk: washington, d.c, may 27, 2011. to the senate: under the provisions of rule 1, paragraph 3, of the standing rules of the senate, i hereby appoint the honorable mark begich, a senator from the state of alaska, to perform the duties of the chair. signed: daniel k. inouye, president pro tempore. the presiding officer: under the previous order, the senate stands adjourned until stands adjourned until that's the essays work for the week. they're not in session next week allowing members to spend time in the home districts. ????

>> over the three-day memorial day weekend commencement addresses from across the country. leaders in politics, business and entertainment, all offering their advice and insights to the graduating class of 2011 at 3 p.m. and 10 p.m. eastern, more the weekend on c-span. >> the senate judiciary committee met on wednesday to consider legislation that would expand the ability to prosecute government contractors and employees for crimes committed overseas. witnesses include lanny breuer, assistant attorney general for the justice department's criminal division as well as a former white house national security council legal adviser and a former member of the u.s. army judge advocate general. patrick leahy chairs this evening. it's about 90 minutes. >> i will start. what i want to do in this hearing was to consider the need

to ensure accountability for crimes committed by government contractors and employees who are abroad. president obama has been working hard to improve america's credibility in the world to our reputation for justice come our commitment to the rule of law, but a key component of that important mission is accountability for those who represent us overseas. accountability is crucial, for our image and our diplomatic relations, but for ensuring our national security. and to promote accountability congress must make sure that our criminal laws by american government employees and contractors wherever they act. i introduced in the last congress a civilian extraterritorial act, and i'll be introducing similar legislation this year. tragic events in iraq made clear

the need to strengthen the law and provide for jurisdiction over american government employees, and contractors working abroad. in september 2007 blackwater security contractors working for the state department shot more than 20 unarmed civilians in the streets of baghdad, killing at least 14 of them. cause the obvious rift in our relations with iraqi government. and efforts to prosecute those responsible, were difficult. our ability to hold those wrongdoers was made out. and jurisdiction of these defense have include. fbi could've been on the scene immediately which could have helped solve the case. other instances show this blog were? was not an isolated incident.

private security contractors have been involved in violent incidents, serious misconduct in iraq and afghanistan, including other shooting incidents where civilians have been seriously injured or killed. these cases have not been prosecution. in the last congress the senate judiciary committee heard testimony from jamie leigh jones, a young woman from texas who took a job with halliburton in iraq in 2005 when she was 20 years old. in her first week on the job she was drugged and then she was gang raped by coworkers. when she reported this, she was 20 or so. should report this assault, her employers put her in a locked trailer which is kept by armed guards and freed only when the state department intervened. ms. jones testified about the arbitration clause in her contract that prevented her from suing halliburton for this outrageous conduct. and congress voted to change the civil law to prevent that kind

of injustice. the criminal jurisdiction over these kinds of atrocious crimes abroad, however, remains obligated. paint to grate on the location of the crime making inconsistent and sometimes fostered this case the gang rape the only person was locked up was the woman who was raped. we must help avoid arbitrary injustice to the victims. to see that there attackers do not escape accountability or i work with senator sessions and others in, and to amend again in 2004 to the u.s. criminal laws, to the extent members of the u.s. military. to those accompanied, and to contractors who work with the military. the next up is establish whether all u.s. government employees and contractors who commit crimes to work abroad went with the military are not could be charged and tried in the united states.

if the military withdraws from iraq and afghanistan the american presence in those countries could consist largely of civilian employees and contractors. there has to be accountability. if you represent our government overseas they ought to be bound by the same laws that you and i and anybody in this room are bound by. and those instances with local justices may be less fair. this exclusive jurisdiction will also protect americans by providing opportunity prosecuted in the united states, rather than an hostile local court. so we have to ensure criminal accountability to improve our national security. and then our allies, including those countries most essential to our counterterrorism national security, have been working with us. and more over the taliban men and women we need to advance our national security efforts. would more likely step forward and served if we step out the lawless atmosphere we see in places like iraq and

afghanistan. that's why the civilian extraterritorial jurisdiction act is supported by people like the ceo of security contractor. in the past this legislation has been bipartisan. i hope it will be again. been working with the justice department for legislation to make it better. i hope we can move forward with it. i've been joined by senator grassley and i will yield to him. >> thank you, mr. chairman. this is a very important. i'm glad you're having it. without a doubt, extending government law to contractors serving overseas is something we have to keep on top of the. it's an important topic given the use of, or should they increase use of government contractors by federal agencies in overseas operations, particularly it's been highlighted in afghanistan and iraq, although it wouldn't be

limited to those two countries. holding any individual accountable for crimes is an important part of our committee's jurisdiction. i think we all would agree that anyone who commits a crime he should be held accountable and in bringing crimes to justice is one of the more important roles of our government. however, extending the long arm of american criminal law is an issue that should be done without significant consideration and caution. now, chairman leahy and i have worked together in the past to ensure that every contractors are not given a free pass to commit crimes or to defraud the government of the resources that are entrusted to her country by other nations. because we were together in 2000 on a wartime enforcement abroad act that would've told the statute and limitations on fraud offenses that occurred in the war zone. we also worked together to amend the false claims act to ensure that claims are under the trust an administration of our own government were protected for fraud and abuse. that fix was necessary to

address a loophole created by the courts in the custer battles decision were iraqi funds administered by the u.s. government were subject to fraud. this was a damaging loop all because it essentially said that contractors were free to defraud the government as long as the money was from a foreign country that entrusted the u.s. government to administer it. ultimately, we closed that loophole in the fraud enforcement recovery act which was signed into law by president obama. today's hearing is no less important because criminal acts committed by u.s. citizens and contractors abroad would threaten our foreign relations. as such it is right for us to examine the ways we can bring these criminals within reach of our law. legislation extending the reach of u.s. criminal law to contractors was introduced in the last two conferences. both times that legislation failed to clear both chambers and was never signed into law.

chief among their concerns at a time was a lack of clear exception for contractors that were employed by the intelligence community. in 2007 president bush issued a statement of administration policy citing concerns with legislation expanding extraterritorial jurisdiction for contractors and citing concern for the impact on national security activities and operations. similar concerns upheld legislation in the last congress. i think there's a lot of merit to extend our criminal law to civilian contractors and employees are brought. however, we must make sure that this is done in a manner that is narrowly tailored to specific problems, it is not overly broad. further, we must ensure that we do not harm critical national security and intelligence operations. does concern should be addressed in a proper form and not necessarily aired in public. however, in the limited scope that we can address that topic

in this public forum, i intend to ask some questions about what a carve out for the intelligence community would look like. i also want to note about how many new resources the department of justice were required to implement investigations and prosecutions under proposed expansion of extraterritorial jurisdiction, given the current fiscal situation that our government unconcerned that we allocating resources from one side of injustice to another could limit other investigations of prosecution that i look forward to the hearing today, and worse impose a i look look forward to continuing my working relationship with the chairman on this very important topic and i want to inform the chairman that at 11:10 i have an opportune to speak on the floor that i will probably miss part or maybe the rest of this committee hearing. >> thank you, and there's a lot of that going on today, as you know. i appreciate it. i share concerns but i also so -- share concerns about how we

define someone i would hate to think there's a thing where the people, they gang rape i refer to would say well, part of our duty is to guide some of the intelligence service here to escape a crime like that. but we can write that. our first witness is co-chaired by chris global transnational litigation practices. both on cross-border disputes. she has worked on defense and governmental contract issues abroad, argued a variety of cases in both state and federal court. former military lawyer, battlefield account the at the u.s. naval academy, mayor of the international stability operation association, served on several committees of the aba, addressing expansion of uniform code of military justice and military extraterritorial jurisdiction act to cover contractors on the battlefield,

received a fascist be from u.s. naval academy a law degree from university san diego, school of law. ms. lee, please go ahead. we'll put your full statement in the record but please go ahead. >> thank you, mr. chairman. mr. chairman, senator grassley, senator franken, others distortion of a committee that are not as often account for the opportunity to appear before you today. i know that each of you share a deep respect and appreciation that i feel for the men and women of the defense contracting community and and a soda served in the navy, then the spouse of an army build and now is in them of the contracting community i want to thank you all not for just the work you do today but for the working to for each of those communities. the issue today, extraterritorial jurisdiction and a candidate for contractors is not a part of an issue. i think we all share a commitment to strengthen national security affect the of the united states and the desire for the declared in the account of a mechanism that reach our citizens. when unaccountably mechanism is

focused on those individuals who serve in harm's way on our behalf, whether they be uniform are not, the obligation to provide them with clarity is especially strong. i'm a naval academy graduate, a former lawyer, at the u.s. naval academy where i studied and taught health and accountable. in the current legal practice i both advice comes to mitigate the risk, train their employees to operate in conflict and violence and i represent companies when it is government investigations and civil or criminal litigation. i've also devoted several thousand hours of pro bono work to the representation of victims of war crimes that occurred in somalia in 1980. victims who because there no just it had the capacity a will to take criminal action, had no hope of achieving redress other than through civil courts of the united states. each of these expenses contributes my very prosperous active on the importance of clarity in criminal accountable the mechanisms. i speak today from the perspective of an attorney who currently manages a law practice

group who specialize in representing government contractors. i can tell you in my experience the military extraterriotorial jurisdiction asked any alone and it's current attractive has not quite provided that clarity. as you know the act has been subject to legal challenges to the breath of its jurisdiction as it applies on his face onto those contractors who are employed by or accounting the armed forces outside the united states. arguably meja does not apply to the contractors working for the state department or for government agencies except in the last they can decide that they're supporting the mission of the defense department. clarity and certainty are as important a contracting commute as they are to government. counties have an obligation to their employees to properly advise and other legal rights, risk and accountability mechanism to which they are subject when serving overseas. a continued absence of clinical whether meja applies to employees on non-dod contracts or its employees. for example, a company with both beauty and state contracts might

under the current statutory framework accurately advise employees working on a defense contract that they are subject to meja jurisdiction while advising employees doing similar work in the same location on a state department contract, that they might be subject to meja jurisdiction. the statute itself with a limited number of a villa judicial interpretations make the affected meja completed clear. the civilian extraterriotorial jurisdiction act as discussed how to begin to provide more certainty recording the application of u.s. criminal law to overseas contractors. that only might meja provide more certainty, it could also enable the prompt and professional investigation of potential criminal incident. contractors agile often operate in unstable environment with host nation capacity for criminal justice functions are limited or develop an. those countries are much better served in my opinion if adequate u.s. government resources are available to assist with or provide a criminal investigation function. united states also offers a person resources to address that need. i believe you have received or will receive written support --

written statements from several countries directly, and as the chairman noted this morning, the ceo of a company and a former command sergeant major has an op-ed in the "huffington post" discussing the need for these legislation any of the very persuasively that the absence of effective accountability for contractors put our country's ability to achieve our goals at risk. additionally, legislation also has support from international stability operations association, a trader position representing stability operations contracts, as well as from organizations and human rights community. the commission for wartime contract also cough up litigation and colonel jurisdiction over civilian agency contractors. this diverse recognition of the need for a properly crafted ceja reflects i think universal recognition that can deliver criminal wrongdoers is a critical component of securing our nation's foreign policy goal. no one wants to operate in an

assignment of uncertain legal clarity, least of all companies who are already operating and often unstable environments. thank you again for the opportunity to discuss this topic with you today and they do it for to answering any questions that you all might have. >> thank you. thank you very much, ms. lee. i'm going to each one test for and then we will go to the questions. the next person testifying is associate professor of law of south texas, houston, texas. retired lieutenant colonel, served with u.s. army's judge advocate general corps, prior to his retirement he served as a special assistant to u.s. army judge advocate general for law for war matters, and was the senior law expert. also served as a chief of international law and of the u.s. army in europe, chief prosecutor for the 101st airborne division. and professor of international, national security u.s. army judge advocate general school.

