year. i've been supportive of the appeals so we can get guidance from the court as i'm a strong defender of the first amendment. my third week o on the job i tended to be bill signing ceremony for large bipartisan majority of congress. i voted to strengthen the fine anyway for in decency, and we need guidance from the court's. so i want this to be expeditious. i'm glad to see the commission has started to dismiss some of the complaints against -- against cable channels and dismiss those that are easily dismissible if they fail in a safe harbor. but we have a backlog still of about 4 million complaints which we need to get you and the commission may not get too into the supreme court ruled. >> host: we're out of time. robert mcdowell, fcc commissioner, thanks for being on "the communicators." amy schatz, you, too. >> guest: you, too.

>> ahead on c-span2, aol ceo tim armstrong and arianna huffington discuss the merger of the two companies and impact the internet is having on journalism.

>> next remarks by aol ceo tim armstrong and arianna huffington on the merger of their companies. and have the internet has impacted journalism. former cnn ceo and "time" magazine editor walter isaacson also takes part in this forum. from the national press club, this is an hour. >> good afternoon and welcome to the national press club. my name is mark hamrick and i'm the one in the fourth president of the national press club. we are the world's leading professional organization for journalists, committed to our professions future of programming, events such as this while working to foster a free press worldwide. for more information about the

national press club, please visit our website, press.org. please visit press.org/library. so we have of our members worldwide, i'd like to welcome our speakers today as well as those attending today's event ahead table includes guest of our speakers as well as journals for club members. if you hear applause from the audience today we like to know that members of the general public are attending so it's not necessarily a lack of journalistic objectivity that you are seeing. i would also like to welcome our c-span and public radio audiences today. our luncheons are featured on her member produced weekly podcasts and that's available for free download on itunes. you can also follow the action on twitter using the hash tag pound in pc land. after our guest speeches conclude will have q&a and i'll ask as many questions as time permits. now it's time to introduce our

head table guests and i'd like to ask each of you here to stand up briefly as your name is announced from your right. we begin with brian doyle who is a web producer at politico. vanessa fox is ceo of nine blue. eric is report with dow jones newswires. i guess ever speaker who also has remarks today is walter isaacson, ceo of the aspen institute. maryland, business editor at npr. skip over our speaker for a moment, over the podium as well, melissa sharp with new silk media. she is our fantastic speakers committee chair. skip over our second speaker for a moment, the key to seem to press secretary with the natural resources defense council. also the organizer of today's event. we thank you for that, bob.

we are told that it is a vote and we are awaiting another guest of the speaker, congressman brad miller of north carolina. then moving on down, andrea stone, correspondent for "huffington post." glow is washington director of reporters without borders and a vital member of our press freedom member and al isley is editor at large who tells me been blogging for "huffington post" since day one. now please a large amount of applause for everyone. [applause] >> if there were a king and queen of online journalism, our headline to a guest speakers could be considered candidates for members of the royal family. when tim armstrong and arianna huffington announced aol's purchase of "huffington post" in february it marked not just yet another reshaping of aol but a redefinition of the online news business. less bench six months after that

$315 million deal, aol now boast a new staff reported as large as that of "new york times." aas a good insult to the times injury, "huffington post" just last month surpassed the times as the most visited news site on the internet. just last week they made the boldest attempt to -- overseas. opening a u.k. edition and becoming the newest addition to london's interesting journalism theme. [laughter] just as one of its oldest avengers, the 168 year-old "news of the world" was printing its final edition. given all that's happening there, one could imagine there's an opportunity for a new player on the sink at "huffington post" is a noticeable part of a wealthy empire but but not the only part. aol's patch division is a closely watched experience in hyperlocal's citizen journalism today. website such as text crush, aol defense, aol government new site helping to shape a new type of

highly specialized journalism. this of course reshaping and redefining and restructuring has come with some anxiety. along with hiring some of the biggest names in journalism and building out a large new staff, aol has agreed under haslett go 700 workers and squelch the careers of some bunning writers and editors. while every poorly paid huge salaries to some of its top journalist, it also plays bloggers the opportunity of being online. some of its contributors also get relatively low money. "huffington post" tendency towards dramatic presentation will also sometimes blurring the lines between opinion and fact has run some scorn from some traditional journalists. let's get to our speakers now. as chairman and ceo of aol, tim armstrong may be a new medium mobile but he got his start in an old school style, running a newspaper. fresh out of college he and a friend started a tabloid called bib in boston in the early 1990s and was aimed at new graduates entering the

workplace. a few years later he was tapped to take over and went another boston paper called the square deal. yet tim realize the future both his and that of media during one day a visit to the computer lab at mit, where researchers were working on the mosaic web browser that would become the foundation for searching for content and then fledgling internet, he had a realization. he began working on ways to build a major online news operation and sell advertising online. he is now doing that. prior to joining aol he served as president of america's operations for google and also worked at disney's abc espn internet ventures. besides her namesake website, arianna is perhaps best of our sometimes sharply worded political, let's say comments. she straddles the worlds of politics, media and hollywood like few others. as if to prove wrong those who might try to define her for all time, she ran for governor of

california as an independent, at one point teaming up with a green party candidate in an attempt to beat another out of the box candidate, arnold schwarzenegger. she is the author of more than 13 books, including the selling biographies of public also, opera star maria callas, self-help books based on her own personal expenses, and political commentaries most recent of which is called third world america, published last year. her first book called the female woman was published by random house back in 1974, not long after she graduated from cambridge with a masters in economics. and interestingly enough, she served as president of the university's famed debating society. perhaps what is most intriguing is that her life so far, or what am i so is there may be more surprises in store down the line coming from arianna. finally, win a special guest here who helped to put all this in perspective, walter isaacson, the former chairman and ceo of cnn and managing editor of "time" magazine who cut his

journalistic teeth on the "sunday times of london" and at times ptm in it worse. he is author of a number of books and biographies about einstein, benjamin franklin and henry kissinger. currently serves as chairman of the broadcasting board of governors which runs the voice of america, another broadcasting operations with the federal government. he's president and ceo of the aspen institute, nonpartisan public organization. i thought i had trouble balancing two jobs. so we are looking for to hearing from all these individuals before get to q&a at roughly the bottom of the hour. tim, you will lead us off. [applause] >> so, first and foremost i think this is a very special institution. we are honored to be here today, and a special thanks to walter are coming with us. i just want to say one thing quickly, about arianna. i think she's a very special person. is a very special day, and thanks.

she came from calgary canada down here for this. so this will be a memorable day for arianna and both of us. so generally whenever i follow, i just have to do to miss amount of cleanup. but that's not the case. everything is perfectly set up when i got here. so that was nice. i'm getting. he's a very good friend of mine has been one of my mentors and in that he yesterday and one of the key people that led aol through a really global success and a big part of this community. i was grateful to see him here today before i turn over to arianna who i think is an expert on journalism and editorial, i want to go through a few points of real big things that we're betting on as a company, not talk about aol but let's talk about the things we see in the future and why we're putting such an investment in journalism. number one question i get from wall street all the time is why journalism, why are you choosing when the rest of the world seems to be going away from

journalism? why are you opening up a thousand patches? why did you buy the "huffington post"? and i think the things i'm about to talk about are a core essence of what we believe them. the first is really a bit of the human needs stage which is, if you woke up and today was your first day on planet earth, what would you knows and what would you see? i think there's some very stark things. one is there's four or 5 billion phones in peoples pockets and a lot of smart phone growth across the world, which means people are going to be connected full-time with information all the time. i think even five, six, seven years ago. that was given the information is one the most powerful things that allows people to drive the economy, and those things. so the first that we're making is that consumers are going to want more and better information. they will want it from people who know about information, that

they need. i'll talk more about that in one minute. the second piece is that the humans need state is really about connecting off-line as the new online. and really, technology has put big change across many of our industry and many other things we do, but the end of the day we are really pointed at what is going to make physical changes in people's lives and make their lives better, hopefully more open. i was at a panel last week were somebody said something that it probably won't forget for the rest of my life. they said social media is really, really important, social media to point out and things happened they are really important, but bullets a point always more important. and with the person that was the things that happen in the middle east, the other things are happening in this country right now is that without really valuable information and information, about what's

happening is other things start to become more important in the physical state, how people live their lives off-line is the most important state of human beings, and information is the thing that actually people show the most to try to improve their lives. second had a main area is we are really betting big on local. and why we are betting big on local is that's what people live their lives. one of the investment we're making is around patch. brian who is the lead editor on patch, and 86% of commerce gets done mostly, but whenever set of people's lives live locally and their families are local and there's been a giant, i would say, white space created by the changes that happen in in the landscape. i think local is something that's important it's important for patches and "huffington post" but most important important for all of us.

the third thing is brands matter a lot. and coming from silicon valley, you know, working in technology and internet for the last 15 or 20 years, one of the reasons that got me to leave google was i did not believe that everything was going to be user generated and brands were going to matter in the information space. and i saw people retreating from some of the major brands around information and decreasing investments in them. i think brands are going to be more important in the future. i think brands are the way people navigate their lives. and the research that we put in that, points to the fact that a majority of users on the internet today is less than 30 sites, and about 50% of people use around 10-14 sites. and if you think about that from a macro standpoint, the internet is exploding people are starting to use brands to more navigate with information and how they get information.

and i get this question also from investors a lot is, what is the big focus on brands? it seems like everybody is going away from information brands. i think it's the opposite. consumers are going to demand the best, highest quality brands of information of journalism space and the countries that do the best will be the most successful. that's opposite of what a lot of the investment community banks. i think that's where things are going. and arianna things as well. i just wanted to close with a few important points about the future of journalism from where we sit in our chairs. wind is that journalists -- one is that journalist new technology. i think there is a big fear from the journalism community around technology. and i think it is correct. we have a bunch of investors, and i think if you look at whether journalists it versus all the other people in the media food chain, everybody else in the food chain has scaled.com

is in scale. google, which is talk about this earlier, journalists need to understand technology and how technology can help them do a better job. we need journalists desktops in this industry. that's one of the things we're working on. the second bullet point for the future is transparency. one of the experiments we did at patch when we found a patch was to have all of the journalists put up their transparency of what they believed, who they voted for, what religion they are, and those things that i think in the journalism space right now there's a lot of stories looking for data. and i think one of the things that comes from is people are not transparent about what they believe in before the right things. that's something that we would like to see in the future is more transparency around journalists and what they believe in before stories get written. that may be controversial but that is something that we have talked to consumers about and we

like. and in the business model going for, i had a giant debate in the content space, and i think the business models and the content space is a long haul of the public that will look like the current business models in the content space where free is going to be very, very big. there's room which will probably be big. and i think as an industry that debate is important but what's more important is the business model is what we delivered. what is the product we put out every day. and i think maniacal focus on journalism is really important to signing with the journalism, what is journalism to 4 million people with smart phones? when you get up in one and we get u up and what do we think about creating journalism for that space, or do we think about in the way we used to think about it? i think that's an important piece. i would finally and by a lot of journalists out there also why you investing in journalism,

like they have lost self-confidence and what journalism is. i always say one thing to people. journalism is not a single entity. it is a networker every time i meet a journalist, my guess is there's a convening power and their certain people in the world who are able to convene the most important information as a society and are able to synthesize it and get out to people in a way that is very manageable and focused. and i think journalists cannot lose confidence in the value they bring to the world. i think you've got to separate business models and technology and those things because the most important thing we have in this country and other countries have, some countries need, is journalists who care, the go for the truth and focus on that. that's the secret sauce of what we are investing in and why we are investing, comes down very simply degrade content from

great people. and i want to turn it over to arianna. it's a pleasure to be here, and i look forward to hearing comments as we go forward. thank you. [applause] >> thank you, tim. it's actually great to be here. i can't think of a better place to be on my birthday. and i would be delighted to be sharing the stage with him and walter, whose team i work with everyday and love it every day. with walter, i've known him ever since the '70s. when he was working for the paper pre-rupert murdoch. i was in london dreaming of one day becoming a blogger in america. i can't wait to read walter's new book on steve jobs. it's safe to say that right now

walter is probably the only man in washington who was making jobs at a priority. [laughter] [applause] >> and i also loved his other autobiography on henry kissinger, and partly because henry kissinger was the first man to reassure me when i moved to new york that having an accent was not a problem. [laughter] he said to me, you can never underestimate in the american public the complete advantages of other income for his. [laughter] >> there's no question that not just at this time but particularly this week, media is an incredible time of transition. i happened to be in london and we are launching the "huffington post" u.k. when the phone hacking scandal started. and it was amazing to see two things. first of all, how all fashion