been extensively published on national security law, law of armed conflict, professor corkum received his law degree from george washington university school of law, judge advocate general school, professor got it's good to have you come and thank you for coming. wonderful statement in the record but please go ahead. >> thank you, mr. chairman, and members of the committee, for offering the opportunity to share my perspective of the importance of enacting the civilian extraterritorial jurisdiction act. as a soldier in a military staff officer i was talked express my bottom line up front. and my bottom line is that congress should enact ceja because it is in the best interests of our national security, our armed forces, and potential criminal defendants. tried to 1970, trial by court-martial was a primary mechanism by which we held accountable civilians accounting the military during operations

abroad. however, as result of an opinion by the court of court of military appeals in 1970, that jurisdiction was severely restricted when the court held that it only applied during perry's of formally declared wars. as result of this opinion, entire generation of judge advocates learned that it was almost inconceivable that civilians would ever again be subject to trial by court-martial. but this create a federal jurisdictional gap, and intended for civilian misconduct created by this gap became apparent as the u.s. military focus increased on operations in the decade following the end of the cold war. in response congress enacted meja, a law that had a article iii trials when civilians accounting the military committed misconduct while operating abroad. however, the perception of contractor immunity arose during operations in iraq and

afghanistan, and these perceptions were in large measure the result of a jurisdictional gap that existed in meja. partially in response to this reception, congress in 2006 amended the uniform code of military justice to reverse the opinion of u.s., and resurrect military jurisdiction over civilians, a company armed forces in the field during any contingency military operation. this resurrection of military jurisdiction top military experts by surprise. while the resurrection military jurisdiction over civilians accounting the force is likely constitutional, i believe that it does pose some serious constitutional questions. most significant of which is whether or not it is legitimate to try a u.s. civilian by court-martial wind that is not a requirement of absolute necessity. when an alternate option of article iii jurisdiction is viable. now, this is not to suggest that

i believe that a court-martial is not a fair tribunal. in fact, i think court-martials are fundamentally fair. but the fact remains that court-martial does not afford the full range of constitutional rights to a defendant as our of four in an article iii criminal tribunal. it's because of this that i believe it was quickly important to enact meja. however, can i was based on an assumption that is becoming increasingly stale. that civilians is in his of military operations will be connected to the military by employment or contract. civilians supporting the complex missions of today's, although often operating in close proximity to the military, are routinely connected to other government agencies. ceja is therefore necessary to complement meja but it's an act that will ensure all civilians and operational areas are subject to criminal jurisdiction. ceja also provide a means for

prosecuting acts of series misconduct committed by civilians associate with u.s. government activities in more mature theaters or areas, not necessarily in countries where we have ongoing military operations. and i believe the ability to exercise such jurisdiction would be beneficial to the united states, because it gives the opportunity to leverage the host nation to forgo criminal prosecution of american citizens who commit serious misconduct, and give us the opportunity to prosecute them in the united states, which i believe is often in the best interest of the nation and a criminal defendant. ultimately, i can see no good reason not to enact ceja. i believe in enhancing the scope of federal civilian jurisdiction over civilians abroad is an important means of limiting resort to military jurisdictions to only those situations of genuine necessity. meja was the first step to achieve this goal. ceja will be the next step. unless federal criminal jurisdiction is covering it,

pressure to resort to the broad grants of militaries jurisdiction over civilians resurrected by the 2006 amendment to the uniform code of military justice is almost inevitable. it is therefore in the interest of the nation, the military, and potential something defendants to enact meja. thank you. >> i appreciate your perspective, and our next witness is michael edney, had counsel of the law firm of gibson, dunn and graduate specializes in appellate and constitutional law, criminal defense and complex civil litigation. in 2000-2009, provide legal advice of national security council senior white house advisers, prior to his time at the white house, mr. edney work in the department of justice office of legal counsel, graduate from university of notre dame to a law degree from the university of chicago law school. it's good to have your. please go ahead.

>> thank you, chairman leahy, ranking member grassley, and guessing which merits of the comedic i appreciate the opportunity to testify on this important subject. with troops deployed in to foreign affairs of combat, holding a, representatives to the united states who engage in serious misconduct abroad is a recurring and complex matter. current federal criminal law leaves a gap for u.s. government employees and contractors unassociated with the department of defense. this gap has raised serious foreign policy problems, and problems with the uniform administration of justice. so, the congress and the executive branch have struggled with whether and how to fill that gap through at least two administrations. that is because it is a difficult question and caution is very necessary in addressing it. expanding wide bands of federal criminal law abroad to employees and contractors of all federal

agencies, including our intelligence community, could threaten vital national security operations if not done with exceptional care. i want to make three points, in my written testimony a site. first, the congress -- >> your written testimony will be part of the record. >> thank you, mr. chairman. first, the congress historically has been very careful in assigning relevant criminal laws, extraterritorial effect, in part to protect national study operation. instead, the congress has extensively studied, often after lengthy classified briefings and hearings the procedures and restrictions to be placed on overseas intelligence operations. that congress should continue that practice their proposed legislation addressing the problem such as security contractor misconduct abroad ought not have unintended side effects on authorized national security activity.

the solution has been laid out by the assistant attorney general for the united states, lanny breuer, in his fourth testimony -- forthcoming testimony and i agree with you any legislation expanding criminal law abroad should have a strong exception for intelligence or other national security operations. whatever additional restriction should be place on intelligence activities we should wait for a setting where the congress is exclusively focus on that issue. notably, finding an appropriate intelligence exception was the sticking point when this type of legislation came up in the 110th congress during the last administration. the current administration's position appears no different from the last, creating an appropriate intelligence exception would be an important step forward and this legislation project. second, ambiguity and criminal law applicable to our intelligence officers should be avoided.

using criminal offenses created by what's called the special maritime and territorial jurisdiction of the united states creates particular concerns in this regard. and this is a common theme in legislation that has been designed to solve this problem from meja to some of the current legislative proposals. this is a body of law that congress created four, when the federal government is the only authority, for foreign military bases and embassies where there is no u.s. state can pick any city here at home these are the public order offenses that we would expect, but they were never meant for intelligence operations. and we have no tradition that would assist us in applying them to this new field. the military extraterritorial jurisdiction act avoided this problem by keeping the uniform code of military justice and as long history of governing violent armed conflicts as the primary regulator of the military itself. there is no such easy solution

for the intelligence community which does not have this tradition. the result of such potential ambiguity is the chili of intelligence operations and the delay required to obtain clarity. intelligence officers will not and should not have to rely on after the fact tutorial discretion to carry out necessary operations. they will seek the opinion of the justice department in advance. ..

>> and see pa reform have to go hand in hand. thank you for the opportunity to testify on this topic again, and i look forward to the committee's questions. >> thank you very much. this question, actually, to ms. lee and then to professor corn. you talk about the fact that the u.s. foreign government contractors are more than ever before. we know the legal framework is unclear, it's outdated. when the military mission in iraq winds down and afghanistan, for that matter, the american presence there will no longer be primarily military or dod contracts, but we will have thousands of civilian contractors and be employees -- and employees.

our criminal jurisdiction will no longer extend to those employees. will that military winddown in iraq create urgencies to pass ceja ms. lee? >> thank you, mr. chairman. that's a very valid point, it's very timely. and it is one that i can tell you that the contractors operating in that environment are very attuned to. you know, how is going to work in the absence of the department of defense, in what ways should we adjust the advice that we give our employees, in what ways do we need to be aware that this will change the legal universe in which we operate. and i think the departure of the department of defense limits the application of any ucmj good order and discipline type authority to the environment and does make it particularly important not just for the contractors to understand what jurisdiction will apply to them in the absence of the department of defense, but also for the host country perceptions. >> well, let me ask you on that,

you would be called upon to advise some of these companies. with the passage of a very clear ceja, would that make your job ease to say, okay -- easier to say, okay, these are the bright lines of what you can and can't do. and i realize this would make it easier to tell the host country. >> there's two parts, and i smiled when you asked the question because it does work counter to my interests. as a lawyer, i'm in business all day long, that's what we do. >> [inaudible] >> if there's lack of clarity in a statute, i stay busy all day. but on behalf of the companies that i represent, i think you do have an opportunity to clearly articulate your intent here, and that's always a good thing. i also think it's a good thing from the host country perspective because i think what we've seen is that if there is just the perception of a culture of impunity, then that's a very dangerous thing for the contractors that have to operate in that environment, for the

military members that have to operate in that environment and for the further answer of our -- furtherance of our national security object i haves. -- objectives. >> how do you feel about that? >> the military will still have some presence in these locations, and if there is no viable civilian criminal jurisdiction for acts of serious misconduct, the military may be pushed into the role of becoming the primary prosecutorial response to such misconduct. and i think that's, that would be unfortunate. i, i'm not willing to say that the exercise of military jurisdiction over a civilian is per se unconstitutional, but i think that it's in the interests of the military and civilian defendants to have a jurisdictional scheme that insures that such jurisdiction is exercised only as a measure of true last resort. i think the other factor that goes into this which dovetails with what ms. lee mentioned is

that there, if we don't enact me ya, there will be -- meja, there will been inconsistency unless the military is the primary prosecutorial authority. and by that i mean if there's an act of serious misconduct in iraq by a contractor where there's no federal civilian jurisdiction, the military member who commits the same misconduct will be try inside an american court. a military court, but an american court. that civilian may have no option other than to be turned over to the host nation for prosecution, and that could create a perception of disparate treatment. i saw this once when i was the international law adviser in germany for u.s. army europe with an allegation of a rape by a contractor in bosnia, or it was kosovo, i think, prior to the implementation of meja. and the military commander had a

very difficult dilemma because if we didn't allow the local authorities to assert jurisdiction, there was no jurisdiction to assert. now, ultimately, the case was disposed of because the allegation fell apart, but i can remember the debates with the commanding general over what am i going to do? if this is true, i don't want this person to have impunity for it. and so having ceja would create a viable, credible alternative which would be trial in federal district court. >> do you agree or disagree? >> i don't disagree with that. i think that, i think, senator, as you point out, um, the more civilian contractors and employees we have overseas in these, in these operations and in these difficult areas the more poignantly the gap in current federal law will be

raised. my question is how do we go about filling it. >> well, i understand. i also worry about we don't want to give blanket immunity. i, obviously, talked about a serious case with halliburton at the beginning of my statement, but i hate to see something like that just be ignored. the, my life was easy when -- the eight years that i spent as a prosecutor in the united states. you go and prosecute when a crime is committed who committed the crime. here you have a real difficulty, how do you approach it? as professor corn just mentioned, you also have the thing, and ms. lee has too, that sometimes these where the situation there's going to be prosecution the defendant might much prefer it's going to be before an american court with our usual experience.