and a credibly irrelevant, the debate between all media -- old media new media. there was an institution of old me, 168 years on paper. not an upstart blogger who did not have enough supervision, but incredible institution of the british press. that was acting in ways that would have been utterly disgusting coming from anywhere in the media universe. and it was new media that played a huge part in bringing the "news of the world" down so fast. it was amazing watching what was happening on twitter, the hash tag and -- started getting thousands of tweets and pressure and advertisers to lead. and literally, i was watching as advertised after advertiser was leaving. i stopped counting at number 39 because i knew that was going to

probably be enough, and it was. and at the same time, to see that that story was broadcast by another major, almost 200 year-old institution, "the guardian." and it was broadcast at the time when "the guardian" had announced it was going to embrace a first strategy. this was in all institutions that had completely embrace new media. and, indeed, brought a story by doing what new media does best, which is obsessively staying on a story. this story is years old. most publications had moved on. most politicians have moved on. but the unique ability of new media is to stay on historic and doggedly stay on the story until there's an impact impact, until breakthrough. that's what "the guardian" did. demonstrating what i always believed which is the future belongs to those who bring together the best of all media,

fact checking, accuracy, transparency. and the best of new media which is engagement with our readers and real-time provision of information. that was all demonstrated over the last week, and the story is still unfolding. one more thing that was demonstrated was that social media, and about accountability. the reason why rupert murdoch had to withdraw his bid for the british sky broadcasting is because the entire parliament and all three leaders of major parties urged him to do so, now, they did not ask them to do so because they suddenly had an epiphany about news corp., they did so because of the pressures they were getting from social media and everyone. so all that happened so fast. everything has accelerated in the brave new world of media. and this is really why i'm so

excited about the fact that social media and new media are all about engagement. tim mentioned patch, and i was in love with patched even before i became part of the arianna huffington aol media group. patch is really about hyper. they will launch 33 patches in primaries and states to be able to cover even more obsessively the 2012 election, and together with patched we launched a citizen journalism initiative last week. within 48 hours 600 people signed up to be citizen journalists, bringing the news to all of you, bringing the local voices into the national dialogue, which is one of the things that we are so excited about, being able to have no of 1300 professional journalists working with us. why not the same time being a

platform that provided distribution channels for thousands of people, including to blog about anything that they care about. so, naturally the future we're betting on. professional journalists, ultimately could be thousands of them, and with the best understanding of how to break a story, how to stay on historic, often mentoring younger journalists, and a platform for thousands of people blogging, commenting. and it's really that universe, have traveled understand because they don't see what is happening which is the best expression as so many people now become the new entertainment in the major social fulfillment. so, you know, in the past nobody ever wondered why are people watching television, often bad television for hours on end and

not being paid? paid? does anybody ever asked that question? [laughter] but people are consummate asking the question where people updating or writing on behalf of the post, or writing on their facebook profiles without being paid? and that really misses what drives human beings to do certain things. and it really misses how much people now wonder what part of the story of the times. they want to really bear with us, and that's what brings me to my last point, which is even before i met walter, i read a book, a book by benjamin israeli who was the primacy of england, it was a novel. that he wrote, that before he run for prime minister he needed to capture the imagination of the people in his country come to help them understand the social injustice that was going on. he was a toward which is also part of the beyond left and

right editorial position of the "huffington post." you don't have to be on the left to care about social injustice. you don't have to be on the left to care about what's happening in the middle class. so benjamin disraeli in the 19th century in 1845 used a novel to touch people's hearts and minds and to bear witness to what was happening in his time. today, newmedia are arming tens of thousands of people around the world to bear witness to what is happening in their countries, to what is happening in their time. and ultimately bearing witness is the highest responsibility we have on journalists, darren witness is actually the highest responsibility we have on citizens. and we've never had more and better tools and greater opportunities to bear witness at the time of multiple prices and at a time -- crisis, and when millions of people are living

lives of extreme deprivation. so we should be grateful that we're living during this extraordinary time of transition, when all of us have the opportunity to bear witness. thank you. [applause] >> thank you very much. i was wondering why i was chosen to put in perspective as i was told, arianna, and then i realized written about in front, albert einstein and now steve jobs and i guess that's the perspective which we should you arianna in in the pantheon. one of the things about the hybrid of old media in india that i think we have to remember is that old media isn't really that old. it's a about 60, 70 years old in this coach. at the beginning of this country there was a social vibrant media in which there wasn't some mainstream publication, when ben franklin arrived in philadelphia

is a 17 your runway there were 11 newspapers, one for each faction, be the anglicans or the quakers, you know, different groups. and he started the 12th representing the market street middle-class. and he also relied on contributions, social media, people for his paper were basically riding as arianna said because they wanted to bear witness to the struggle that was happening in the 1700s in america. they also occasionally as on the internet wrote anonymously. ben franklin famously used a pseudonym. but as they were doing it they had the hybrid as arianna and tim have created at aol and "huffington post." of the values of journalism that within him urging as well as the guy of social media and contributing and being part of a that would come out each day so they would slip sometimes there, contributions under the door

anonymously but others were reporters and had big names. they also though, and this is what tim is trying to do at aol now, had hybrid of a business model as well. one of the things benjamin frankel did is he made sure he charged at it for the newspaper and at great advertisers in the newspaper. he said if we were totally beholden to advertisers the freedom of expression would sometimes be cramped. he said it would be hurt to be an advertising only malik him and his started the model in america of having a variety of revenue streams. and i think we're feeling our way back to that position now. when i was, i was present at the grace of many aol milestones. ..

still couldn't get my name and the others who just arrived, final deal point is on want my name on a lot, another guy got kicked out or have his e-mail account directly send to rupert rock or whatever it tickled is but part of that arrangement that we made was great for time magazine because as i said for 60 years this monopoly type of mainstream media where information was handed down happened because of the rise of

the broadcast media where any 17-year-old could start a press in philadelphia but it was hard to start a tv network or radio network and metropolitan newspapers for a variety of economic reasons generally consolidated one or two newspapers so it became a mainstream and people in the media handed down the words as if they were in grave and never got much feedback. the most interesting is thing that happened on aol was in the 1990s the feedback and discussion, correcting of our facts, people who added information and the wonderful bulletin board culture as it was called back then. the other thing we had was the deal we made which was when you went on aol in the early 1990s you paid a certain amount per hour. i can't remember exactly what it was but you were charged for being on and aol was in a tough decision with five or six other

major internet service providers so they wanted to have our concept and they would pay as for the amount people stay on line. if we kept our eyes on them for another hour we got at revenue. it was the dual revenue model that worked. that was undermined when the web camelot and everybody could basically put up their content on the web. many people started creating things and internet service providers, people who were there getting you on line to go to the web surge did make a difference for them whether they paid the creators at all because they would get more money if all of the contents were out there for free and you were paying your phone or cable company to get you on line. that was all right because we started time.com and moved away from aol and others to be online for free and eventually people from madison avenue came with

large baskets of money to say we want those banner ads so we kept it for free. that business model is not totally sustainable in the long run. we need the hybrid business model we learned about today. if you want a special type of information it will be good to find some way to have consumer revenue instead of having to be advertising only. when i was in new orleans after the storm we were trying to rebuild and get everybody involved in social media but what it was was the wealthier neighborhoods and home depot wanted a certain -- in the poor neighborhood it was a little harder to get people to blog or write about which housed needed rebuilding and they kept saying do you want to do this for free? the tension arianna mentioned that some people love to do this because they're part of the

conversation but are do believe we have to develop in the future some sort of hybrid model. i will end by saying that the broadcasting board of governors, we look back to over 60 years in which authoritarian regimes control their people by controlling the free flow of information. radio free europe was invented to break through the censorship. so was voice of america. we had a meeting yesterday of all of our boards where we have a new strategic plan in which we are shifting large amounts of resources into social media, breaking down the fire wall in iran, china and other places so that many people around world have the same freedom we have in this country to share information and accelerate the free flow of ideas. if you look, this is truly a noble cause. whether we figure out the business model this decade or

next decade the move towards digital bdm and more people having access and was controlled and fewer gatekeeper's as we had is a great thing whether it is in iran or the united states. and if you look at those long strokes of history from gutenberg to arianna huffington the free flow of information and ideas has always ended the arc of history to a democracy and towards freedom and you are seeing that with what is coming out of tahrir square and the bloggers in the middle east and the fact that in iran, the fifth largest per-capita user of the internet and in the end people who cannot control the free flow of information will not be able to control their people. in 1989 i covered the fall of the berlin wall.

i was in a hotel and one of the people working there said can you open up your room in the afternoon so the kids coming? only place they can see outside satellite tv and they like watching music videos. i came home earlier and some of the students were using the room to watch but they brought watching music videos. they're watching the shipyard. more recently i was -- about ten years ago on a news story we did in which steve case started talking about merging a o l and time-warner. i was watching in the internet cafes in these tiny parts of china how people were using the internet. i would go up to them and tight in aol.com wartime.com and one of them elbowed me aside and cnn pops up. we know how to go through proxy services in hong kong. anyway this is what you are

watching in america as new people get to be part of the discourse and around the world and that is why i congratulate arianna. it could [applause] >> i would like arianna to come back to the podium. i have the ability to go up and down the stage. continuing that analogy with benjamin franklin he didn't set the bar too high. now you need only make a scientific discovery on par with electricity and felt a democracy that can be sustained for over 200 years. we begin with questions given to us over the internet or from our audience today. the first question and you can decide among yourselves because many of these are appropriate to both of you related to the rupert murdoch scandal and journalism practices this questions stand alone without

that. it says how does the huffington post and the media landscape draw the line between the interest of the public and the public interest? >> i suppose what the questioner means here is the fact that there is a highbrow and lowbrow, the fact that the public wants to talk about lindsay lohan and charlie sheen which we may conclude are not entirely the public interest but are in the interest of the public. both highbrow and lowbrow, we see that is human nature and we discovered when we needed the with facebook will make it possible for our leaders to be able to read what their friends were reading and commenting on, they often did not like their

friends to know they were -- lindsay lohan and charlie sheen. we had to watch for the end so that we could go and click on stories by their friends and beating on stories about that. >> you want to back up on that? >> let me ask you to refine that answer. how much of the highbrow stuff is right? where do you cut the line off at the bottom? >> when you say right -- >> what is the ideal? >> the mix at the moment if you go at any of our sections to combine the first media -- offering different sites to discover everything from quality books and celebrity, this week alone we launched three new sections including san francisco. we are doing a lot of regional

sites. iran and san francisco, 24 -- so from the regional level and the national level. by covering the waterfront, a very friendly media station for those of you who come to these sites, you basically immediately let the world know and after that, you have the blogs and in the public interest stories on the right hand side you have the lowbrows stories and entirely highbrow public section you can ignore that. >> how do you decide if something is too low brow? >> there is a standard, nudity for example. >> is that a good thing or a bad thing?

>> entirely good thing for online publication like ours. some of it is in the eye of the beholder as we regularly review our status. >> a question for both of you. with recent acquisition how do you balance the editorial branch simultaneously? is it unreasonable to expect one of them gets faith out? >> we spend a lot of time -- one of the things is about 300 the purse to we went down to 50 and recently announced we would go down to the more powerful brands. right now, each site or what the audience attractions are very different, huffington post and aol and we are working on that. one of the things that is beneficial is we use really

scaled technology platforms and journalist platforms to repopulate all of these different sites. one of the funny stories, chris christie with his helicopter in new jersey and his son's baseball game. how we can combine program, at the field and chris christie landed his helicopter with a couple minutes we had the have and opposed. a few minutes after that was on cnn. i ran into chris christie last week and asked him about it. we are from ao -- i am familiar with patch. second thing he said was i reap hatch every morning in new jersey. a powerful way to connect to the local community. from the standpoint of how we program of brands, we are just at the beginning of how all

these brands are going to be used in the future and in platform did journalism. >> one of the most exciting things for me to see how we now have -- about 1,000 professional journalists underground because of patch. team o'brien who came to the new york times to see about reporting is leaving from our end which means how do we serve that? whether it is a story about "in the middle" -- chris christie or the unemployed. the latest unemployment numbers came out, and amazing story. there was flesh and blood on the data from the reporter which we would surface and bring them together and to write national stories. incredible opportunities for journalists. if you bring in the blotters for

the blogging platform and under 7,000 loggers ranging from the mayor to high school kids. we have 1 hundred million. that to me is what we're betting on. people increasingly want to be part of the conversation. part of the story of their times. >> do you feel like you want to draw engagement in at a higher rate than now or do you feel that is pretty good with the number you have? >> we are happy with the engagement we're getting. they're going to be more engaged because those of you who blogger or comments, you now how

exciting it is to be part of the conversation and we are finding new ways of introducing new tools to make our content more engaging. >> one other quick, and. i spent time with steve case and when i was coming to aol and they were both incredibly helpful. one thing they said was what arianna had done with the huffington post, one of the first things people said to me was aol lost its way not because of the business model but because of the community and ability for people to actually comment on what was happening. as i traveled around whether it is people commenting on articles, one of the most disappointing things was not having the ability to comment on stories. all of the comment in technology

was stripped off of the company and you went from the most in gauge community in the world to the least engage community in the world and arianna brought that back to the company and several successful internet companies when aol went down they took that opportunity and a lot of features on facebook were things he grew up using on aol. really important part of the business solution. >> back to the question a few minutes ago. those of us who are old enough remember when we heard the automatic modem sound that you have got mail, to go back -- in some ways you have a startup incubator with a large corporation. is it important for the user to know the end gadget is part of a lot, and how will you leverage that? >> we did a brand study last year and will be at huffington

opposed. most major brands have three attributes. ao o only has two at this point. a few attributes are trucks and brand awareness. the brand study, they said we have never seen anything like this before. over 95% trust with consumers and 95% awareness and no other attributes. so the secret sauce for us is if you can connect a third attribute to that experience you will be one of the most powerful brands on the planet. what they are hoping the third attribute will be is content. may be like disney or abc or some of those brands but overall

hoping that a o l -- the information communication space. one thing arianna is interested in is i like the obsessive focused nature of the huffington opposed and the voice to a large degree of the third attribute from the content brand. it is the key experience for all our users. >> that is how i had my conversation before the acquisition -- and i remember listening to the team at the conference in new york making this point about brand awareness and identity. the next day he and i met and talked for hours and had a conversation that went on for a couple of months. not a conversation about buying of the huffington post but what

mattered in the space we were occupying and it was amazing how his vision for what he wanted to do and my vision for what i wanted to do were unbelievably aligned. i had and e-mail that i would like to come to l a and b with you and discuss something and invite you to lunch and bring us here and i said yes. >> the cfo like lunch a lot. >> so before we even started eating he said i want to by the huffington opposed and bring a o l content together. for those of you who have read the story of our announcement at the super bowl at halftime -- [talking over each other]

>> we had arianna's first super bowl together and corporate video conferencing, arianna huffington's first video conference and today is the first day we are having -- [talking over each other] >> i wanted to talk about something. you are at the national press club and we are grateful you came here today. a lot of members came to me before this event and wanted me to ask the question about the value of professional journalists the versus one who participates for non-financial benefit to them. how do you balance that? how do you decide where the value comes from adding a professional and those who like me are professional journalists who worry that the people who can work for free might push them aside, are you ok with

that? how do you preserve the added value that we like to think it professional can bring to the table? >> we are very committed to professional journalists. we have 1300 of them on the table. that is an indication of our commitment. those who added over 160 professional journalists. the fact that we are a robust journalistic enterprise does not mitigate the fact -- a distribution mechanism so people who have something to say are able to use it. some are journalists but they are parting on their own gloves. many of them have not done journalists. the majority of them are politicians, people who have just written a book and high school kids who have a robust college section in over 100

colleges with academics and actors and every possible profession you can imagine represented. i would like to invite all of you here, you are supposed to bring in and we love having people's voices whenever they want for a long as they want. nobody is going to bother you. i asked why didn't you blog? some of our partners, a sign of white house correspondents with the president the other day. john ward -- they have an incredibly -- incredible team of professional journalists. that is in tandem with our platform and you

unapologetically -- >> the president's log for free for the national press club. speaking out of both sides of my mouth. what competitive threats are you most concerned about right now? >> the biggest one is in turtle. i don't mean that from having issues internally. i don't think anyone is putting as big an investment into areas we are investing right now and it is our opportunity to take a step back and look at the competitive landscape at the high level. you have silicon valley and an absolute work with each other and data being more, the ties and the future of that is going to be about content. content platforms, how aol needed content to attract users. facebook and google and those things. the secondary thing which i don't think has been appreciated

is google's release of their index focused on real time and quality and i think you will start to see google has focused on quality and real time to force the other platforms to do that. we believe are having a premium brands and quality content we will grow and the second piece of competition is instead of focus on each other and other media properties is how do we fulfilled real need for real people with real content every day? one thing that keeps me awake all night is the phone in my pocket i used to be connected to journalists and content once or twice a day and in the internet multiple times a day. my relationship with journalists, i am with them all day. from a competitive landscape if

you were the person connected all day, i think that is the real significant opportunity. >> if you could reaffirm that with my wife when i am on a laptop at 11:00 a.m.. >> relationship with somebody. not that side of the relationship. the information relationship. >> i agree with everything you said except about being kept awake at night. we have a major editorial commitment. this is one of the things we write about constantly. one of the first things i did when i created a fabulous news room, install two back rooms because we are on mapquest, one and two, and editorially, way we

cover the questions of being able to get enough sleep to take care of yourself, is very important right now. this summer, walter has a fantastic plaque on the pursuit of happiness. it goes back to the founding fathers and everyday -- psychologists, doctors and scientists debating that issue. we are debating that and discussing it everyday. we believe increasingly this is going to be a very important conversation people want to engage in as they redefined success and happiness. >> quick question for you and and we will have a little advancement and arianna the last question which is on the lighter

side. google reported earnings. it has a market capitalization of $190 billion. a o l's market cap, and these fluctuate over time, less than what google earth in that quarter. if google gets too big -- >> i don't know if it is too big or too small but we should make the market cap bigger. the reality is google's market cap and all the other market caps reflect real consumer interests and revenue and the secret to our success is the same three things that matter. the number of consumers on your property and the revenue able to generate for the consumer and what does your brand stand for

and google has done a nice job staying focused on those three things. those earnings were spectacular. we are still doing our turnaround. we have a clear vision where we are going and to a large degree a large degree of content. google is a winner-take-all at this point. we have a clear vision what is going on. our vision matches closely consumer growth and advertising growth and revenue growth. i hope to close that gap. >> now is the point we present our guests with token appreciation of your presence here today. i have one for both of you and that is the coffee mug. don't have any coffee before you take that.

you can blog that certainly. i have my next question for arianna. you were so gracious and appearing here today and the cameras did not see that our audience sang happy birthday to you. my question is do you have a wish and if you can't share with us what it was can you share with us another one? >> if anybody here with children knows you're first wish is always about your children and they say you are only as happy as your least happy child. i have two daughters in college and they went through their ups and downs. i am happy to say that my birthday was about them and

about their life and no matter how old they are one will graduate next year. they never stop being your babies and i speak to them on my phone when they were babies and less problematic. so has everybody who knows me i love my work and don't make a separation between my work and my life. [applause] >> how about a round of applause for our guests today. [applause] ..

>> have you ever visited the library of congress? over too many people have and this is your chance to tour the world's largest library. tonight join c-span for a glimpse inside the library of congress. we will take you into the great

hall and explored the main reading them. you'll find unique books in the rare books and special collections including original books from thomas jefferson's personal collection, and see how the library using modern technology to discover hidden secrets and to preserve its holdings for future generations. join us for the library of congress tonight at 8 p.m. eastern and pacific on c-span. >> last week the u.s. special envoy to sudan testified before the senate foreign relations committee on u.s. policies toward the nation. as well as the new country of south sudan which recently declared its independence. he discussed the continued military conflicts between the two nations and their disagreements over how to share oil revenue. senator john kerry chairs this 90 minute hearing.

>> the hearing will come to order. thank you all very much for being here this morning. ambassador lyman, it is a great privilege to welcome you back to the committee. we appreciate enormously the work that you are doing as the president's special envoy to sudan. and i want to just thank you personally. i've had a chance to see you working in many meetings that we have had together they are in sudan, and i've been extraordinarily impressed by your steady, calm, tireless commitment to working under difficult circumstances to make progress. it's the essence of good diplomacy, and i really

congratulate you and thank you. i thank the president and the nsc and all of the folks, secretary clinton, who have been engaged in this effort. they have done a terrific job of laying out a roadmap, living up to it, nurturing the process and staying committed went a lot of people thought it might have been impossible. and i know that six months, nine months ago, even a year ago when we were working with general gratian and yourself, there were a lot of doubters as to whether or not a referendum could ever take place. and i think that it was the good efforts of a lot of folks who came together and stayed steady. and our allies in that effort. the norwegians, others have been, british, been particularly committed to this. and i think it shows what can happen when people stay focused

and put their energy into things. so we welcome you here this morning to discuss a remarkable and a rare event that took place last week, the birth of a new nation, the republic of south sudan. six months ago when the referendum that set this in motion, i had the privilege of being in juba with you, ambassador, and others, and general gratian. and it was really impressive. it was a remarkable event. i had the privilege of speaking in the cathedral with president kiir, and millions of southern sudanese stood in line for hours to cast their votes for independence. i remember coming out of one of the voting places, and i had a sense of gosh, some of these people are going to walk away, the lines are just so long and

they can't wait that long to vote. so i went up to them and i said, you know, i hope you'll be patient, wait to vote. and so help me, two or three people in good english just turned around to me and said senator, we have been waiting for 56 years, we can wait a few more hours. they didn't mind it. and last saturday as a result, five and have decades of waiting came to an end. and today, today, even as we're here now having this hearing, events are taking place in new york at the united nations, and south sudan becomes the 193rd member. we should recognize, i know you do, mr. ambassador, that while only one country is joining the community of nations, the reality is that two nations emerged on january 9. the newly independent south, and a greatly changed north.

both of these nations are fragile, and they will remain that way until they reach an agreement that allows them to live separately but work together. sudan and south sudan share more than a poorly defined border and a bloody history. they share traditions of migration that must be respected. they share trade routes that need to be reopened. and they share a mutual interest in not merely avoiding a return to all out war, but in crafting a lasting and a genuine peace. abyei is at the heart of this conflict. and of any lasting resolution. tomorrow, international peacekeepers will begin to arrive there, and i hope that they can pave the way for the return of the tens of displaced ngok dinka who call or be home a for a resolution that addresses the needs of the misseriya migrants as well.

abiye is one crisis point. southern kordofan on is another. once again, we are hearing chilling reports of serious human rights reports. there are new and serious allegations of mass graves, shells are falling in the nuba mountains. people in need of been cut off from humanitarian relief. sudan must not go down this road again. southern kordofan needs the united nations monitoring mission and both sides need to agree and abide by a cease-fire. if atrocities are occurring. they must stop and they must be accountability. there are also positive signs. sudan was the first country to recognize the south as an independent state. it's worth pausing to acknowledge that fact. not just because it suggests

hope, for the relationship between north and south, but for the relationship between sudan and the united states as well. because of the successful january referendum, president obama initiated a review of sudan's designation as state sponsors of terrorism. completion of that process rests on the review itself, as well as the resolution of all the major issues outstanding from the comprehensive peace agreement, including abiye. and, obviously, this process will not go forward if gross human rights violations are taking place. finally, the true transformation of the u.s. sudanese relationship runs through darfur. khartoum needs to reject its recent returns to old destructive patterns and recognize that reform can bring with it new relationship to the

international community including the united states. i very much would like to see that happen, but wishful thinking will not bring it about. it's actions by the gos that will make that happen. we are also entering a new relationship with the south sudan. along with president kiir, we hope the july 9 will mark, as he said in his words, a new beginning of tolerance, unity and love in which cultural and ethnic diversity can be a source of pride and strength, not parochialism and conflict. south sudan bears the scars of wars in many forms. including roads, schools and hospitals that were never built. they provide their own sense of permanent scarring. it must also overcome internal corruption and internal rebellions. but as they have already showed

the world, the people of south sudan are capable of rising to a challenge. america has stood with the peoples of sudan throughout these struggles. we helped to broker the cpa. we have provided billions of dollars in humanitarian assistance. our representatives, including ambassador lyman, are working tirelessly to bring the parties together. and we must remain involved until there is lasting peace in the region. i would remind people that the war that took place there was the longest war in africa's history. and a cost of over 2 million lives. the last thing that we want to do is go backwards. senator lugar. >> thank you very much, mr. chairman, and i join you in welcoming you back to the committee. a very distinguished witness who has a longer -- long record of service to our country and and

unsurpassed depth and experience in african affairs. on july 9, 2011, the republic of south sudan was declared by its elected government to be independent of the republic of sudan. this is a rare modern milestone and one that follows decades of violent oppression and conflict. the people of south sudan have realized their dream of independence and deserve recognition for the sacrifice and commitment they made to achieve it in the face of enormous odds. the people of the united states, from government officials to religious and academic communities, to young citizens, have had a profound impact in elevating the importance of resolving this deadly conflict. there is a prospect for new life and economic and social development in south sudan. nevertheless, violence remains a real prospect for millions along the borders of these two newly defined countries.