we've seen some highly publicized cases abroad where you wonder how in heaven's name those are done even close allies of ours. i think of one that's dragged on for a couple years in italy in a case where a young woman is accused of murder. and when her parents point out the fact that the prosecutor had been involved in ethical misconduct, even the courts said then the prosecutor wanted to prosecute them for defamation. i think i'd much rather be having the trial here in the united states, but that's my view. senator grassley. >> mr. edney, you described how a carveout for intelligence was important. what are the potential pitfalls that we face if we pass legislation extending federal criminal law to contractors abroad without a

carefully-crafted carveout for intelligence and national security? >> thank you, senator grassley. well, one of the problems is that it's difficult here and it's, i think, difficult period to really account for all the many ways that the criminal laws that we draw up for the united states might apply to otherwise authorized national security operations. so that has to be very carefully studied. that's why the previous administration and i believe this one supports leaving those questions for another day and finding an intelligence carveout that protects those activities. if you, if you had an intelligence carveout that focused on authorized intelligence activities or authorized national security operations, you would avoid the situation that chairman leahy pointed out in his initial statement where a, where a

security contractor that claims he was protecting somebody in the intelligence community but went off the reservation on a frolic and, clearly, serious misconduct would not be covered by that. um, that's the key. the key is that it has to be sufficiently simple that the intelligence community continues only to worry about the authorities they're currently working under, and any further authorities or restrictions that this congress decides are warranted in the specific context of regulating the intelligence community. >> do you have any idea what steps should be taken in crafting a carveout or exemption since it's got to be carefully done? >> >> yes. i think, i mean, i think the first, the first issue is that it needs to be very simple. if it were to become too specific, it would, it would provide points to our adversaries about what is

authorized and what isn't authorized. it needs to focus on current authorizations. also it needs to be a, it needs to have a, um, an allowance for the reasonable belief of intelligence officials that they are engaging in authorized conduct. and, finally, the important key is that it be drafted in a way that keeps these potential criminal laws off the table because their application to these activities, again, is extraordinarily complicated. >> yeah. you discussed including special marry time and territorial -- maritime and territorial jurisdiction of our country as a basis for applying criminal law abroad. that statute was designed to place the federal government in a position of state and local governments and cover general crimes when no state and local government existed. this approach is similar to the

military extraterritorial jurisdiction act utilizing special territorial jurisdiction. you mentioned in your written testimony a concern that the use of this special jurisdiction is additional for civilian contractors under meja. what is that distinction, and why is it important? >> yes. i think this is an important point that the committee should keep in mind as it turns again to crafting legislation in this area. because it is tempting to follow the military extraterritorial jurisdiction act model which, which looked to crimes that would be applicable in the special maritime and jurisdiction alter story of the united states. and as a man from nebraska, this would be the type of laws that i would expect to govern my activities while i'm living in omaha and that would be supplied by the state legislature to keep me safe. but their application to intelligence activities and military activities for that matter are very complicated.

the way that the meja act dealt with this problem was to maintain the primacy of the uniform code of military justice. that happens in 3261d of title 18. it says that if you're subject to the ucmj, it's the ucmj alone that will govern you. and after a long history of dispensing justice to members of the military while they're abroad you canning combat -- conducting combat operations, we have a lot of case law in a sophisticated manner that deals with violent combat operations. but we don't have that outlet for the intelligence community. there's no substitute that you can resort to. so the impulse to look to the special maritime and territorial jurisdiction set of criminal offenses would be, would be a difficulty if you're expanding the criminal law beyond the department of defense to all

federal government agencies including the intelligence community. >> could i ask one more -- >> please. >> if congress failed to include an intelligence exemption in the legislation and relied upon prosecutorial discretion of the justice department, would that have an impact on the intelligence community? for example, would they have to ask the justice department to provide legal opinions, and if intelligence community became reliant on the justice department to preapprove intelligence operations, would it have a chilling effect on that community? >> well, i think that, i think that you seize on a very important point, senator grassley. as i mentioned, the application of these criminal offenses as they would be to military operations, to intelligence operations would be very complicated. there are a lot of common law doctrines in affirmative defenses such as justification and public authority that the justice department would have to sort through, and as i mentioned

in my initial statement we can expect that the intelligence community will turn to the justice department first to sort that out. that will take, that will take time, and it will require a pretty significant exercise of discretion. um, and i think what you'll see is that it would transfer a lot of responsibility about what intelligence operations occur from the senior executive branch officials that this senate confirmed to oversee those operations to the attorney general because he will have a very wide legal interpretive task in advance before he approves those operations. i think we can also expect that the justice department won't, won't provide general guidance in this area as they shouldn't. these legal inquiries if many of these federal laws were applied

require very fact-specific issues, and it would be a kind of a de facto reorganization of the way that we conduct our national security operations if, if federal criminal laws that we're considering applying to intelligence agencies weren't selected with great care. >> thank you, mr. chairman. >> thank you very much. senator franken. >> thank you, mr. chairman. ms. lee, it seems pretty obvious to me that we're going to be depending on private contractors to work overseas more and more as we pull out of iraq. there'll be more tied to the state department. and we have to make sure that they're accountable to u.s. laws. and, unfortunately, the actions of a small number of bad actors have tarnished the entire reputation of the contracting community which you represent. you said in your testimony the

companies you represent would welcome greater certainty and clarity on the application of u.s. criminal laws to their employees. um, i'd like you to explain this a bit more. you talked about the culture of impunity. now, i, the chairman talked about jamie lee jones and kbr which -- and halliburton. now, jamie lee jones was gang raped by kbr employees. what i understood was that this had happened many times before, and kbr insisted that she, that she was required to go under arbitration. now, kbr is no minor player many contracting. in contracting.

also she formed her own foundation while in the four years that she was trying to fight to get into court. and part of her foundation was finding and inviting women who had -- this had happened to, but who had submitted to the mandatory arbitration. and she found 40. 40 women who had been raped. by contractors. now, did this create -- and you heard all kinds of stories of prostitutes being brought in to these contractors including prostitutes in local, in the host country. did this create, was there a culture of impunity? is there a culture of impunity? and i just want to know, as i

said, kbr is not a small actor. it's probably the biggest contractor there is. so i'm not terribly convinced that this community wants this, but i hope they do. >> uh-huh. i can tell you i believe that they do, senator. i want to clarify, i don't represent kbr, never have. and when i speak here and talk about certain things i'm, of course, speaking with my own personal opinion anyway. but i can tell you from my experience not just representing the military community, but also a military prosecutor that even a perception of a culture of impunity is, i think, a dangerous thing. and i think that's what i referred to when i spoke before, and that's a potential host country perception of impunity. and can that's why -- and that's why the clients that i work with and the trade organizations that represent defense contractors

that i work with are all in support of a measure that would move forward for better, more effective accountability across the board. i think because it's fair to say that they recognize much like you have and many other senators and many members of the american public have recognized that it's contrary to the goals of our mission overseas to allow even a perception of impunity to persist. >> now, kbr was contracting with dod as we withdraw from iraq, more and more will be contractors for the state department. um, we did a bill, amendment in the appropriations, dod appropriations that contractors couldn't exercise their mandatory arbitration, um, clause in their employment

contractors if they're getting paid through dod. do you think it would be wise in terms of trying to get rid of this culture of impunity in if we did the same thing for state? >> you mean, senator, specifically for civil liability and civil -- >> yeah. >> -- those kinds of things? i think that's something that's within congress' power to do. i apologize, i'm not as familiar with that bill. but i think -- >> well, basically, kbr took the position that in her contract with them they had a mandatory arbitration clause on any complaint about employment. >> uh-huh. >> and they took the position that, um, if she was raped, that was an employment dispute. >> uh-huh. >> and they had taken that position with, evidently, 40 other women. and she fought 'em.

now, my question is, do you think that it creates a culture of impunity, and would continue to create a culture of impunity if people like blackwater or other who are under the employ of the state department are able to assert these arbitration agreements on their employees who come under similar circumstances? that's, i'm asking your opinion. >> and i'm happy to give it. [laughter] i can tell you as a lawyer who practices civil litigation, what i often advise my clients when they ask me should we have arbitration clauses in these agreements, and sometimes these are contracts overseas with subcontractors, sometimes these will arbitration clauses not just in the defense contracting community, but in other industries in the united states,

very common aspects of employment contracts. i'll tell you my honest experience, i tell a lot of the clients i work for, most of them, it's not necessarily a guarantee that the proceedings will be cheaper, faster or easier if they're done by arbitration. arbitration can be just as expensive and just as adversarial as litigation. when i represented in a criminal justice capacity victims who had been, who were making rape allegations in the uniform code of military justice proceedings, their families would also ask me the same thing. you know, what should we do about this, should we sue about this? the confluence of those particular types of criminal acts and the way they're superimposed over civil litigation is a really complicated area, and i think it's not -- you to not -- i don't mean to not answer you directly, but it's not pure enough to say if nobody's allowed to arbitrate, that'll improve the perception of impunity. >> i think you don't understand

my question then. because this is mandatory arbitration. it isn't that no one's allowed to arbitrate. you can arbitrate if you like. >> right. i think -- >> i'd really like and appreciate an answer to my question which is, do you think that the state department should honor mandatory arbitration? i'm not talking about a woman has a right to arbitrate. of course, a woman would have a right to arbitrate. that's not the issue. that's not what i'm asking you. >> can and i think i do understand. i think as the clauses read what they are is arbitration in lieu of litigation. so i think what your objection to them is that it deprives a woman in that position of the ability to fully litigate her claim in a federal district court or state court instead of going to ab arbitration proceeding, and that may be an area where you and i disagree as to whether that necessarily means a person has given up anything that will be of benefit or right to them. some arbitrations might be structured so that that would be

a reasonable conclusion. in my experience they aren't always. and so, you know, if there's -- >> my time is up. but -- >> yeah. >> but i'm not satisfied with the answer because not always is not a satisfactory answer. >> well, i can tell you from -- and i mean this very sincerely -- the u.s. litigation process in terms of achieving redress for a claim much like mrs. jones or ms. jones' is entirely likely not to be satisfactory either. so i think that's all i meant to express is i can't do an either/or for you and tell you one will definitely help improve a culture of impunity because both have flaws. >> i think the woman should have the choice. thank you. thank you, mr. chairman. >> what i'm going to do is call on senator whitehouse and senator blumenthal, i'm leaving for another hearing. i should note that the issue of arbitration, it's -- i think

we're saying is we have arbitration if it's agreeable to both parties and not imposed on them. but i also agree with what ms. lee said that on both civil and criminal litigations, the results are not always satisfactory. but at least to leave on the table the ability to have both criminal and civil litigation, i think, is necessary. so i thank senator franken. senator whitehouse, you're recognized, and i thank the members of the panel. this is a difficult thing, and you your experience is important. i understand, mr. edney -- [inaudible] but i just don't want to make it sense that somebody who happens to be guiding the outside of our station, our ci station might

suddenly be able to go off and do whatever they want and get that immunity. and i'm sure that's not what you're suggesting by any means. >> no, not at all, senator. i think there are very helpful ways to deal with that particular problem. >> i agree with you. thank you very much. >> may i proceed, chairman? >> yes. >> mr. edney, your concerns regarding the consequences of application of the statute to the intelligence community will depend to a significant degree on what the offense is at issue, will it not? >> yes, it will, senator. >> so, for instance, our intelligence community is engaged as a matter of ordinary day-to-day business in trying to break into places, steal things, get unauthorized access to

information, conspire with people to divulge secrets to us. that's kind of the nature of the intelligence business, to get unauthorized access to information. and so something like that which is actually not covered by this bill, as i understand it, would be a really significant impediment to our intelligence functions. but as best i can tell, there is no legitimate intelligence function that involves rape. >> no, i think that you're right about that, senator. >> so at least -- >> i certainly can't think of one although i will say that the proposed legislation is broader than that. >> no, but that's what i'm saying. you need to start to distinguish among -- >> that's exactly right. >> and you'd concede that as to rape, the forests of the intelligence community -- interests of the intelligence community are nil. >> i can't think of any. >> and as to murder? pretty much also nil, correct? >> well, that's a -- i don't

know that, i don't know that, i don't know that there's a productive way to talk about this, but i think that, i think that there are lots of complicated questions raised by lots of criminal statutes, some of which are included in the proposed legislation from last session. >> but we should be distinguishing between them because different statutes, different crimes will have different impacts, and at least as to rape you can agree that the impact there is nil. >> yes. and as you, as you point out, you know, this is an important point, i mean, there are actually laws that apply to the intelligence community. and one of them is the war crimes act which congress amended in 2006 to address concerns that the congress had and various types of sexual conduct beyond rape are already prohibited by applicable federal law. um, and that's for everybody. >> yeah. even overseas. >> yes.

especially -- as a matter of fact, especially overseas. that's sort of -- >> the fact that there's an overlay between what is already prohibited by those statutes and what would be prohibited by this law, again, the net effect is nil in terms of a deterrent on intelligence collection. >> i would not raise any yellow flag about restating current applicable federal law that's already applicable to the intelligence community, that's exactly right. and this committee as well as other committees spent a fair amount of time figuring out exactly what those rules are going to be, um, in the specific context of national security operations. that's exactly the type of process that i think needs to happen and should be the practice of the congress going forward. >> and while i think we'll all concede that there could be some either deterrent effect or some delay while legal issues get

sorted through in terms of a potential subset of intelligence activities as a result of this statute, are there not also potentially significant national security consequences from the culture of impunity that has been referred to from the degradation of america's standing in the host country from criminal acts that take place from the diplomatic consequences from the failures of either military or intelligence cooperation that might ensue from that? so there are costs on both sides of this equation, are there not? >> there absolutely are costs on both sides. an example of that -- >> national security costs. >> national security and foreign policy costs. an example of that was when this country was trying to negotiate

the 2008 status of forces agreement with the government of iraq. we were not able to achieve the immunity that we traditionally would like from the iraqi criminal justice system because of some of the shortcomings in our laws was, at least, a factor, and that is a foreign policy consequence. the way to thread it is to keep these intelligence operations out and focus on the problems that this committee has identified with, with security contractors and others that have nothing to do with authorized intelligence operations. and a carveout can leave what rules apply to the intelligence community when they're carrying out their work for another day and a setting where -- >> but your carveout, your carveout, your proposed carveout for the intelligence community would be limited to sanctioned and approved intelligence activities. so if an agency operative, an

intelligence operative were engaged in something that had not been specifically directed through the chain of command as an approved intelligence activity, that would be a different matter, that would not be part of your carveout. >> well, i mean, look, what's in the carveout is a very complicated matter, and i can tell you from the last -- >> but it would be authorized things. >> it -- >> not unauthorized things. >> i think that focusing on authorized matters or matters that, that intelligence operators reasonably believe are authorized so they don't get caught up on technicalities would be a very productive way to start and would address the issue of frolic, detour and clearly unauthorized conduct that senator leahy referred to in his opening remarks. that's a, i think that's a productive place to start. now, i'm two years -- >> my time has expired, and i'm now encroaching on senator blumenthal's time, so thank you very much. >> absolutely. thank you, senator. >> senator blumenthal.

>> thank you, mr. chairman. thank you to the members of this panel for being here today. professor corn, reading your, your law review article i was struck by your observation and i think there's a lot of agreement with it that, essentially, the military extraterritorial jurisdiction act has been largely ineffective. and, in fact, you observe in the one of the footnotes that there has been, there have been virtually no prosecutions during the iraqi era. and i wonder if you could expand on the reasons that you see for that lack of activity under this law, whether it is weaknesses in the law or purposeful decisions

in the exercise of discretion that we just shouldn't prosecute for whatever reasons relating to intelligence or national security? >> well, first off, i should note that the law review is a couple of years old, so i think there's been good movement on the implementation of meja. as i said in my opening statement and in the statement for the record, i think meja was a critically important statute to enact, but i think there was a period of time where we had to ease into its implementation. so i think there have been two challenges with meja. one has been that it has been limited in the it jurisdiction -- in its jurisdiction. that's the challenge that ceja is motivated to respond to, to close that jurisdictional gap. the other is in implementation. meja was a complex law to implement because it touched on the interest of both the department of justice and the department of defense. and there was a period of time

where the two agencies were working on an implementing regulation that finally emerged. and that's why when i was in germany in 2001, meja was not yet a viable response mechanism to this act of civilian misconduct. my understanding is that the department of justice has moved substantially in a positive direction, and i'll leaf that to -- i'll leave that to the justice representative in implementing meja. i think personally whether we're operating under meja or if you enact ceja, one of the important aspects of implementation is ownership. i'll go back to my military training and the importance of effort. meja has a split interest and, therefore, you have the military responsible to initiate the case, but a u.s. attorney in the united states responsible to bring the case to trial and bring it to fruition. and i think there are creative ways that that could be streamlined. but, you know, as i understand it the, again, much of that has

been improved. i would also note that i my meja has been important to reach an issue that wasn't the primary objective, but has been an important issue which is to address service member misconduct that's discovered after the service member is separated from the armed forces. what i call the infamous specialist medlo case, one of the participants in the massacre who went on question 60 minutes request admitted everything, and there was no -- and admitted everything, and there was no evidence to try him. one in the western district of kentucky for a soldier who was involved in a brutal rape and murder of an iraqi teenager and then separated from the military before we found out about it. so i'm a huge fan of meja. and i think as we grow into meja, the implementation process will become more mature and more regular, and that's a very positive thing. but i think if she ya's enacted -- ceja's enacted,

that's an issue that's going to have to be addressed because now it's going to create bifurcated interests between state and justice or department of energy and justice. so there really has to be unity of effort from the beginning to the end of the criminal investigation and prosecution process. and if there is one great strength of the ucmj approach, that's it. the military initiates the investigation, assigns the prosecutor, prosecutes the case, etc., etc. i think it can be done under meja or ceja, but it just takes a little bit of, um, of coordination. >> for that unity of purpose, shouldn't there be a central prosecuting authority? in other words, perhaps these decisions ought to be elevated to the level of the attorney general rather than have united states attorneys responsible for them. >> well, again, i think i'm a little bit outside of my area of expertise. i would, i think -- and, again,

i'll leave it to the justice representative -- i think that there's something akin to that beginning now with the department of justice creating a team of prosecutors that focus on meja cases. so even if we prosecute the case in the eastern district of texas or the, you know, the western district of washington, the department of justice can detail one of these special prosecutors to the case to assist with the prosecution. which i think is an ideal method. one of the suggestions i think i made in the article was even within meja perhaps you could assign judge advocates as special assistant u.s. attorneys. we do that for civil cases, environmental cases, labor cases that arise at a military installation. and, you know, the military has very fine attorneys and very experienced prosecutors who could periodically be detailed to work in this special team if it would facilitate the

effectiveness of the ultimate objective. but i think department of justice has started that process already. >> thank you very much. thank you. >> thank you, senator blumenthal. and i want to thank these witnesses for their testimony. we'll now move on to our second panel. i would like to welcome a frequent guest of this committee, lanny breuer. thank you all. >> mr. chairman? >> yes. >> while we're waiting for the witness to come to the table, um, i wanted to mention that i think one of the reasons that this hearing is so important is

the size of our contractor footprint overseas. i don't know if that's been discussed already, but the last time that i was in iraq last year, our contractor population was far greater than our military population and our civilian population combined. um, i don't have the numbers off the top of my head, but i want to say it was two or three times as great in terms of contractors compared to civilian/government employees and uniform military. so it's a really big piece of what the host country sees out of our american presence there. >> and will increase, mr. chairman, even further under the strategy that's been outlined by the united states. so i think senator whitehouse's remarks are very apt. >> very, very good point. we'd like to welcome lanny breuer. lanny breuer is the assistant

attorney general for the criminal division of the united states department of justice. mr. breuer started his career as an assistant district attorney in new york city where he prosecuted offenses ranging from violent crime to white collar crime. he later joined covington and burling llp where he served as co-chair of the white collar defense and investigations group. mr. breuer served as special counsel to president clinton from 1997 to 1999. an eventful period. mr. breuer received his undergraduate degree from columbia university and his law degree from columbia law school. thank you for testifying and go ahead. >> thank you, mr. chairman. and distinguished members of the committee, thank you for inviting me to speak today with you about the proposed civilian extraterritorial jurisdiction

act or ceja. i am honored to appear before you on behalf of the department of justice where, as you mentioned, i'm privileged to lead the criminal division's nearly 600 lawyers in enforcing the criminal laws. together with the nation's 94 u.s. attorneys offices, the divisions human rights and special prosecution section, hrsp, investigates and prosecutes individuals under the existing military extraterritorial jurisdiction act or meja for crimes those individuals commit overseas. our commitment to bringing prosecutions under meja is evidenced by our record. since meja was enacted, the justice department has used it to prosecute numerous department of defense employees, contractors or individuals accompanying them overseas who have committed serious crimes. in united states v. steven green -- and i noticed that the

witness right before me alluded to that case, for example -- we convicted a former army soldier for the brutal rape and killing of a 14-year-old iraqi girl and the murders of three of her family members while the soldier was on active duty in iraq. the united states very williams convicted a former air force senior airman for a gang initiation beating that ended in the death of an army sergeant in germany. and just this year in united states v. christopher droplef, we convicted two department of defense contractors for involuntary manslaughter of a civilian in afghanistan. in addition, we've also been able to prosecute individuals for acts committed abroad when meja doesn't apply. in the particular, if conduct occurs within the special maritime and territorial jurisdiction of the united states or falls under a federal corral statute with