each country's respective security forces are continuing to engage in the three disputed areas along their common border, and there remains untold suffering, scarcity, and tension within both countries as well. it falls to the leaders of each country to acknowledge the challenges and begin to respond fairly to the needs of the people and to build upon an inclusive vision of a stable and productive future. the challenges are daunting. both sudan and south sudan represent widely diverse populations with a history of often violent competition. khartoum will continue to govern many regions in the north that bridle at the harsh yoke of the omar al bashir government. darfur remains unresolved, a region with millions displaced as a result of genocide, and the eastern provinces continue to suffer atrocities.

in south sudan, the leaders in juba must learn how to govern and empower a new country with few common ties other than a common enemy. that enemy will remain a threat, as it was through proxy militias during the decades of war. the prospect of civil war across the south looms if the oil becomes a source of inter-tribal conflict rather than the means to build a better country. oil, the primary source of income for both countries, could also be a bitter disappointment if, as many experts believe, it is limited and diminishing. south sudan will initially join sudan near the top of the list of the world's failed states. while the comprehensive peace agreement of 2005 achieved the independence celebrated last

weekend in juba, there has been little progress in concluding the essential agreements between the north and south also required by the cpa, such as wealth sharing and border demarcation. the new country has limited governance capacity, weak and non-existent government institutions, and heavy reliance on outside donors. high capital costs limit prospects for private investment. these factors increase the likelihood of competition among ethnic tribes and diminish the odds for near term stability and growth. while the united states should maintain its critical interest in a stable and productive south sudan as well as a more responsible and responsive republic of sudan, it is evident these countries must begin to deliver for themselves. the united states escalated from

a role so far, from senator danforth efforts to concluding the cpa to secretary powell's efforts to stop the genocide in darfur, to secretary clinton's recent direct engagement at the u.n. on a peacekeeper agreement. now the administration must clearly define and limit its responsibilities and expectations associated with a long-term relationship with this nascent nation. the heavy burdens that now fall upon the people of both sudans should be tempered, when and where appropriate, by the international community. neighbors like ethiopia, kenya and uganda must help integrate the new country into the region while balancing emergent threats such as the approaching famine in the horn of africa and the human calamity in darfur, which lacks a viable peace process. i thank ambassador lyman for his decades of dedicated diplomacy. i look forward to hearing from

him how the international community can assist in this effort across both sudans and how the united states roadmap has worked to date and prospects for its continuation. i thank you very much, mr. chairman, for calling the hearing. >> thanks a lot, senator lugar. normally, we just have the openings of both the chair and ranking member, but today we're going to make an exception to that rule. senator isakson has taken a great interest in this area, this region as well as in this issue and he has taken the time to travel there. and, therefore, it's my pleasure to recognize senator isakson for an opening. >> i think that year. i want to do two things in particular. first i want to thank princeton lyman for his dedication to this area, this caused. and acknowledged in the last 10 years between the bush

administration and the obama administration there have been five special envoys, beginning with mr. danforth, and their work has brought about the comprehensive peace agreement culminate in a peaceful election that took place to great independent nation of the south sudan. and i thank you very much for your commitment to the. second thing want to do is really acknowledged with the chairman said in his remarks with regard to the admonition, to the north regarding the removal of state-sponsored terrorism. that is predicated on good behavior. and it is predicated on us being sure that there is no more violence and continuing atrocities taking place in that part of the world. that's an important component part of the overall deal that we made to bring about a peaceful election which took place. i thank the chair very much for pointing that out. i think princeton lyman has great service and i look forward to his testimony today. >> thanks very much. mr. ambassador, our pleasure to welcome you and look forward to your testimony.

>> thank you very much, chairman kerry, ranking member lugar, two giants of leadership. it's a very great pleasure to be here. senator isakson has taken such a great interest in africa, all the time you've been on this committee. it's a privilege to be here. thank you for the very kind words. i have to say i've never worked on an issue in which there has been so much sustained support from the administration for the present, the vice president, national security council, and secretary, this committee, people in the house, people and the public. it makes an extraordinary amount of difference. it's a high priority for the united states and the united states public, and all branches of our government. and that makes a tremendous difference in the work we tried to do. so thank you very, very much for all you are doing. i would like to submit a full statement for the record if

that's all right. >> without objection it will be placed in the record. >> thank you. i agree that one of the first things to recognize is one of the fundamental objectives of the comprehensive peace agreement was for the people of south sudan to have a choice as to whether to stay within one state are separate. they were able to make that choice, as you pointed out, in january. and on july 9 they were able to achieve their independence. and it was an extraordinary event and it was a privilege for me to be there. very happy event. there must have been over 100,000 people at that ceremony. and it was quite moving. i think all who have been working on this for decades, over many administrations, over many people in and out of government, they can take a great deal of satisfaction for what has happened in that regard. nevertheless, as you all pointed out, the past few months have

not been free of conflict and they haven't been free of tension. the parties failed to reach agreement before july 9 on some of the most important issues that they faced to have a full and productive relationship. and then we had crises in the disputed area of abyei, as you pointed out. and now an ongoing conflict causing many deaths, and displaying over 70,000 people in southern kordofan. we had to focus a lot of our efforts the last few weeks on those two crises to keep them from derailing the entire peace process. so the entire relationship between the two countries after july 9 is going to be one that is not yet free of tension, and not free from the threat of future conflict. the next few weeks will be very critical in this regard. they must follow through first of all on the agreement you

mentioned, senator kerry, on abyei, an agreement that allows an enhanced peacekeeping force to come into abyei, mainly the ethiopian troops, and the withdrawal of sudanese armed forces that took over abyei a few weeks ago. we can't have a political solution to abyei while it is being occupied by one side militarily. that process is just getting underway, and it must be implemented. they also have not resolved one of the most important economic issues between income and that is the financial relationships related to the oil center. and i fear that if they don't come to some resolution by the end of july, we could have a serious confrontation over that issue. threats from each side to shut down the oil flow are not helpful, and the only raise confrontation. this is a difficult issue for

the south to deal with. because they see any final resolution of how to share the resources from oil as linked to the solution for abyei and some of the other unresolved issues. and the timetables now are not in sync. so what we are urging is that by the end of july, at least the region into an agreement to keep the oil relationships going. and set up a very firm timetable on dealing with abyei and the remaining issues like disputed border areas. they both face problems inside their countries, as you have indicated. we are very concerned about the situation in southern kordofan. when fighting broke out there, and as you well know, southern kordofan is a state in the north. it was heavily involved in the civil war. people there fought on the side of the south, but they are from southern kordofan, and there are

elements of the spla, southern people's liberation army, which come from southern kordofan. and the cpa called for a political process called popular consultations come in which their political rights would be addressed in their grievances. fighting broke out their june 5 between the sudanese armed forces and the spla units. the issues are complex. they are political, they are security. but we are very concerned i very critical -- credible allegation by targeted and ethnic-based killings and other gross human rights abuses. as you said, senator kerry, these abuses must end. there must be an investigation, and perpetrators held accountable. the two sides on june 28 signed a framework agreement covering both southern kordofan and blue nile. and it's a promising agreement in that it provides for talks of both the political and security issues.

but, unfortunately, president bashir has now raised objections to portions of that agreement, and that puts the negations at risk. without those talks, without parallel political as well as security talks, the chances of ending the hostilities and reaching the thousands of people in need are frankly slim. so we hope these talks will resume very shortly. in the meanwhile, we call on the government of sudan which so far has resisted in allowing for a u.n. presence to remain in southern kordofan and blue nile, because we need to present not going to market what's happening, but to help in humanitarian activity. now, the situation in darfur, which you have all mentioned, remains a very serious problem as well. this week, in fact, probably today, the government at one of

the armed groups, the liberty and justice movement are expected to sign a peace agreement, or protocol around a peace agreement. but one of the major group, justice and equality movement is the best on the fence and most of the others did not take part in the doha peace process at all. but we have emphasized, the government of sudan is that signing an agreement with lg him as a positive step, but it has to continue to negotiate, be ready to negotiate with the other arm movement. they can't say, well now we have done it, the other need to sign his or their outside the process. what we are also concerned that several of the other armed groups are not very interested in darfur so much as they are interested in broad change in sudan, and are fighting on that he says, which makes it almost impossible for them to come and be part of a darfur based local

process. and we've urged them to come to the table and negotiate around the issues of darfur. also, to look ahead, we need to engage the people of darfur. they deserve a much of a right to participate, much more greatly in determining, not only the process of peace but their future. but the conditions are not ripe yet for carrying out a darfur based political process. so we have set forth a list of conditions that we think are very important to create what we call an enabling environment, so that you can have a darfur-based process. it means lifting the state of emergency. means freeing political prisoners. it means allowing for freedom of movement and expression, better rights for unit, et cetera. and we hope to pursue those with the au, the u.n. and the government of sudan, in order to

make it possible to have such a darfur based process. now, let me turn to the issue here also all raised, which is our relationships with the government of sudan, khartoum. .. we have laid out a road map to normalize our bilateral relations and the president followed through after the

referendum on january 9th to open up some licenses and initiated process of reviewing sudan's's designation as a state sponsor of terrorism and that review is continuing. but we can move forward as all of you pointed out with improved bilateral relations if the government of sudan does not fulfil its obligations and that isn't just the position of the united states. it is also the view of other members of the international community and the international creditors. those negotiations require readiness on the part of both parties to take what are often very difficult political decisions. we will be working with the in cp to encourage a commitment to reach agreement on all outstanding issues as soon as

possible. sudan faces enormous governance and developmental challenges. anti-government militia are causing havoc in parts of the country. the government needs to respond politically and militarily to these challenges sole legitimate ethnic grievances are not ignored. there is a staggering lack of infrastructure and education levels on which to build development. the government outside sudan will depend heavily on international support as well as its own resources to address these challenges. we have strong ties for route sudan and they go back many decades and we are committed to continuing that partnership and helping them meet those challenges but we won't be alone. the u. n is inaugurated a major program helping the government in a variety of areas.

other donors are coming in in various aspects of economic and security assistance but we told leaders in june that to succeed they must work to build an effective democratic and inclusive government that embodies south sudan's diversity, respect human rights and delivers services with transparency and accountability. i am pleased the president spoke to those same issues at the ceremony in juba. the historic occasion offers a new beginning for the people of south sudan and sudan and it is up to the leaders and people of both to turn this promise into lasting peace. the obama administration's engagement will be unwavering and will be a steadfast partner

in all those in sudan and south sudan boost seek prosperity. thank you and i am happy to answer questions. thank you very much. >> thank you, that was helpful and comprehensive. let me begin by asking you on the south kordofan issue, do you have any evidence at this point or hard information with respect to the scale of the abuses? >> i don't have hard information on the scale but it is credible allegation of gross human rights abuses. let me say something more about this because i raised this with the sudan government. they have a pattern of fighting their wars in a way that invites gross violations of human rights. we have seen this historically. we saw it in abyei.

it is followed by and supported with alishas, people's defense forces and other groups and come in and. and kill and do all these things. this is not the way an army in the twenty-first century fights wars. there are human rights principles and they don't follow them. avalon as they do that there will always be subject to the harshest criticism and sanctions for what happened. it is not the way to fight a war even when you are fighting a war. what is happening in southern kordofan is raises fundamental issues for both sides. fundamental political issues because what the political issues in southern kordofan include is how is the government of sudan structured and operated with the secession of the south? will be a government that

recognizes diversity and decentralizes of 40 and opportunities for welfare or is it going to be highly centralized in trying to force these issues? that is what is really raised in southern kordofan. for the ljm, be that the fundamental issues they fought for during the civil war. they are not prepared to have their forces integrated into a single sudanese army until they know these issues of being addressed. the other side the government says we can't have two armies so we have to disarm them first and that is not tenable in this situation. that is why the agreement is a sign to deal with the political issues as well as security issues were so critical and we have to get them back to that agreement and get those talks under way otherwise we are not going to get either side to

agree to a cessation of hostilities and opened the door. >> you are talking about the khartoum agreement. to whatever degree it is helpful and i have relationships with a lot of folks over the last few years -- i will be speaking with akhir later this morning. it is important to emphasize that everything that was talked about with the transitional components they are hopeful can be affected as we move forward with respect to their economy depends on -- as we said, but i want to reemphasize it depends on their behavior and what happened in these next weeks and months in the terms of

accountability and so i hope to the degree they're listening to this hearing and any other comments, in matter of dictation, it is a matter of living up to international standards of behavior and their own promises. this is going to be a critical component of their ability to succeed. there's a lot of turmoil in the ncp and future politics of the north. there also a new nation and our. they have to figure out a constitution and other components that meet with this new situation. we will back you up and i want them to know that in your efforts to creates accountability here and to move us to a new standard and are think that is critical. >> thank you. do you have any sense of how

rapidly or where we would stand in respect to getting the cease-fire restoring or monitoring presence or reestablishing humanitarian aid? >> i wish i could be more optimistic on this. i have talked extensively to both sides on this. i talked to abdel aziz and the government about it. until we get those political talks going it is going to be hard to agree on the security side. what we have pressed for until we get political talks for the process going is going to be very hard and they differ on how to deal with a cease-fire on the security side. what we pressed hard for on the humanitarian front is they have got to allow for more help to the people who are being killed and displaced.

one of the things we proposed is how about a humanitarian pause? a 72 hour pause? that happened in another conflict situations where you can get food and medicine. both sides have said they are open to that. we are going to press that if they can't reach a broader decision. but i am hoping the talks will start very soon and clarify these objections to the framework agreement and continue to press on that and if we can't get a longer cessation of hostilities, try to get a period where we can get help to the people who need it. >> you believe among the leaders in the north there may be any doubts or reservations about how the united states may behave? are our cards on the table sufficiently that they have confidence in the roadmap?

>> there are elements in the government who did that have confidence in the road map but once in while we hear that publicly. i hear it a lot. because they think we moved the goal post or they accuse us of moving goalposts and there are people who continue to argue inside the government that don't trust the u. s or base policies on that road map. i think we have made some progress in that regard. we stuck to the road map. we have not added new conditions. you made it clear as you sit in your opening statement and subsequently the conditions were the same ones you talk to when you came out and we have done our part and they have got to do there's. we keep making that point. more and more there are people in the government who realize it. it is still an argument that the u.s. will never do this.

becomes an excuse for them following other policies. >> you may get important point that we need to think more about or examine more and that is the doha process and the darfur issue itself. it is possible they may have signed that agreement. >> i haven't had a report. it was supposed to be 4:00 their time. they did sign. i knew they were had some outstanding issues. >> when they do sign, it still leaves us with the same problem and that is an important one which is jem and two major factions of the spla abdul ahid and menimanwi they have a

different agenda and we have to think carefully about how you measure it. one thing i heard repeatedly from people over there is you can't hold accountable for the darfur accountability act which requires complete settlement in darfur before you do certain things with us. of the players in darfur are not choosing to be part of the process and if their goal is our overflow it is different from the struggle that took place serving the genocide in the 2000s. that is a legitimate position. i think it is fair to say those groups have a different agenda and they are behaving differently and they will do their own thing not to mention the other groups which were criminal enterprises.

we have to think very carefully about the makeup of those groups. i wonder if you could comment on that. >> it is exactly as you say. we have said to those groups very candidly that you can't expect the government to come to the table to talk about overthrowing the regime. we said something else. if you are interested in changing in sudan why don't you demonstrate that by giving change in darfur and becoming a political part of the process. we pressed them very hard on this. some of them watching as to what happens in southern kordofan whether there's a great deal of instability and how that affects for carts elation. i think if we are successful in containing the situation in southern kordofan improving north/south relations it may change their calculation as to

where they should go but we have been very clear on that and there are legitimate complaints if these groups are not prepared to talk about darfur and engaging in the peace process. we will continue to press them on that and your point is quite valid. >> i want to ask for just a moment the role of the united states as we go forward not only in south sudan and sudan including darfur and three contested areas in this respect -- the international community join us in large measure or will the united states be the default stabilization nation-building lead? if the response in the international community will, can you identify the players? which countries are likely to be

involved in joining with us or have already for that matter? this is of considerable interest to many americans who look at the responsibility, understand our interest in a humanitarian way but ask who else in the world, described if you can that contest. >> i am glad you raised that. up to now, we had a large degree of international involvement. other donors have contributed roughly $700 million a year to southern sudan. of course others carry three quarters of the peacekeeping budget for the new mission in the south or the new mission in abyei. but i want to take it to another point you mentioned. i just met before i left

khartoum with representatives of most of the european countries and we were asking that very question. how should we organize ourselves now with cpa in formally over even though several issues remain? how should we organize ourselves now to continue to have a major role bringing about peace and resolution of these issues? we are talking about a number of ideas. how to create or recreate this kind of group of international countries all of which are committed to the peace process. we also have the african union has a mandate to oversee negotiations north/south and we look closely -- we need to think about this situation how to do that and our will come back to you because we agreed to think about this in a couple weeks and think about exactly that.

how do we keep up not just the donor program but politically hard to we act together in a consistent way on the issues we were just talking about? >> it may be obvious to us but why is it important that the international community as opposed to just the united states describe at least the feeling in north or south darfur with regard to international relations? >> it is very important and others have special contributions to make that are extremely important. the british have played a major role in security sector reform in the south. they have connections in the north that we don't have that week and drop on. the dutch are extremely

knowledgeable about all the arab tribes along the border. the norwegians play a major role sorting out the issues of oil and pricing both sides, how to treat the oil sector. that e.u. has its own set of sanctions and responsibilities. working together it reinforces the political impact that we can all have and also sharing the burden of resources. i want to mention two other countries, china and russia. i have been in touch with both of them about their role. china as you know is a major investor in the oil sector in sudan. we have urged them to play a very important role in issues with president bashir and others on issues regarding oil.

china understands they have important investments in the north and the south because the oil industry is in both the north and the south so they're picking up rapidly their relations in the south and stability becomes very important to them. we look to them to play a very important role in this regard. i met with the deputy foreign minister from russia because although they're not as heavily invested they are arms suppliers to sedan and a member of the p 5 and how they play the role in the security council is extremely important. getting them and our western european friends on the same wavelength becomes very important so that the message is various parties are receiving in khartoum are consistent. >> you mentioned china specifically. this may be an amateur

reflection but a good number of americans have observed throughout all the problems in darfur, the charge of genocide, religious groups come to see many of us, china realized some very bad things were happening but oil came first. the desire to get the oil out come hello or high water so dominated the situation that despite diplomatic overtures by ourselves or others the chinese were not particularly forthcoming. what is likely to change in the current situation? >> two things. one, emergence of south sudan as an independent country which has 75% of the oil. if oil is one of their interests than having not only a positive relationship with south sudan but also stability and no confrontation over oil, no

turning off the pipeline or the oil pumping center which each side might do in a confrontation and it also means they have to balance their relationships in khartoum. they're not inclined to trade one for another. they knew -- they do need to realize they need good. -- relations with both and that gives us the same in saying these conflicts resolved and not having an stability or conflict between the two. we talk about that a lot together. >> the year we spend in the united states approximately $1.5 billion including half a billion dollars for peacekeeping in the sudan situation generally, what is your estimate of whether these sums are likely to be larger or will it be requested by the administration for more than $1.5 billion in the coming year? can you give us any benchmarks

of the budgetary situation as you recall is tends elsewhere but sudan is important what would you predict in this area? >> we have one of the largest combinations of peacekeeping operations anyplace in the world in sudan. we have the combined you and, / and,un/eu forces, and partly peacekeeping but a lot of assistance to creating a a viable government system in the south and we have the special force in abyei which would not have been able to get these forces to withdraw. i don't see any major additional activities. the government of sudan has said we don't want a continuation of the un in the north but there is

a role but not have a role in monitoring the border of their discussion but not another big mission. i don't see any major new mission requirements but i can say these -- the ones we have will diminish in the near future. until these big issues are resolved. >> thank you very much. senator isakson and senator udall. >> i will be brief. not my impression when i was in khartoum in view of darfur they were content to fight a surrogate war because it was far enough removed from khartoum not to feel any pressure but you made an interesting comment a section ago about how jem and spla are watching because of the geographic processes. if the north continues the

alleged or apparent atrocities we had some evidence of that changes that paradigm a lot and run the greater risk of a new war in the north. >> that is exactly the risk and exactly the one the government needs to avoid. they don't want a war in the north. they complain about what they think is an attempt to create a new cpa but if they don't address those basic political issues in southern kordofan and darfur etc. they will have serious problems in southern kordofan and darfur. these are linked in the sense that the government in khartoum needs to think through the new constitution they need or what

new political relationships they need. they haven't indicated exactly where they are coming out and they are being challenged forcefully to make those decisions and hopefully not make them with the military response. >> the north which is interested in self preservation first and foremost in terms of the government runs a risk if they continue in southern kordofan with the removal of state-sponsored terrorism. if they continue that it will be a violation and they run a risk of expansion of hostilities against them. is that not correct? >> that is a major risk. >> hopefully that will be a motivating factor. have they done better with the n ngos? >> it is very uneven and not totally satisfactory. unm unmidas better access than before but it is not perfect.

it is one of those conditions as we said for having darfur based political process because it reflects lack of openness and movement so we continue to work on those all the time. >> conditions are not right yet for darfur agreement. the main condition is khartoum is not ready to be a player in doing that. >> i think khartoum is not ready to create an atmosphere of real freedom inside darfur so you could have a real political process. we have had cases in the past where people speak up and are arrested. they released some political prisoners yesterday. people have to feel that if they speak out in some sort of domestic political process they won't be jailed or something. that is something you don't just

do overnight. you prove it by creating an atmosphere people can watch and see it happen. we don't have that yet. they have to lift the state of emergency. until you have that environment it is hard to say you have a really effective darfur based political process. >> they are masters of their own destiny if they wake up and realize that. >> they are. they have these armed movement fighting but they have a lot of opportunity to create an environment that is very different in darfur. >> thank you for being here today. >> thanks. >> senator isakson and senator udall. >> i want to thank you, ambassador lyman, for your service. south sudan in one of the critical issues is education and as you are very aware, one of the least educated countries in

the world with one of the highest rates of illiteracy. i am wondering are there any plans to increase the amount of u.s. volunteers to go to south sudan? would it help our relations and strengthen our relationship with them by encouraging young americans to volunteer to help teach the next generation? >> i am glad you raised that. it is one of the highest illiteracy rates and it is going to be a major drag on development. we have a lot of ngos and church related activity providing the bulk of health and education services right now. we had some discussion whether we could bring the peace corps to south sudan. you have to be short the living conditions are possible and

other things. we will look at that and other ways for young people to volunteer because there's a real opportunity. one of the areas is teachers who are coming back to south sudan from the north have been teaching in arabic so english-language training is going to be very important even for teachers trained as teachers and a need to operate in the south where arabic is not a major of language. there are a lot of opportunities like the kind you mentioned and we will pursue them and i will let you know what happens. >> you mentioned the peace corps. are you doing a the valuation to see if the conditions are right to have the peace corps there? >> there has been some discussion the we have to check their next plan. we have to wait until the south those independent. i will check with the peace

corps. one of our peace corps officials was at the ceremony in juba so there has been some discussion and i will check on the status. >> you mentioned the lack of education be a drag on development. one of the other issues is the issue of sustainability and land use and the use of natural resources. i am wondering what we are doing to shore sustainable development practices are put in place so there will be cropland viable for future generations. >> we have been fortunate and i appreciate the congressional support. we have been able to draw on the

bureau of reconstruction of stability to provide a lot of capacity for the african bureau to deal with sudan and one of the things they have been doing is providing expert team that go to all the states in the south and look at what are the issues in those areas. land is an important issue. land ownership and land management. especially as hundreds of thousands of people are coming back. local corruption questions are important. that information is leading us and the u n to structure programs to reach out to the state and county level and urge the government to deal with those issues because they could be sources not only of injustice but instability. issues of land, issues of access