extraterritorial application. we successfully from prosecutedr example, former cia official aaron warren -- andrew warren for committing abusive sexual contact while on a u.s. 'em emby property while in algeria. although we've accomplished a great deal using our existing laws, meja leaves significant gaps in our enportion ifment -- enforcement capability. the criminal statutes with clear extraterritorial application make up only a subset of the federal criminal laws, and the special maritime and extraterritorial jurisdiction of the united states is limited. consequently, a u.s. government employee who rapes a foreign national in the employee's diplomatic residence may be prosecuted for his crime while the very same person might not be able to be prosecuted if he commits the exact same crime in

the victim's apartment. additionally, meja applies only when the defendant's employment relates to supporting the mission of the department of defense overseas. therefore, a civilian government contractor whose employment is unrelated to the mission of the department of defense but is related to another agency's mission cannot currently be prosecuted under meja even if he or she clearly committed a serious crime. moreover, whether any particular defendant falls within the scope of meja depends upon highly specific facts and circumstances relating to his or her employment and the statutory language has proved in those cases very difficult to apply. the proposed ceja legislation would address these gaps by

extending u.s. jurisdiction to all nondepartment of defense employees and contractors and those who accompany them who commit crimes overseas. we believe this legislation is critically important. mission to permitting us to prosecute u.s. government employees who are currently beyond our reach, the legislation would also show our international partners that we take seriously the conduct of u.s. government employees within their borders. mr. chairman, we're pleased that you are introducing and this committee's introducing new legislation to close the gaps in the law. we fully support the goal of passing the robust and comprehensive ceja statute that provides clear and unambiguous jurisdiction to prosecute non-department of defense personnel for their overseas misconduct without curtailing

lawfully-authorized intelligence activities. we look forward to continuing to work with the committee on such legislation. thank you for the opportunity to appear before you today. and, of course, i would be pleased to take any questions you may have. >> thank you. thank you, mr. breuer. mr. breuer, you suggest in your testimony that ceja closes a large gap in the law and would make it much easier for the department of justice to prosecute egregious criminal acts committed by all u.s. contractors regardless of the agency that they, that they work for. and if crime was committed on a military base or elsewhere overseas. but i'm struggling to get my head around how large a gap in the law we're talking about. how many cases has the department investigated or issued indictments on that ended up being dropped because of jurisdictional problems? are we talking about 10 or 20,

30, or more than 100 cases in the last several years? >> um, mr. chairman, um, i think we've brought probably around, um, 50 or so cases that have been indicted and that we have pursued. i think the real challenge is twofold. one, i think there are an enormous cases or a good number of cases that are not referred because from the very start those who hear about the underlying conduct can't find any kind of department of defense nexus. and so i suspect that we just don't hear about them in the first instance. and the second very troubling issue is in each of the cases where we have gone after some contractor who's not directly working for the department of defense, we literally can spend, literally, thousands of hours on one case trying to establish that nexus. so instead of investigating the underlying criminality, we have to investigate -- and these are very difficult cases -- that

contractor's nexus to the mission of the department of defense. and that becomes very burdensome and takes a lot of our resources away. and that's what we hope ceja will completely eliminate. >> thank you. um, when it was first supported back in 2007 that blackwater security guards allegedly shot and killed a thurm of -- a number of iraqi civilians, somewhere in the teens, in baghdad, it seemed like it would only be a matter of time before those guards were tried and convicted. i realize the department's been hard at work at this case for quite some time. i wanted to ask you about some of the jurisdictional hurdles that you encountered there. we are preparing to massively increase our reliance on state department contractors as senator blumenthal was referring as we continue to draw down our forces there in iraq.

given your experience with baghdad and similar cases, can you explain how it can be difficult to establish jurisdiction under meja and how ceja might make it better? um, and relate that to nesor? >> absolutely. let me be careful about nesor square. it's under active litigation. we just went in front of the court of appeals on an unrelated issue, and so now it's here in the district court again. it was an unrelated issue, so i just want to be careful. but there's no question even in that case that we will be litigating the nexus between those contractors and their mission with the department of defense. just taking a step back, because we have to relate it to the department of defense mission in any case that we bring with a contractor, the first thing that the defense is going to do is say, look, we were a contractor for the state department. we were a contractor for the department of agriculture.

we don't have the sufficient nexus to the department of defense. and that becomes an incredibly both fact-specific inquiry, and it also becomes a very burdensome inquiry in looking at all of the aspects of the underlying contract. and when you assume these cases are halfway around the world, we have to bring our investigators over there. we have to find out what your specific role was. this becomes a very difficult issue to then describe to a district court judge in the united states. and, frankly, i think at least half of our time if not more is spent on that very issue. >> as i understand, part of this legislation is to have investigators over there in place, right? >> yeah. well, i mean, with respect to that i think we'd like to have as much flexibility as we can but, yeah, we'll have -- we will have investigators abroad, and we'll have investigators here who we'll bring abroad. but if we don't have the litigate of the issue to the nexus of the department of

defense because it's enough that you committed a crime and you were a contractor for the department of agriculture, then we're more than halfway where we need to be. >> thank you. senator blumenthal. >> thank you, senator franken. thank you, mr. chairman. you may have heard some of the remarks as you were coming to the table from me and senator whitehouse about the importance of this issue in light of the fact that the united states is withdrawing its military forces from iraq and, in effect, substituting a civilian force whether it's characterized as military or not. and so the importance of this issue will only increase, and i think your testimony is very, very important in support of these proposed changes and want to thank you for that and also for your service to the nation and to the department of justice now. i wonder to what extent the

barriers here relate to confidentiality, security, intelligence, um, especially in light of what the united states supreme court recently had to say on this issue just in the past few days? >> sure. well, senator, that's a great, that's a great point. and, first, let me begin by saying i absolutely agree with you that with the drawdown,downt this will only become that much more important because of the role of civilians. but right now without seizure, senator, even in case -- without ceja we often actually face the issue that whatever program the contractor may have been involved in is classified. and so we have the very difficult balance with maybe some other aspects of the government in determining how much are we willing to reveal about the classified program? and even cepa, the procedure that the courts have for this,

may not be sufficient. so what ceja will do is it will eliminate all of that. we will never have to go into the classified aspect of one of your, of the undertaking. and that's why we think so strongly this will make a very, very big difference. >> and in terms of contractor responsibility just thinking about the civilian liability of a contractor, to what extent does it now and should it extend to the conduct of employees? in other words, where there are criminal acts, where there are other kinds of misconduct the focus is on the individual who works for the contractor, for example in the case of a rape. but should the contractor itself be responsible for the criteria it uses to hire people, train them and so forth, supervise

that kind of activity? >> well, senator, i guess my view on that would be that the same principles of corporate/criminal liability that apply in other contexts i would think should apply here. we hold in all kinds of contexts, often companies responsible for the criminal acts of their employees. it's very fact-specific, but just the other day in a totally other area in the fcpa we convicted the first company ever in that context because of the conduct of its employee. so it would be fact-specific. i think we would want to look at how high level the conduct was. but, absolutely, it should apply as it does, i think, in other settings. >> and in making these decisions and others, um, is the top level such as yourself, the attorney general of the united states increasingly involved in making these prosecutorial decisions because they involve such

important discretion as all do but especially national interests and national security? >> absolutely, senator. it absolutely gets our attention. under my tenure i'm proud with the help and support of the congress we combined two sections to create the human rights and special prosecution section, hrsp. and we did it because of our commitment in this area, and it absolutely gets my attention and, as appropriate, the attorney general's as well diswhrsm thank you very much. >> thank you. >> thank you. >> thank you, senator blume b that would. senator whitehouse. >> thank you, mr. chairman. mr. breuer, does the department have a position on mr. edny's recommendation that there should be a cardiovascularout for intelligence actsivities and, more specifically, should that carveout include the crime of rape? can you identify any situation in which rape is an approved intelligence activity? >> no, senator, i cannot. so rape is off the table. we do think that there should be an intelligence carveout.

we think that authorized intelligence activity has to be permitted to continue, and we don't want our intelligence community being, feeling as if they're being second guesses. so -- second guessed. so we do think there's an appropriate role for the carveout, but rape absolutely cannot and would not be a part of that. and, indeed, we would continue to pursue unauthorized activity of anything. the carveout makes the lanes that much more clear as to what we will pursue, and we'll absolutely pursue unauthorized activity. >> and the focus on authorization allows the intelligence agency or agencies itself or themselves to make it very clear internally how to provide the necessary legal protection for those authorized activities. that doesn't require other agencies to get involved, they can take care of their own in that sense by being clear about what is authorized. >> i think that's right. i think that also, um, as we know there's a body of law with

respect to what's ,000ed. -- what's authorized. congress has a fair bit to say about that. i think we do owe it to the intelligence community to give them clear direction so that when they're serving the american people, they don't have to feel they're being second guessed as long as they're working on conduct that's authorized. >> in your organization's experience dealing with these types of situations, are there considerations that we should be alert to that, depend on whether the victim is an american or a host country national? is that aty 2006 that pertains -- distinction that pertains in any dimension here that we should be paying attention to to, or is that irrelevant? >> so i need to think about that more. i have not made that in my own thinking particularly relevant. my view is that if you're abroad and you're a contractor and you're working for us, you should be held liable if you

commit a crime. i will say, of course, if you were, if you're a foreign national and you've been living in the host country irrespective of the contract and you've just been living there for a long time, then we would not have jurisdiction for you because you would be there. but if you are working for a contractor, you're in the host country because of the work you're doing for the government and you commit a crime, and i would say the one thing i would, i would say about this is we do think that we should limit ceja to serious crimes. i think we want to be thoughtful about how we're using our resources, but with respect to serious crimes i can't see much of a reason why we have to distinguish nationality. ..

>> our commitment is very strong, but these are resource intensive matters. getting our witnesses, supporting the families, all of this is exponentially harder because we are doing these things are cross the globe often. but we are committed to doing it, and we do in our laws, and they're doing an excellent job despite the challenges. >> thank you very much. thank you, chairman. >> thank you, senator whitehouse. senator blumenthal, you have any other questions to ask i have just one question. we don't have any of our republican colleagues here today, but i can anticipate that

one of the issues that may be raised is that this kind of proposal, ceja, would in quotes discourage, or deter contractors from wanting to be involved in doing business and working for the united states. you're not in the business of contracting, but i wonder if you could address that issue on behalf of the department? >> of course. i would hope that's not the case, senator. i would hope our contractors are wanting to serve because they want to fulfill their contracts and service, and work for the united states. all we are seeing here is that if you're a contractor for the united states, and you could make a serious crime in the host country, wherever you are, that we need a way to reach you. that's very important. i should clarify one point that if you're a citizen of the host country and you're working for

us, cj wouldn't apply to. we would rely on the host country. but i can imagine that fair-minded people think this would be a deterrent to working for a contractor. >> i would agree. thank you very much. >> thank you. >> thank you, senator blumenthal. mr. breuer, i want to thank you and other witnesses for coming here today to talk about this very important issue. and i look for to supporting senator leahy and marking up ceja and getting it a vote on the senate floor as soon as possible. also want to take this moment to thank senator grassley for working with me on a request, i'm planning to file later today related to contractors who have been convicted or found liable for procurement, fraud and other misconduct. mr. breuer, you may recall that i asked you a number of questions related to suspension and department back in january. and also press general holder on

those issues when he was before the committee earlier this month. i'm very concerned that u.s. taxpayer dollars are being funneled to contractors who have repeatedly shown to be, showed that an irresponsible or even worse, have been convicted of serious criminal acts. gao in each day to cover his look at how federal agencies are investigating, and when appropriate, suspending and d. barring contractors that we know cannot be trusted. the department of defense often gets criticized for this issue but it's not just them. as we mention we are going to be pouring more and more money into the pockets of private contractors to protect state department personnel in iraq are and we know that those dollars are going to contractors -- are not going to contractors who have bribed or other fraud on the us government. i will add our request to the

gao to the hearing record come and we'll keep the record open for the next week for any additional questions or statements by other senators. thank you again for your time today. this meeting stands adjourned. >> thank you, mr. chairman,. >> thank you. [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] ???