opportunity, these are important issues and we are getting a handle on them and trying to build up the capacity of the government to deal with it. >> also infrastructure is currently lacking in south sudan and if south sudan is going to achieve some economic freedom it will need to be able to bring goods to market. what needs to be done to improve transportation and create infrastructure needed so farmers can sell their crops outside the country? >> you fly over south sudan you hardly see any roads. where usaid is building a road along the border and a couple other roads but we hope other donors will come in more heavily. we will do a lot in agriculture and health and education but we hope the world bank will come and and the chinese and others

because we will do a lot in agriculture but if there are no roads for people to market their commodities won't have the right results. we will look to other donors to do more in the infrastructure. >> thank you very much for your service. i see senator coons is here so i will yield my time. >> thank you, senator lugar, i want to thank you and senator kerry for your leadership and to thank ambassador lyman and all the dedicated people who work so hard to make south sudan achieve independence. less than a year ago looked unlikely independence day would ever come to south sudan. it not only came but came on time and it is a fair referendum. we all celebrate the establishment of south sudan as the 50 fourth nation in africa i remain concerned as many of my colleagues do about the path forward particularly the

north/south border particularly in darfur. we will introduce a resolution welcoming independence and congratulating the people of south sudan and calling on government to peacefully resolve the outstanding issues including division of oil revenues and citizenship and as you detail very troubling conflict in south kordofan. the recent violence in abyei and displacement of many people remind us of the human toll of conflict which is why the international community, united states must continue sustained efforts to urge resolution to the difficult ongoing challenges south sudan will face to become a stable and peaceful nation. you have discussed the current situation in abyei but i would be interested in what you believe to be the outlook for a final agreement or referendum and i would be interested in what became of president mbeke's

proposal and abyei that would have the backing of the international community? >> what happened mbeki is a proposal back to the two presidents on abyei and the timetable got derailed by the military takeover and even though the government said we could have a political solution while we are occupying it nobody felt that situation was tenable so we were diverted and lost weeks in working for a way for the withdrawal of sudanese troops and introducing peacekeepers. it is going to -- the feeling is we have to get those peacekeepers there and the troops out and begin to get displaced which is 100,000

people back in. that will be a better atmosphere for bringing a final solution idea to the table. unfortunately what that does is delay for weeks and maybe a couple months. i am bothered by that but i understand the logic of it and its impact on the other negotiations result in oil issues etc.. the advice of most people working on this, people close to it and i talked to people on both sides and others involved, we need to make sure abyei is demilitarized and people feel safe and we can deal with this issue. it has been delayed. i am bothered by it which is why i said earlier we need a very firm timetable for addressing it because otherwise it lingers as a source of conflict. >> you mention the peacekeeping mission. if i understand correctly there

are three distinct peacekeeping missions across a wide area. i am concerned about coordination, sustainability, quality of the troops in the peacekeeping missions. what work is being done to coordinator round supply lines, logistics and sustainability of the troops engaged and for how long they might continue operations? >> this is the issue our colleagues have been concerned about. there are three different missions right now. there is talk of creating a special envoy who will work on some of these issues in the u. n. it hasn't been finalized but it is one way to have someone who is dealing with all of it. but i think right now we are going to have to rely on the

leadership in the u n on the ground to do this. the peacekeeping operation going into abyei responds to a point you made about the effectiveness of peacekeeping operation. the peacekeeping operation in abyei was not affected. if it had been we might not have had the crisis we had. we turned to a country we knew would put in peacekeepers who would carry out their mandate vigorously but it took as a long time to work that out. i think they are going to be there for at least months if not longer until we get a resolution. the mission in the south is a big mission. it will be there for a while. unimed would be wonderful but that will take some time. i can't honestly put a timetable on when these missions will end but this issue of coordination is on the mind of the un as they

work through more, i will get back with more of their ideas on it. >> you already addressed in response to senator lugar some concerns about china and their role but could you elaborate on where you see the interest of the united states and china overlapping with regards -- are there examples of china playing a constructive role? what advice? we have a hearing on a roll of china and africa in the next few months and i am concerned about better understanding what role they might be asked to play? >> china is already a vigorous player in africa. they have important commercial and political interests. some overlap with hours sometimes when we are in competition. in sudan it took a long time to

get on the same page on darfur. longtime. but now are as i mentioned earlier now that south sudan is independent they have a stake in resolving the oil issues and stability and have no good relationship with both. i expect them to develop a fairly substantial presence in south sudan. i hope they will contribute to the infrastructure area as well as other training. we look to them and we discussed this together with the chinese, in their contract with president bashir and others to press hard to the points we were discussing earlier about resolving issues like southern kordofan differently. chinese and russians stood with us in the u. n. security council to urge the north to keep the un presence in southern kordofan. i think we're getting closer

with them in terms of shared interests and it is an opportunity to see them making a bigger contribution. >> thank you very much for your service. >> mr. ambassador, our relationship with the north with sudan is caught up and controlled by number of overlapping laws passed over the course of ten years but obviously as of last saturday the map has been completely redrawn. i see that you are currently able to do certain kinds of work in darfur, south kordofan and blue nile but not allowed to do a long rest of the border but

obviously relations between sudan and south sudan aren't limited to those areas now. particularly there is this cuteness of delivery on our part. in the south and north to south sudan and the north. my question is our staff has been working to figure out how we might adjust some of these laws which i personally think is important to do for a lot of reasons not least of which is we are constrained in our ability to deliver to the north unless we do. so would you comment on whether it would be helpful for you to have both legal authority to work on a piece empowerment zone that stretches across the entire border rather than have certain section of carved out? >> there is a lot of attraction

to that idea because the border area is where a large portion of the population on both sides live. there are a number of flash points, some disputed border areas. there are questions of crossing borders of mutual development and i think it is an area where we can make a significant contribution if we have the ability to work wherever we thought, that would help alleviate both pressures and humanitarian needs. it would be wise. >> can you share the kind of projects that might facilitate a more lasting peace? >> part of the tension that arises is in the migration from north to south, access to water and so on. what we talked about in some cases, can you get the joint development zone that transit

north and south that would make people comfortable that everybody is developing equally from that kind of development? you would also ease the 5 -- migration pressure if you could develop the water above the line. we see that in abyei and 7 kordofan. those things would help alleviate some of the tension but equally important build cooperation. you really want on the border cooperation between the governors on each side and a lot of them the governors are interested and perhaps programs that facilitate that and conflict resolution could be useful. >> what about legal authority to work in a food security or democracy projects? >> on food security i think the

government of sudan will face a lot of difficult economic challenges and oil in combat someone -- maybe isakson mentioned or maybe it was you, the oil doesn't last that long anyway. norwegians predict a sharp decline in both. the economic adjustments are going to be great and food production is one of sudan's great potentials if they would invest in. i would think in our readiness and willingness to do so should reflect the political relationship and their fulfillment of major issues like cpa and 7 kordofan. opening that possibility up is important for the people in sudan and everyone because of the trade. >> and some leverage in

negotiations. >> it would be important in terms of demonstrating we tried to say over and over again which is the interests of the united states seek two viable successful states. without that there is not going to be stability in either one. we don't want sudan, northern sudan to be in deep economic trouble any more than we want sudan to be. it sends an important message to say if you are moving in this direction coming into the international community we are very serious about the people of your country not going into economic turmoil. >> let's assume you get an agreement, a grand bargain that addresses abyei and other

critical issues including the apportionment of that -- get --debt would you not need some sort of legal change or redress to address this? >> there are clear restrictions in the legislation on that. debt relief is an extraordinarily important issue for the government of sudan because under the agreement they have with the south they have taken on the full burden of that $30 billion of debt. on condition the international community will afford them debt relief and the south will support them politically, as we move forward, the president will need an understanding with

congress about those restrictions. right now it is in a technical note. world bank is doing what they have to do which is to gather all the detailed knowledge of the loans to reconcile the records of creditors but after that it will start to move -- >> we need to address it. >> it will be important. >> other questions. how would you say south sudan government is doing in terms of prioritizing its own governance agenda, development agenda? >> it is still in very early stages. usaid will sponsor a conference in september, not a pledging conference. it presents exactly that. what are their priorities in governance and development and how could the private and public sector help? but at the early stages they

have been focused so heavily on becoming independent. they're moving from a liberation army to becoming a government and that transition is entirely complete. they have to engage in a new constitution. they have an interim constitution but they need to develop a constitution that brings more popular participation in to the process. i would say they are at early stages and need a lot of encouragement. >> you mention the question of the army and its own transition. they have a force of 130,000 soldiers but they have incorporated within that range a number of armed groups. my question is i don't think that is sustainable politically and otherwise. what should their priority be for security reform and how can

we have an impact or should we have an impact with respect to that? >> one way they deal with these militias is to incorporate them into the army which means the army gets bigger before it gets smaller. >> wire them out in colloquial terms. >> a great many members of the armed forces are illiterate and not trained for anything else. just rushing into a demobilization process is not going to be good because then these people will have no way to make a living other than to join another militia. what the government talked about and the right way to go is a program which develops a lot of the skills, builds a more professional ministry of defense and oversight and engages in a program of reduction and demobilization where people go out with skills that are able to make a living and so we are

working with others on this issue of security sector reform and this is exactly the question we are working on. >> final question. up until now we have provided non-lethal support and military assistance in support of the transformation of their security sector. there are some -- i won't say it is a heated debate but some suggested they are an independent nation and it may be time to consider legal support including air defense training technologies. do you have any cultural to this committee? >> we have not decided to provide assistance. we are focused on the issues you first raised. how do you develop this into a

better organized, more professional national military force? we have made no decision on legal assistance. i want to come back to the congress and discuss that before we make a decision. >> we will welcome you back. we will stay actively engaged and try to provide some transparency to this process and hopefully that can be helpful and assist you in the process in consultation with you. i thank you personally. i need to run to another thing. do you have more? >> ambassador -- i just want to thank you again for your tremendous work and working so closely with the committee and we look forward to continuing. >> thank you. we are grateful for the interest

you have given this. >> let me carry forward questions you raised about the lack of a constitution. you tried to fill in some of the gaps. there is at least a military force that is expanding as you suggested taking in militia and so forth. so for the ordinary observer they would say essentially the government right now is the army or the military force. is this true in the sense -- are their generals leading this? a general at the top of it? trying to described what the executive authority is in -- in terms of a military hierarchy at this point? >> they have an interim

constitution signed during the independence they said that ceremony. it is supposed to be an interim constitution. it doesn't have a terminal date which is a source of great controversy. but the pledge is to have a much more broadbased process for developing a permanent constitution. the constitution they just signed centralizes power quite a bit. it is one of the sources of controversy when it was developed. many of the leaders in the government's arf generals who led the liberation struggle including the president and -- salva kiir and a number of others. there are people who come with skills in those areas but this

is the transition from drawing heavily as they understandably have on their military leaders to fill these positions and some of them are extraordinarily good to building a broader based government that makes a clear separation between the government and the military and that will be part of security sector reform and constitutional reform should do. >> is there a basis for optimism that as we observe this process unfolding at the end of the day, three four years from now we could observe this government looks much like those governments involved in arab spring and by that i mean essentially a strong man or woman as the case may be and

somebody not prepared to give the story and surrounded by a military that is subservient to that leader and if so what will be the debate in our country as far as to what we have supported or helped produce in this case. >> i think the challenge, we have to stay close to these issues with the government in south sudan because it is tempting when you are the overwhelming political and military force in the country to run it as a quasi one party state and not to see any challenges to you as something to push back on. that is the challenge. we have ndi and other

organizations to not let them go down that path. they talk about it. they are very conscious of it. they are where this is a big challenge for them but we have to keep those issues in our dialogue. it is political openness, fairness to allowing new political forces to develop. human-rights culture and that has to be on our agenda all the time. >> we just touched upon oil and agriculture but one of the points made about the recent egyptian experience, the young people in tahrir square and millions of people who lacked food with price of wheat having--egyptian dependence on us and 65% of their wheat, amount of subsidies on the

countryside was inadequate. a lot of the revolt came from people who were hungry. we are dealing with sudan and we hope it will develop an agricultural situation. that could be true in the north and the south. there's only limited evidence at least so far and furthermore as the norwegians suggest the oil may run out. these basic elements of the money for this state as they get it right constitutionally is how are people going to make a living in south sudan? is a culture development or is there any potential industry of any sort? >> the food problem is true of the north and the south. food prices have been rising. there has been a weakening of

the currency of the pound which has raised the price of imported food. the south which is dependent on food from the north as well as from the south is also faced very high prices on food. in my view a very serious situation that both countries have to deal with. .. very

critical. and it's going to make people more self-sufficient and reliable. it's going to cut down the need for food imports, which they now rely on heavily. and then there are, as i say, many other mining and other opportunities, industry may be if the infrastructure improves -- if they join the east africa union which they are talking about, it does open up the opportunity for a bigger trading area, but i think their ability to profit on that is depend on building nor structure and capacity. >> now, this is maybe a step for another hearing at some point, but -- yes. >> let me just say thank you very much. >> thank you very much. >> and i'll see you on the trail. >> okay, thanks. >> i'll conclude in just a moment. >> sure, anytime. >> essentially, one of the dilemmas in the development of agriculture in many african companies, leaving sudan out of

it all together has been a disagreement between the united states and european friends on so-called genetically modified seed or procedures. and there's a debate in brussels -- now, the dilemma here, obviously, at the gates foundation as the department of usaid pointed out if you're looking for the kind of yield increases that made agriculture a very different situation in the united states. i've seen on our own farm, my dad getting 40, officials an acre of corn now we're getting 170 so in my lifetime a fourfold increase on the land but only because we adopted procedures that are in dispute, internationally. and this is why, as we take a look at the international involvement in sudan, i'm hopeful that somehow a humane streak will come over all of us,

europeans as well as the united states because otherwise the possibilities of getting the kind of yields that are going to be required to support that population are pretty distant. and this is likely to lead to more conflict. now, leaving aside all the other reasons for conflict, the most essential reason people may fight is before they starve. without putting too grim a note on my final question, i'm hopeful that in our delegation to sudan, there are people who are gifted in this particular skill, and that would be true really of assistance we're giving to all african countries presently. >> uh-huh. >> well, you touch on the issue which i have rather strong feeling but i don't know what the u.s. government position is but, frankly, i think that debate has not been fair to africa and paul collier, the author of the "bottom billion"

wrote not long ago taking the same point in which you did in which i agree. there are opportunities in this technology for africa that may be vital and essential and they ought to have the opportunity to develop those. so i happen to feel that way too. i'll have to check with others and see where our u.s. government is. but our u.s. administrator told me that in his visit to southern sudan, the technology that we could introduce today would have a dramatic effect on the yields in southern sudan. he's very optimistic that we can do that. and he's very focused on it and i hope you get a chance to talk to him because he came back enthusiastic. also the minister of agriculture in south sudan is terrific and she's heavily focused on these opportunities. >> this is great news, both raj shah as well as the secretary of

agriculture in sudan are on the right track for the benefit of the people of the country. >> exactly. >> as well as some degree of peace at least on that situation. >> absolutely. >> well, i join the chairman once again in thanking you so much for your coming today. this has been a very important hearing. and you've given very important and encouraging testimony to us. >> well, thank you. it's a great privilege always to be before you, senator lugar. >> and i'll conclude by saying the hearing is adjourned. [inaudible conversations] [inaudible conversations]

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[inaudible conversations] [inaudible conversations] >> taking you live now to the

treasury department. this week marks the one-year anniversary of the dodd-frank financial regulations law, one of the provisions in the law called for the creation of the financial stability oversight council to identify and respond to emerging threats in the industry. its members will be discussing what's happened since the law's enactment and why some of the measures have yet to be implemented. we're just waiting here in the room for the participants including federal reserve chairman ben bernanke, securities and exchange commission chairman mary schapiro and, of course, the group's chairman secretary of treasury tim geithner. we'll be bringing you live coverage right here on c-span2. [inaudible conversationses]

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[inaudible conversations] [inaudible conversations] >> and we're here at the treasury department just waiting for an event marking the

one-year anniversary of the dodd-frank financial regulations law. and again, one of the provisions called for the creation of a financial stability oversight council to identify and respond to emerging threats in the industry. and we're going to be hearing from some of the participants including federal reserve chairman ben bernanke, securities and exchange commission chairman mary schapiro and the group's chairman, treasury secretary tim geithner as soon as they come into the room here. we'll have live coverage on c-span2. the dodd-frank act also created the consumer financial protection bureau and this afternoon president obama will be announcing his choice to head up that agency. former ohio attorney general richard cordray and we'll be bringing that announcement on our companion network c-span but we'll take a look now at one of the reporters we spoke to earlier today about the

appointee. >> host: here's the piece today, the follow-up piece in the "washington post," one of the writers is elon muye pos and th headline says president obama is to top the former ohio attorney general to lead this new consumer agency. we know the name elizabeth warren has been out there quite a bit to potentially run this agency butsu elon, i guess star us off by explaining why not elizabeth warren at the end of the line here for this consumer bureau? >> guest: well, i think we're finding this story it's about who obama is planning to name and who he isn't planning to name and that is elizabeth warren a popular speaker among proves and she is very outspoken on tricks and traps of the financial industry. and because of her strong rhetoric on this issue, that has made her very popular among liberals and progressives but it has also made her sort of anathema to the industry that she would be regulating.

and there was a real concern elizabeth warren from the very binge beginning would not be confirmed from the beginning. and cordray that obama is going name. republicans have vowed to block anyone that obama puts up and we'll see -- right now we'll see whether or not they awere able stick to that pledge. >> host: well, prior to any blockage on the gop side explain who this new face is at least at our table richard cordray, he's a former jeopardy winner? >> guest: he is a former jeopardy winner in the late '80s. he's well-known in the consumer circles on some of the robo signing issues and he was former attorney general in ohio but he lost his bid for re-election back in november and so since then he has been already at the

consumer financial protection bureau. he's already there hand-picked by elizabeth warren and bringing actions against banks that break the law. and so he's someone who is formerly with elizabeth warren's camp and does not have that same history and that same polarizing nature that could have had her confirmation. >> host: how will the nomination work and how much umff will the house give to this new nominee? >> guest: well, i think that taking somebody from elizabeth warren's camp they are hoping to appease her ardent supporters it's either liz we the warren or it's nobody. we've seen liberals are very disappointed by the fact that warren wasn't named and the fact they are willing to accept this new camp as well. anthe president is expected to

formally announce this today. and again, it's really uncertain whether or not that will actually play out, whether or not he'll be able to get any movement on this before the senate breaks for recess and if he'll have a chance to appoint mr. cordray through some other means as well. >> host: take us deeper what you do write. republicans -- they still want to make changes to the agency's structure and to the funding before they agree to any nomination. tell us more about what they're looking to do? >> guest: yeah, if you remember, this is part of the dodd-frank bill that was passed last year that reformed the nation's financial system. and now there's certain pieces of that that they're trying to pull back and the financial protection bureau is one of them. one of the things they are is to change the leadership of the bureau from being a single director with

elizabeth warren or richard cordray to be a five-member commission similar to the way the federal trade commission is run. and another thing they're trying to do is to ensure that there is a stronger oversight of the bureau's decisions by other regulatory bodies. and the other thing they would like to do is to make the bureau subject to the appropriations process. right now the cfpd is funded through the federal reserve and so it keeps its money a little bit safer as opposed to having to go through what is a contentious round of congress. >> host: ylan mui is financial reporter for the "washington post." here is the headline to her piece, obama to tap former ohio ag to lead new consumer agency. thank you very much. >> tim geithner the group's chairman here. we'll hear about the dodd-frank regulations law. the financial stability

oversight council is meeting. they identify and respond to emerging threats that are seen in the industry and its members are going to be discussing in just a few minutes what's happened since the dodd-frank law's enactment and why some of the measures have yet to be implemented. we're just waiting for federal reserve chairman benernanke and securities and exchange chairman mary dodd-frank all will be speaking at this event. you're watching live coverage here on c-span2. [inaudible conversations] [inaudible conversations]

[inaudible conversations] >> okay. there appears to be a critical mass. welcome to the open session of the financial stability oversight council. this week we mark, of course, the first anniversary of the passage of the dodd-frank act. i'm going to give everyone here a chance to say a few opening remarks before we get to the formal agenda but let me just start with a few of my own. we all know why we're here, of course. we had a financial crisis that caused devastating damage to the american economy, to businesses, families across the country and caused a huge blow to the basic

credibility of the american financial system. reform was not a choice. it was an obligation. and we have an obligation together to do the most careful best job we can to make sure we put in place reforms that are going to endure for generations and leave us with a more resilient, more stable system with better protections for consumers and investors. we are making a lot of progress against that objective. the people in this room have been working very hard and very well together to try to meet that basic requirement of the law. and it is my view that we can say with confidence today that the american financial system is in much stronger shape because of the actions we took, the strategy we embraced to resolve the crisis but also because of the progress we made in implementing the basic foundations of reforms in dodd-frank. our financial system today is on more solid ground with less

leverage, more capital against risk, more transparent to investors, creditors, and regulators and i think overall more resilient to adverse events in the future. u.s. financial institutions hold much more capital relative to risk than they did before the crisis. and they are now funding themselves much more conservatively. we have a global agreement with capital standards and liquidity, a very tough, a very strong agreement. we have underway for the first time a comprehensive role of framework of oversight for the over-the-counter derivatives markets which as you know is an estimated in terms of gross national exposures of $600 trillion. we have a consumer financial protection agency up and running to provide better protection for consumers. we've begun the process of unwinding fannie mae and freddie mac and reforming the overall mortgage market. we've withdrawn or terminated

almost all of the emergency measures we took -- we put in place to put out the financial fires. we recovered most of the investments we had to make in that financial market in that financial crises and i think you know taxpayers were going to see a very positive substantial return from the investments they made in the banking system. compared those results with what most people felt two years ago was an estimated cost of the crisis. it could amount to hundreds and hundreds of billions of dollars. now, we've been busy. but the opponents of reform have been busy too and they've been working aggressively to try to slow the process down and weaken the challenge of reform. i'll just give you a couple of examples. the u.s. financial community has spent more than $50 million to

pressure lawmakers and regulators at higher than they spent in the previous quarter, you see more than 25 bills introduced in congress to try to dismantle or weaken critical provisions of the law. you're seeing legislators try to starve enforcement agencies of the resources they need to carry out these reforms and to delay and block appointments all with the objective, as i said, of trying to slow and weaken reform. but we're going to keep moving forward. i think we all feel we owe the american people a stronger system with better protections for consumers and investors and better positions against catastrophic failure and we're going to justify -- we're going to work to make sure we achieve that. i want to thank everybody here in this room and their colleagues for all the hard work they've undertaken and for bringing the kind of care and diligence that an endeavor of this complexity requires. this is not an easy challenge and i appreciate their efforts

everyone has made to work a little bit closely together to build a system that's going to work better in the future. i want to introduce the two new members we have here today on the council and welcome them. they are marty groomberg who's sitting on my left why chairman of the fdic and the president's nominee to take over at chairman of the fdic and michael mccray on my right who's the director of the federal insurance office here at treasury. welcome michael and welcome marty. i also want to just take this moment to thank my colleague geoffrey goldstein who's sitting behind me, i believe, who is undersecretary of defense and he's certainly played a role to restore a measure of stability and confidence to the american financial system and in helping build this institution for cooperation we call the financial stability council, and i have the greatest admiration and appreciation for his hard work and for the fact that he was willing to come work for his

country at a time of crisis. i want to give my colleagues a chance to say a few things at the beginning before we get to our formal agenda and i'm going to go in the following order. i'm going to go to my right in order and then come back and then go to my left and that means chairman bernanke, you go first. >> thank you, mr. secretary. on this anniversary of the dodd-frank act, i think it's very important to remember why we're here in the first place. it's only been about 2.5 years since the worst financial crisis -- or certainly one of the worst financial crisis in world history brought many global financial firms to the brink, froze financial and credit markets and had an enormous impact on global production trade and employment two years after the beginning of the recovery, we're still, obviously, feeling the effects of that crisis. comprehensive financial reform was needed. we have very extensive rules that have been put in place. we're working hard together.

it's a complex process with many aspects to it. the federal reserve itself, of course, has got many responsibilities but we're working closely and consulting with our colleagues here. on the fsoc and we're involved on an international process because we do not have an international consistency we do not have regulatory arbitrage and the process will not be effective and so we're working all very hard. the secretary has pointed out the many difficult steps that have already been taken. in implementing the statute, of course, there's been much debate about many specific aspects. we're listening. we're talking with market participants, with the public, trying to understand all the implications of what we're doing. we, obviously, want to weigh costs and benefits. we want to protect smaller community institutions and most importantly, of course, we want to promote the flow of credit to help this economy recover.