>> treasury secretary tim geithner wednesday called the debate over raising the debt limit theater and said he's confident the $14.3 trillion limit will be raised before the august 2 deadline. in an interview with politico's mike allen, he agreed unemployment and the housing market continued to suffer. the two spoke after an event cohosted by bank of america at the museum in washington, d.c.. >> good morning, everyone. totally we. try again. good morning, everyone. >> good morning. >> we've got a few more people filing in the seat. thank you all so much for coming. i'd like to introduce john harris, the editor in chief of politico. [applause] >> good morning to all of you. welcome.

[inaudible] >> we start a new line of business, our own political hedge fund where we place bets to make money on the future. summit in 2009 could have made a lot of money by placing bets on the future of tim geithner, his status. two and a half years later, he turned out to be one of the administration's great survivors playing a central position of what achieve economic policymakers in the obama administration. they could have made a lot of money on that. we expect him to be a -- here a bit longer.

[inaudible] apparently has quite the truck drivers vocabulary. [laughter] we're going to ask him and our c-span audience not to drop any of that language. before we get going i do want to thank bank of america. they have been the sponsors were several of these breakfast. i believe this is the fourth. they have been a great partner and we appreciate it. i special it is that word of thanks to jim. welcome to the whole playbook teen. up into the whole bank of america team come and we really appreciate the partnership. without any further ado, treasury secretary tim geithner and mike allen. [applause]

>> i will say before those guys get started, people watching allied and also follow us on twitter at hash tag playbook breakfast, and at the end of the show we'll still be taking questions so start thinking of them now and we will recognize you to get you all included in this conversation as the morning winds on. thank you very much. >> thank you john and thank you to the people in person, the people who are here electronically and on twitter, hash tag breakfast. you were there from day one. you were the president of the new york fed during the meltdown so you have sort of a permanent seat on the committee to save the world. you that good news this week between stock sales and aig, payback by chrysler. 75% of the money invested in the bailout has been paid back. at the time you're making those calls, did you think that was

possible or impossible? >> possible but plausible. if you think back to the fall of '08, there's a broad-based run on the entire american financial system. it was really falling off a cliff. at that point nobody would have thought, there would be the prospect of where we are today. it's not just that we've gotten so much of the money back so quickly, but you have an automobile industry that is profitable now, restructured, much stronger, leading the sort of comeback of american manufacturing. into the financial system today that is much, much stronger, dramatically restructured. weakest part is gone, much more capital, much safer, much more stable. and we achieved that, i think ultimately it will be a very, very, very small ultimate cost to taxpayers. much, much smaller than anybody

predicted. much smaller than the cost crisis, across the u.s. economy, at about three times gdp. so i think much better than we could have hoped, but it was because the president was willing to do what we're were going to be very politically tough things, very early on in office because he recognized nothing would be possible without making sure we threw everything we had at fixing this financial crisis quickly. and that was incredibly allegedly constitutional, but actually the right thing to do. >> you feel like public opinion is turning yet or do you think that this didn't happen? >> i think people still look at the economy, this is a very tough economy today. they see unemployment about 9%. on average it's much higher in some community. those are the aftershocks. i think realistically until people see, intuitive further away from that crisis you see more people back to work, more

confidence, i think people are not going to be that impressed with the financial returns of this program. but the financial terms of the program are very important. think about it, people thought we were going to lose hundreds and hundreds and hundreds if not trillions of dollars fixing the financial system. and now if you look all incoming you look at what the fed did, including when i was in new york, you look at what we did through t.a.r.p., we are forced to do through t.a.r.p. we never want to do it again. you look at what fannie and freddie did, the losses they to god, all the things we did to put out the financial fire. all in, people think of ultimate losses will be well under $100 million which is an extraordinary account. we are now in the midst of this critical debate about how to go back to living within our means as a country, bring our deficit down over time. and that challenge is much easier today because of the successes, the strategies we did

with putting of the financial fire. their hundreds and hundreds of billions of dollars to go to long-term deficit reduction agreement for education or head start or if other things because of the success. >> you are saying it could wind up costing under 100 billion. what was the upside? what did you think it could cost? >> if you look at what people said at the time, cbo's estimate of just t.a.r.p. alone piqued at $350 billion, but if you add that what they thought loss of fannie and freddie can it was another public quarter trillion dollars. a lot of analyst at the time said realistically it would be in the trillions. that's just the direct costs, the direct cost of the crisis. the indirect costs are higher unemployment, not just the thousands of companies that failed, and those costs were terrible, terribly dramatic and again we're still living with the damage that has put on the economy. >> steven ratner worked for you

on autos, the press called him the car czar. in his book, bill a cohesive when you went into to talk to rahm emanuel, then the chief of staff about chrysler which pay back their money this way, that he said why even do gm? he wondered if you should in any these bailouts. >> he who said that? >> rahm emanuel. >> at that time although we were having a rich debate like you'd want to about everything you're doing, i remember, think about the choice the president was faced with. very difficult politically, very costly, very asked and said, very risky. but the president and his senior advisers i think all understood that again our job is to do what was necessary to make sure that we prevent as much joblessness as we could and make sure we get out of this as quickly as possible. i think we all felt that if we had allowed the collapse of the american automobile industry it would have seen hundreds and

hundreds of thousands more jobs lost. it would've deepened the recession, magnify the housing crisis, and make it much more harder to come out of this. what he did was he put these through bankruptcy. very tough conditions, and you're seeing the results of today. in those rooms at that time, you had a lot of debate as you should have. and again that's a test of any credible policy making process. this president is very good about forcing people to look at all options, and he wants to hear all the choices in their start -- stark contrast. but what he is exactly good at is the one to decide and to choose even when the politics seem terrible. >> the other day the present economic adviser was on cnbc and jim cramer asked him why did decision doesn't talk more about the successes. by longtime the politics have been very toxic.

>> i talk about them quite a b bit. >> but what i hear now is public thinks bailouts, bailouts are better. i think administration is starting to talk more about tough choices. that sounds better than bailouts. can we expect to hear more of that now? >> well, i think it's important for people to understand and i think it's a hard thing to explain how far we've come, why we're in a much stronger position to do even with all challenges we face. and that was not an accident but it did happen on its own and it would not have happened without the type of choices that the president made using authority congress gave him. and, of course, just to give credit, he was building on a set of hard choices made by predecessors and by president bush to as the. i think what was what was remarkable for this country at the time was you had a president willing, during the transition, before he took office even, to

make sure that he had the authority to do what was necessary. so i think what's very hard for the average american to understand today looking at this economy is not just as barney frank famously said when he said you can't run an election telling people could have been worse. very hard for people to understand it could be worse than it was because people have no memory of the great depression. no experience of what most countries face going through a crisis. i think the hard thing for people understand, why it is not possible for it to be dramatically stronger today. because again, this was a crisis produced in part by people borrowing too much, banks taking on too much risk him huge over investment in real estate. and because of that, it takes time to work that often work it through. so as people save more, bring down their debt, that makes growth slower. and because utilities huge oversupply of houses, of real

estate, monetary policy doesn't do, doesn't have its power in helping stimulate recovery more rapid recovery in the context. so these are things that just take some time to work out, and i think part of what is hard today is people have a hard time separating what is the damage caused by -- caused by the crisis on the underlying basic resilience of strength of the american economy. if you look past, look through all of the trauma caused by the, all the things are working through, and you look beneath a to what's happening in the economy in innovation, export strength, private growth, private investment growth, i think we can be really very encouraged, very confident that we're going to come out of this stronger if we make some good political choices in the months ahead. >> mr. secretary, how worried are you that there are still shakeout to come in housing? >> housing, you know, is again,

we are sort of we are four years into the housing repair, you could say. and i think speed is repair, that's a nice way to describe it. [laughter] >> but we've got several more years to go. again, just realistic that i think it will take time still big deal that. you are saying delinquency rates come down steadily quite dramatically. and that will again use the risk of more people losing their homes going forward. we have a terrible mess to clean up. we are working as you know to try to get the services to dramatically do a better job of meeting the needs of their customers and their investors, to clean up the mess they created to bring more legal uncertainty and the whole process, and to do as much as we can to try to make sure we did get more people a chance to stay in their homes. but the best thing you could see the future of housing, it will depend much more now on just

what happened to the economic growth in the trendy pick if we're going as i expect we will at a moderate pace going forward you will see that healing process continue. >> it's been reported we understand the president himself will be out talking to some of these. >> and the president will go to toledo next week to a chrysler plant hope again underscore, help people understand the amount of restructuring that happened, and why not just the choices made by the decisions made and the management, what management has brought to this companies should make americans feel more confident in the underlying strength of the american worker, of quality of american innovation, and what you can do as an american company. even in this much more competitive world. >> a figure that sort of hurts that case is as you've seen the forecast for unemployment in q4, 2012, 8.2, a tough number. >> you, you know, unemployed can still high and it will come down

slowly. i think too slowly for everybody. and it's important to remember because the political debate in washington now seems overwhelmingly dominated by long-term deficits, which i hope we can talk about it but it's good to remind people that again the most important thing we have to do is to make sure we get more people back to work as quickly as possible and make sure the economy is going to durably, led by the private sector. we are a long way from where we were. we're making progress but not fast enough for people, could remind people that the most important thing washington can do now is to create the conditions for continued progress, getting more americans back to work. private sector is created i think roughly 2 million jobs since the low, but obvious in millions of more americans out of work and again, washington should be focused on creating the conditions for that to happen more quickly. and remember, that's our first obligation, first priority.

>> would you say the country has a jobs crisis because absolutely, of course. again remember, this is, all these things you see we are living with today, millions of people still working for look -- work, risk losing their homes, stewart about the economic security, that is the tragic consequence, legacy, of what was the worst financial crisis since the great depression. again, just to go back, remember this was a crisis that if you listen to the economic constraint, it was larger, the shock a cause larger than what participate in -- precipitated a great depression. and so in comparison to the size of the shock, the president working alongside the fed with the authority of congress gave us today, entirely effective job at stopping the collapse in getting the nation for growth and started the process of repair. but that process will take sometime. >> you have said there could be

another story. what does that look like? >> i think that was in the context of thinking about future crises. you know, financial markets are the product made by humans, by individuals, and you can't take risk taking and markets. you can't prevent people from making mistakes. and it will be in the future, i don't know, hopefully far in the future, there will be financial crises. it will be a challenge for us. it will be very different from this experience the job of government and the task of reform and what wall street reform act will do is give us the authority make those crises less frequent, less damaging, to make the mistakes firms me, less dramatic, less damage to the innocent, less collateral damage. and to do that we've got to make sure we put in place and stick to it and put in place tough reforms that run with what we

call better shock absorbers. so the system is better able to adjust the mistakes the minute they have spent so we could have had something as bad as '08 or no? >> i think it is very unlikely you'll see anything like that ever again. and, of course, you will see people stand years and years reducing the risk that will happen. but it will be a crisis in the future, hopefully far in the future, but i think what reform act did is give us a much better capacity to manage that. remember what happened to the united states of america we left the financial markets completely outgrow the framework of the constraints and protections we put in place around banks after the great depression. we let an entire banking system merge outside the framework of regulation with no constraints on risk-taking or on capital. and so what happened is if you allow that to happen, all the risk move to the parallel system, and you allow the huge amount of leverage to build up. in those iconic giant financial

giants. and when things turned and the recession build and liquidity dried up, there was a collapse of that basic parallel market come put huge amount of market -- pressure on the rest of the system. so what this reform act does, dodd-frank act does come is give us the ability make sure that if you're a bank, you're engaged in banking. we're going to make sure -- and you matter. we're going to make sure we have authority to put leverage requirements, capital requirements to make sure you hold more financial cushions against loss, you find yourself markets are really so that we are not vulnerable to you making mistakes in the future. that's the central objective of the reform act and the most important thing we can do, and we now have the authority to do that. but we have to stick with reform. >> capital requirements were too low. they been increased. a word about sending increased again. are you worried that could

interfere? >> i think will be very careful to make sure that doesn't happen. so when we think there's a case for tougher limits, tougher constraints, that they are phased in gradually over time so that we can make the system more stable without putting at risk, you know, an expansion that still in its early stage. that's hard to do but i think we can do that. you were saying and i think it's important to point out, you are seeing some people run a war of attrition against the reform act. they are trying to starve the agency's -- >> who is they? >> well, i won't name them, but there are people in the financial community and in the political system who are trying to undo, block, delay, we can. >> house republican? >> there are people -- [laughter] >> human beings -- [laughter] who are doing that. but what they're doing is it's very clear what they're doing.

they are trying to starve the agencies of thing so they can't enforce protections for investors. and they're trying to block appointments as a way to get leverage over the outcome and they're trying to slow down so that they can weaken over time the thrust of these reforms. and we're not going to allow that to happen of course. and i don't think there's any risk that will happen, but remember, this is where have today is the system that caused across the. congress passing reform, loss does not itself create a stoicism ejecta that the rules be shaped and put in place, have traction so again committee with our system is much stronger today, much better capitalized, the weakest parts are gone, and we do this much earlier, much more aggressively than any other country, we've got to make sure these reforms can work. >> have these mysteries forces that you have referred to, have

-- >> and our courses i would say. >> having had any success of? >> no, and they won't have success ultimately again because they can't -- and i going to -- really, think of it. think of what this crisis cost that you think you'll have credible process of legislating that would undo? it's not going to happen and it shouldn't happen. i'm sure we can prevent that. >> you mention holding up appointments but a number of appointments this administration has yet to me. why is that? >> it's very important point that i. i don't know why it's a good stretch. think about this. everybody i think wants to make sure with a strong financial system, does a better job of financing innovation, the great companies of the future but everyone recognizes it's got to be a more stable system if it's going to be good for business, consumers have better production. i think those are unambiguously shared objectives. but for the torture of people in these jobs who know what they are doing. were going to come work for the country and set in those tough

jobs and make a decision to understand markets, and a strategy that prevents that from happening cannot be in the interest of the american financial system. and so what's happened is by making some confirmation process, really untenable for most people, they had deterred people from being will want to come up with are so skewed that process. so the reason why all those jobs are sitting empty is because they have raised the bar so high, untenable a high, and that is a mistake. and it is irresponsible. and it is terribly bad for the country. remember, these are really difficult, coveted choices, competent problems. and how could it make sense for us to make it harder and less likely you get talented people with some experts to come.

it can't be a good idea either for the financial community or for the people that say the want to defend their interest in the congress. >> you are saying it is hard to fill these jobs that are required to put -- >> we want to put a people who be confirmed. we want to put up talented people who can do those jobs, find the intersection between those two things has become difficult because people are less willing to, and congress has proven itself unwilling to confirm, you know, nobel prize winning economists. people with the local history, no particle background, no politics, independent people have a great record experience running jobs that are difficult to do in supervision and things like that. i hope it will change. we're working very closely with the people we need to work with to try to find a way to freeze this and it's important we get. >> mr. secretary, before this, a

question that was most often suggested this morning, people want to know how you thought about the portrayal of you in hbo's movie, too big to fail, based on the book which we especially called too big to read. [laughter] the beast too big to carry. >> i hate to admit this, i have not read the book. >> what? >> i have not. [laughter] >> i have not seen the movie either. >> you are in the screening of it. >> no, no. i was in the screening of it. [laughter] >> a very important distinction. i've got a lot going on in my life. [laughter] i agreed to go be interviewed by them, and i did read the book called lords of finance about different financial crisis, a much worse when. i talked to them about the

crisis but haven't seen the movie yet so i can't speak you have jet black hair in a movie spent my here is very great now, as you see. >> you went to the panel but not to the movie? >> i guess. >> a number of people said about them and was a to know if you work out as often in real life as you in the movie. you are extremely fit in the movie. >> i do -- i do -- i do try to work out as much as i can. i'm sure he's a great actor by the way. people say he is a great actor. but i've no interest in really reliving the dark moments of 2008. >> let's revisit those dark moments. [laughter] >> you have talked into college to talk about how close we came to catastrophe. like what was the more that you became convinced that it could happen, or maybe it was more likely than not to have been? >> i think he got to look back further than that. is really begin in the summer,

late july, august 2007. that was really when it turned, and it was, you saw the first signs of panic and what panic as to behavior. of course, it cannot, of course progressively worse, more scary after that but that was really the turnpike i think it was at that point where you saw in one famous example, people really -- i won't describe the example, but you saw the classic, the classic beginnings of people running away from any kind of risk and with the destiny financial system. dramatically worse than away when we came into the fall of '08 and a movie i gather really begins which talk about, well, the way people think about this, they think about this as the weeks running the failure of lehman and aig and all those things after that, but going into that some of those weeks in september, you know, it really was a gathering storm, huge amount of momentum behind it.

the world was shifting very, very quickly into a recession. the u.s. economy was falling in the fourth quarter at an annual rate of almost 6% a year so huge amount of momentum behind it and that was threatening to engulf the strongest institution in the world. large counties, not just large banks. and that was a very grave, a very great mom. i think none of us knew at that moment -- it was great in part because we came into a crisis with none of the basic tools governments need to draw a circle around a fire break around the entrance to prevent the fire from jumping to grand of the basic tools. that's what made us so dangerous. and again that's another reason why i think what reform act we're in a much better position because now we can force institutions devote more capital against the risk when they make mistakes i'm a make those mistakes less damaging to the innocent. we can prevent the fire from

jumping and starting a flame well run starting -- institutions that are the bad actors from that catastrophe who are still out there? >> i don't know the answer to that. i think that, i think i would say this would. mike, part of confidence and trust in financial system is confident that you have in an enforcement regime with cops on the block that will go after and effectively deter, not just illegal behavior, bad behavior, abuse. and part of it is not enforcement challenge. it's getting reforms in place. again, you can't prevent from making mistakes but what we can do is make sure that when people take risks cannot take a risk that imperil the system as a whole to the economy. and so to rebuild confidence company both those two things. you need an enforcement system that works and you need a set of rules that do a better job of

preventing disaster. and we have a long way to go to try to rebuild confidence in both those aspects. they were a great strength of our system for decades but we lost, a devoted and we have to build back. >> there has been reports about criminal investigations into behavior that went on during that could. do you believe charges will eventually results. with i can't comment. i don't know enough but history has not been written on that yet. you have to watch to your to watch it, look ahead to what happens in process. but again i think that we have a very strong enforcement mechanism in the united states but i think stronger than any other finance system in the world, and i think you'll see people try to make sure they're using that authority as carefully can aggressive as they can to deter this kind of behavior in the future. >> do you believe criminal behavior occur to?

>> i'm not a position to know that. i don't have to make that judgment. people, people make those judgments are in the judicial system and enforcement. >> when you say history has it been written, what do you mean by that? >> i just think it's not over. you know, you know there's a lot of things moving through the system now, and you have to wait. >> your document is criminal investigation? >> just in general, yes. >> what are some of the countries that did it right? who can you point to who came to the recovery in a way that -- >> you mean financial institutions speak with anybody who is involved in a catastrophe. >> i don't know. i think that -- i don't think any of -- know what testing which themselves. and i think the most honest and the most knowledgeable, even the one to look the stronger today took a missed it. they will say that like so many other people around the world,

they made a bunch of judges about the future. they assumed a more stable future. is in house prices wouldn't fall. they assumed that everything was stronger than it seemed. and they all got caught in a race to the bottom on care and prudence. they all got caught up in the pressures that lead to more leverage, more risk-taking. and all got caught up in i think a terribly damaging compensation raise build on completely unrealistic expectations for what financial businesses could produce in terms of return. and so i would say no when distinguished themselves. >> mr. secretary, i've heard you say in recent months that you are optimistic about some sort of action this year on corporate tax reform. i wonder where that is at? >> we have been saying for a long time, the president said in the fall that he would like for us to do this.

so yes -- ss to look for a range of options, come up with a set of reforms that would achieve the following objectives. what we want to do is make sure that we're doing everything we can through the tax system to improve incentives for investing in the united states so you see more jobs created here. what you want to do is create a system where it is more likely that any large american manufacturing copies build their next play care what makes sense for them to do that, rather than someone else. you want to improve the odds that the major foreign countries in this business choose the u.s. has a place to build a new business. and you want to make sure you get the tax incentives better to doing that. so he asked us to look at options. we've been spending time doing that, consulting with the tax community to broad-based community labor and we used to do that with people on the hill. i have a regular private breakfast with chairman ranking member of the tax committee, and we made a lot of progress. and i think we have a framework,

at least a set of options, which would be good for the country, good for the economy, good for investment. and would have some prospect of commanding. but we are in the midst of a very difficult, public innocent of negotiations how to bring our system and better balance. that's going to i think dominate, dominate the field the next few months realistically, and probably should. and we need to get through that before we start this process more formally because we don't want to redo anything right now that would carry one of the following risk. we don't want to do anything that will make those budget discussions harder because they are hard enough. we don't want to do something now that would reduce the prospects. so i think that once we get through the fiscal thing will have a chance to move this forward and we will try to do that.

>> you hope that originate in to put out your options, your white paper in may or june sounds like i do think there needs to be some space and that would occur after the debt ceiling negotiations be? again, we want to make sure we're getting these fiscal discussions in a good place. get those done and that process and to the next age and then we'll have a chance to forget what is a good strategy for getting corporate tax reform moving. >> i feel like now you are thinking more like the false be? again, we have to see -- there's a reason why we have to wait that long. we just have to get this stuff done and start the process again. you know in washington, the challenge in washington, a chase everything we do. is how to design a strategy that will maximize the odds you get legislation on terms that make sense. so we have to choose the timing and the strategy based on that. >> it sounds like you're saying late summer or fall been. now, -- [laughter] >> going back to corporate, you

suggest. pulling back -- [laughter] pulling back the camera from corporate, what is the single tax cut that if you have your fingers would have the best impact on economic recovery? >> i think we did, we did two very good things in december. in the lame-duck session. >> i'm sorry spent we give businesses for limited period 100% for investment in capital equipment. good catalytic effect on behavior, and pretty good high return bang for the buck. and gave americans very substantial tax cuts similar reason. i think those are two good examples again, effective use of a temper tax incentives to help us. but i think now as you think about the economy going forward, what you need to do is you have to think of permanent reforms that people can make investments in over the long-term.

we live year-to-year now with huge uncertainty about what particular tax regimes going to be for different businesses, different investment choices. and that really makes no sense to try to win a series economy, series country in the tax regime. so i think looking for doubt we should be focused on long-term investments that the test is why the things the markets likely to under finance on their own, utah where returns don't get captured fully by the innovator. and what other kind of change has big long-term bang for the buck, those are the two tests we should apply. but i think realistically we should rethink about permanent changes people can plan for the long-term. >> secretary, are you going to be the first treasury secretary in history to preside over american defaulting on its debt? >> absolutely not. i think two things will happen this summer. one is congress will act to make sure we are paying our bills, avoid default as they always have when they recognize and are

able to do. and we're going to put a place i believe a long-term comprehensive bipartisan fiscal reform plan that begins this process of giving us back to living within our means. with a very good chance of doing that, and the basis of what i've seen these negotiations, i think you are seeing a fair amount of pragmatism open as recognition that we have to do that. >> this pragmatism is on the part of both parties? >> yeah, i think so but if you're listening closely, washington is a difficult place to read. people say that the most unbelievable things. you have to ignore a fair amount of that, and look at what people are doing and what they are open to doing. and i. and i think you're seeing more flexibility. i will put anybody in a difficult position because of course ultimately nothing is going to happen unless people are overall comfortable with basic balance in that pic but i think we are a to doing that. again, i think right now if you

think about it, we've got a lot of challenges, but all those challenges, bring them down unemployment, think about better investment opportunities or the united states, making sure we have room to invest in things like education, not just me our national security needs, all of those things depend on locking in a fiscal framer, fiscal reforms that make people more confident that we'll bring these deficits down over time. if you don't do that and you the people at a much more uncertainty and that will make the recovery slower. >> stick with a dizzying for a second and then we'll do the long-term fiscal stuff. you think about the risk and not acting about the debt see. do you think minutes of congress get that? >> i think the leadership absolutely understand. i think the vast bulk of congress understand but i think there are some people who are pretending not to understand it, or think there's leverage for them and threatening default. i don't understand as a negotiating position. you going to say -- and every the 14th minute speak with we will stipulate.

it's paperclip in his -- >> the validity of the debt of the diocese authorized by law, including debts incurred and bounties for services in suppressing insurrection or rebellion, this is the important thing, shall not be questioned. so as a negotiating strategy say you're going to go same if you don't do things my way, i'm going to force the united states to default, not a the legacy of bills accumulated by my predecessors in congress. it's not a credible negotiating strategy and it's not going to happen. and again, the leadership understands that they have to do this. they also understand as we do that we want to take advantage of this book to guide people to do things they may not otherwise have been comfortable doing. i can come up with the steps on a long-term path that is more sustainable. >> house republicans have scheduled a test vote on the debtli til to make a point.

are you worried about market reaction or what will market reaction to that be? >> this is a funny place, washington. think about this. as i understand this, i'm not sure i do, that house republicans introduced a bill that they say they're going to oppose, ask their members to vote against, and then go tell the investors of the world to pay no attention. so it is a strange place, washington. [laughter] >> and you did get it right by the way. exactly right. >> i didn't really understand. let me do the positive side of it. the leaders in congress are trying to figure out a way to get their members to understand what's necessary and are trying to do a range of things to maximize a chance to get the votes were doing this. it's going to require republican votes and it's going to require some democratic votes also. in the house of course the majority party will carry the burden of getting this done, but

they know they need democrats for it. so that's partly why i think is recently optimistic. you can get something done on the budget front on reasonable terms because you can't do anything with just one party. you need to do it together. that will force i think a bit more realism and balance to the overall package. >> you right there telling the markets pay no attention, with the markets listen to? >> i think they will. if you look at financial markets now, we pay very low interest rates tomorrow short-term, long-term now. and some people misread that as lack of, we'll have a a problem with deficits. but usually a reflection of confidence that we'll ultimately do the right thing. that washington will ultimately act, and act to fix this problem, and much less make sure we pay our bills. so i think you see a lot of confidence of the market is

about -- the ultimate capacity of this political system which we are now testing, if you take it too long you might see that confidence the road. and you don't want to take it too long. again, think about it. you don't want it, you don't want to force people to start to prepare for the possibility if people misguidedly to washington. that would be irresponsible your that's a phrase i think if you listen carefully, you are saying the leadership use they said the president, they say we are not going to take this too long, we're not going to take to the edge. we recognize that we can play around with this. >> wall street, next week, what about international markets? have you reached out to the japanese, chinese, tell them what's up speakers they spend a lot of time trying to understand this place, this country so i think they are pretty good deal of what is theater and what is reality spirit and you believe what is occurring is the a to?

>> obsolete. this is all theater. but again beneath the theater you had seen people start to work together. i would we dinner last night that pete peterson had. pete peterson is an iconic fiscal hawk, having a summit today in washington on the fiscal problems. and one of the major combatants in the previous -- what changed in terms of prospects for a good outcome of the fiscal side was when, if you listen carefully, you saw the republican leadership, conservative republican leadership and the president of united states alongside a bipartisan fiscal commission say we need to do for $20 in deficit reduction, and to embrace a path to the desert largely the same. to bring the deficit down over the next three to five years to level where the overall debt burden starts to shrink. and when you see that brought a consensus in the american political spectrum about what has to be done in the debate is

only about how to do, about the composition, what's the mix of things you're going to do to achieve that, then that has changed expectations about the probability of an outcome. and i think i think smart people look at that, they look back, for example, you look back at 96-97 when president clinton at that point joined with a bunch of republicans and say we're going to balance the budget and and that's what she did about completed i think people are sophisticated and smart outside the united states they look at us today, they know washington is our duty to do politics in their countries, too. they will give us a chance to prove the campus political system can do it. >> mr. secretary, we agree the debt limit is essential and will get done. the more interesting conversation is a long-term challenge that you talk about. what do you think now is the prospects for a sizable deal on

the issues because i think they are quite good. because they can give people a green, about bringing the deficit down to the level where the debt starts to fall to the share of the economy and the recognition that you need to do as much as you can now in the form a substantial down payment to lock in significant savings towards that objective. you don't need to solve it all at once right now. but you have to go as far as you can. so that's why think you have a realistic process -- prospect. >> the down payment might look like something like 1 trillion of the 4 trillion over 10 years to? >> like the vice president suggested as well as the majority leader of the house, and so of course i think that's a realistic prospect your but remember, it's the shape of it that matters a lot. because again, why do we care about this stuff? we care about this stuff because

we want to make growth in the united states our job growth, investment growth stronger in the future. so the composition of the savings, how you balance the interest of the elderly with the young, how you balance the need to make sure we can invest in education against the reality the government will have to demonstrate they can save money, do more with less. you know, how do you balance the need for better investments against the need -- how do you make it fair, how do you make sure people feel like they are bearing a shared part of the burden for bringing these back down-to-earth? i do is very important. in terms of the credibility of the basic exercise. if they tried to solve this, people either tried to solve this by assuming away the problem by using growth assumptions that create the illusion that we will solve it by assuming there'll be political in the future, that kind of magical thinking, then the market will look at this and

say, it's not real. >> when you talk about political courage in the future, what you're talking that is what like very specific target? >> we want to have a mix of targets for deficit with a dead cat that forces the debt down over time. within an enforcement that makes it happen but a substantial down payment now so that people can see and feel the reforms are going to happen. >> when with a real debt catastrophe can? i've heard a panel on this very stage with the estimates were from nine months to five years. like, if we didn't act, when we start to feel? >> you can't know the answer to that question. that's a judgment about the capacity of a political system to get its act together. >> and at the moment -- >> you don't know when it'll come. what you know is our deficit are unsustainably high now and have to come down. and you can't know but you don't want to take the risk that you can get behind it if you want to put yourself in a position where

the markets force you to act. if you let yourself get in a position and it's much harder to fix, much more costly. but i want to come back to this point about balance again. you know, people need to look at the shape of the package and say, is a realistic, is it fair, will congress hold to it over time? and that's why things like the balance between revenues and savings is so important. you know, realistically you're going to have to find a way for a tax reform to get revenues that can help reduce the defic deficit. and just one more thing on the. i think americans are not going to be open, maybe should not be open to doing that until they can demonstrate, we can demonstrate that the resources you get through tax reform are going to be is for deficit reduction, just like the other side of it. people are not going to accept, you know, the dismantling of

medicare or deep cuts in medicare that shifts costs to seniors result in huge cost increased to seniors, if those savings are going to be devoted to the same tax breaks for the most fortunate americans. it's just not realistic. it's not going to happen. it's not possible. so this thing about alice is important for the credibility. if you put a plan out there and the market looks at it and says it's not realistic, it's got implausibly deep cuts, or politically unfair balance, then they will think it doesn't look credible. >> or three people if you lock in a room, gave him truth serum, the church ask that you believe can solve the deficit? >> there's a lot of people. again, i don't think -- this is not a difficult economic challenges. it's not a hard financial thing. there's lots of paths to recently balanced deal that will not put unfair burden on the

economy. and people understand it. it's a fundamentally apolitical challenge them. it's a challenge of how you build a coalition that can support that at a time when the country is so divided. and that's the chunk's. there are only a couple key players in these conversations right now there you are one of them. the vice president is running this process. what style does vice president biden have? >> before i go to him, you have around the president down, you really have an exceptionally talented group of people who have been at the center of all the successful bipartisan fiscal reform of the last two decades. so in jack lew and gene sperling, and bruce reed, and jason furman, just exceptionally talented people. and the vice president is spending a huge amount of time, not just talking to the leadership on the hill, but one on one with exceptional care and discretion. he's been a huge amount of time making sure he