but i think as we discuss these issues and they're very important issues, we must not lose sight of the reason that we're here again, which is this enormous crisis which showed the weaknesses in our financial regulatory system and in our financial system more broadly. and we are certainly committed to doing what is necessary to prevent the recurrence of such a crisis in the future. thank you. >> thank you, chairman gentzler? >> thank you secretary geithner and thanks to members of all the treasury staff for working so well together. i have to agree with chairman bernanke that it's important on this anniversary why the president and the congress came together to pass the historic law. the crisis occurred because of the financial system failed and because the regulatory system failed. when large financial systems such as aig and lehman failed we all played a price and dodd-frank had critical reforms including the swaps markets place to protect the american

public bringing much-needed transparency and lowering the risk that swaps marketplace to the economy and lowering the possibility that taxpayers once again would stand behind barge financial institutions. the dodd-frank included establishing this council and that gives an opportunity for all of us regulators now and in the future to ensure that the financial system works for the american public. and though the crisis had many causes i think it's clear that the swaps marketplace played a central role in that crisis so the cftc working with fellow regulators here but primarily with the fcc has been working diligently writing rules around the swaps provisions of the act to make sure that transparency comes to what was otherwise a market in the shadows and the financial institutions pay, impose less risk to the taxpayers. we've substantially completed their proposal phase and we're moving forward on final roles. we did so a couple weeks ago and a handful of rules we're going to do so again tomorrow.

we're going to do so through the fall and as chairman bernanke said, we're going to consider all the issues that market participants raise and get the balance for markets and the cost benefit analysis and the international coordination taken into consideration but this rule-making process is very important. it's the only way that will really protect the public who still is unprotected until we complete the work at hand. >> thank you. acting director demarco? >> thank you, secretary geithner. thank you for your leadership this past year of the fsoc and its members have worked diligently on the numerous requirements of the dodd-frank act. it's hard for people outside the process to realize just how much effort and how much coordination goes on in undertakings like this, not just with the fsoc but the numerous interagency rulemakings and i think the work of our collective staffs the past year has been outstanding

and their diligence should be recognized. you know, the dodd-frank act gives us the regime to develop a prudential framework and resolution tools to use ex post but taken together should reduce systemic risk and make private capital more responsible for risk-taking. our success will not ultimately be judged by whether or not a large financial institution ever fails again because surely it will, but by whether or not market participants and regulators alike realize that equity holders and creditors of these institutions will not be saved but will absorb losses. there's much left to be done to implement and realize the benefits of the dodd-frank act. and so there's -- while we have much left to do, i would also note that we have another critical step and that is the development and enactment of housing financial reform. ..

>> and to the federal government government. >> thank you, michael. bill harris is the commissioner of the california department of financial institutions. >> thank you, mr. secretary. let me thank you personally for establishing a very good tone within the first year for the fsoc, and ensuring an open and transparent process throughout all this. you are to be commended for that. i'd like to thank the staff of

all the agencies as well, for an incredible line of work that's been produced over the past year. during the financial crisis the resolution mechanism that worked for most of failed banks in the country, including 36 in my home state of california, stopped working for the largest institutions. and i really think one of the critical foundational elements of dodd-frank was the establishment of the liquidation authority or some other mechanism that would ensure that we have balance and fairness in our approach to financial institutions, in a situation where investors face a true risk of loss. i also think the work being, council staff is doing and the work in areas of heightened prudential supervision, i know it's not yet finalized but think very positive progress there, and i think we should all feel good about the progress that we made in this first year.

>> thank you. john is the director of the missouri department of insurance, financial institutions and professional registration. john. >> thank you, mr. secretary, the much. it's been approach for me to serve on this council with my fellow financial regulars. this council is certainly engaging in difficult but important work that will undoubtedly improve u.s. financial stability but will also have an impact on financial institutions and the regulation. given the gravity of these deliberations and decisions being made by this council it is critical that all sectors of the financial system be well represented. for much of this inaugural year of the council i was the only insurance sector representative, and i remain the only insurance regulator. i continue to believe this council would benefit from greater input and expertise of the insurance regulatory community. my fellow insurance regulators and the national association of insurance commissioners mean ready to assist in any way they can.

while more regulatory insurance resources can and should be brought to bear to assist the council i am pleased today to be joined by michael, our nation's first director of the fio, and hope to be joined worrisome by the voting insurance representative. it's about importing that the uniqueness of the insurance business model and the strength of a state-based system of insurance regulation be recognized as this council monitors systemic risk and determines which non-bank institutions to designate. it will be our joint responsibility to be vigilant in this regard, and i look forward to working with the other members of this council to continue to ensure that the insurance sector is well represented. >> thank you, john. david massey as the deputy of the securities division of the north carolina department of the secretary of state. >> thank you, secretary geithner. the wall street reforms and investor protection provisions in the dodd-frank act were born out of necessity.

the financial crisis made it clear that the existing regulatory landscape required and overall. the formation of the fsoc was an integral part of this overhaul. the work of the fsoc and its members is important to preventing another crisis and restoring investor confidence. investors of all kinds look to their state and federal regulators to protect them from the types of practices that led to the financial crisis. we are committed to working hard to live up to those expectations and to continue to advocate for investors as we work with the other members to carry out the work of the fsoc. thank you. >> thank you, david. marty. >> thank you, mr. secretary. i have been acting chairman for all of a week now so i think i will be restrained in my remarks

today, but let me just say, a viewpoint of the dodd-frank act as the creation of the financial stability oversight council. under our previous framework we really didn't have a mechanism with the explicit charge of trying to look at risk across the system, we had a series of individual regulators tasked with supervising particular segments of the financial ministry, but no institution specifically dedicated to look across the system as a whole. and for that reason i really -- view the creation of the fsoc as crucial. it's never going to be perfect, no mechanism of that kind ever will be, trying to get the different agencies around the table to agree. it's never going to be an easy thing to do, but it is a very important thing to do. and it is my perception that the fsoc is serving its purpose in

terms of bringing these agencies together, requiring them to work together to look at risk process is an attempt to address it. and certainly the fdic remains very strongly committed to that nation, and i know the secretary and chairman are quite committed to that as well. thank you. >> chairman schapiro. >> thank you, mr. secretary. i want to thank you and all the treasury staff we have collected leadership. over the past year and the staff of all the agencies for your due diligence and collaborative spirit. after one year it's already clear that the dodd-frank act is reshaping the regulatory landscape, filling gaps, reducing systemic risk and helping to restore confidence in the financial system. it is beginning to strengthen the financial system so it is less prone to financial crisis. any specific area of security, dodd-frank love a very significant impact. it brings hedge fund advisers under the regulatory umbrella, it creates a new whistleblower program. it establishes an entirely new

regime for over regime for over-the-counter derivatives. enhances the authority over credit rating agencies, provides for special corporate disclosures and heightens regulation of asset-backed securities, among many other things. although there's much to do to fully implement the law, we at the sec of already established a program to incentivize insider to bring us information about financial fraud. we've already established the process to require hedge funds and other private fund advisers to register with the sec and be subject to our rules. we have already taken advantage of an array of new enforcement tools to pursue fraud and we have proposed virtually all the rules necessary to build a regulatory structure for the securities-based swap market. to help fulfill the acts promised as many here know, the sec was cast was right a large portion of the rules, and over the past year we have accomplished a great you. of the more than 90 mandatory rulemaking provisions, the sec has proposed or adopted rules

for three quarters of them, or about 70. this does not include the additional rules stemming from dozens of other provisions with the sec was granted discretionary rulemaking authority. the rules we are proposed and adopted have been strengthened because of the process we put in place. we have increased transparency and make it easier for the public to provide input. as secretary geithner alluded to, it is so important that we not forget the harm that the financial crisis inflicted upon our economy and our people, or ignore its lessons. that is one reason it will be critical that all regulators receive an appropriate funding levels to be able to fully implement this new law and protect investors, as the law intended. after one year i'm pleased with our progress. i'm looking for to even busier year to come. thank you. >> thank you, mr. secretary. and thanks to you for your

leadership and to treasury staff for the leadership that they have shown in this process and the cooperation that we have enjoyed, as with many others here in the occ has a large body of work underway, 85 projects that we're engaged in as a result of the dodd-frank act, and that doesn't include things like the mortgage foreclosure mess that we're dealing with on its own track. but i can report that as of this morning the staff of the office of thrift supervision has reported, so there is from this week for a single agency responsible for supervision of national banks and federal threats. also we are ready to hand over supervise responsibility for large banks this week and have arrangements in place for a smooth transition there. but actually and comments of others, i do think that the council is one of the key

defenses against future financial crises that dodd-frank has put in place and the council deliberations i think will be helpful in breaking down regulatory silos that existed that kept us kind of a bit too focused on her own work and not looking across the system and will help us tear into dark corners of the financial system, where abusive act is his ability to market disruption can take root. i think the council success will depend on the willingness of its members and staff to engage in candid discussion and i think that process is evolving in a confidential sessions that we have had, like the one we just had today. however even with the fourth deliberation and best data, in an age of systemic risk to remain unforeseen, so while the council may not be able to foresee the future i think it does provide a mechanism for communication, coordination and effective response to contain elements of systemic disruption,

should that occur. thank you. >> thank you. debbie matz is the chairman of the national credit union administration. >> thank you. i would like to thank the staff of all of our agencies for the diligence, creativity and patience they have demonstrated to get us to this point. it's been an extraordinary job that they have performed. as we continue to work together to carry -- on the first anniversary of this historic legislation, we should feel a sense of accomplishment on what we have achieved. we are putting in place a framework to reach our integrity and markets and strengthen the public's trust in the financial system. our combined fsoc activities, independent actions, and joint rulemaking are correcting many of the weaknesses laid bare by the financial crisis. together, on the fsoc we have made significant progress in issuing a number of important studies proposed and final rules, and establishing a venue or identifying and analyzing emerging risks.

it is essential all americans have access to dynamic, competitive and well functioning financial markets and institutions. doing so will ensure that businesses can secure capital needed to innovate. the economy can grow and create jobs, and families can confidently save and invest for the future. that is why we must take the time to write efficient, effective sensible and tailored rules. the release of the first fsoc annual report which will include key recommendations for addressing emergency, emerging risks facing our financial system will mark an important milestone. while much work remains we have made real progress this year in creating a stronger, more secure and more stable financial system. the fsoc is a critical institution that will have an important role in financial stability for many years to come. >> thanks to each of you. let's move to our agenda. i'm going to start with a brief

preview of the annual report. i say preview because we are close to finalizing a report, expected release in the next few days. i'm going to ask to give you an outline of the structure of the report and its core recommendations, and they'll be joined by nelly from the fed and barred from the fdic to be available to answer any questions. so, go ahead. >> thank you. thank you to each of your staff for their tremendous attention and care they've given to the report that has been delivered, prepared and also i want to thank neighbors of the council for creating a highly collaborative process with significant input from each of the member agencies. this annual report is noticeable because it's not on the first annual report from the council, it's also the first public report in which the u.s.

government has taken a comprehensive view of the financial market governments and potential threats to the financial system. it's also been written in the context of our continuing recovery from the financial crisis and a significant ongoing work by member agencies to evident that dodd-frank act. the report fulfills a statutory requirements to report on the council's activities and to assess significant financial market and regulatory developments. the report is structured around four key sections. it is a section on the macroeconomic environment, ran financial market developments, an update on implementation of dodd-frank, and the council's activities, and also on attentional and merging threats. this is also an important won't because it's a reflection of the council ongoing efforts to monitor risk to financial stability. the discussion in the report to talk about some atomic forces that will drive change in the financial system over the next few years in which all of the members will need to carefully monitor and work together to

understand such a cyclical forces, secular forces like technological innovation and new products, and regulatory forces. it also discusses current vulnerability in the financial system along with important potential shocks and imbalance is that could combine to create a threat to financial stability. the report will make recommendations in a number of areas to address these risks. including heightened risk management and supervisory contention, areas where there are a need for reform to address structural vulnerabilities and it emphasizes, will emphasize the continued progress and the importance of domestic and international coordination on financial regulatory reform, including the importance of continued progress of housing finance reform. in terms of timing, as the sector emissions and there's a robust discussion during a closed session. we as a staff will incorporate the changes suggested in that discussion for improved by this

council and released in the coming days. >> thank you. questions, comments, observations for our colleagues? mr. chairman? >> i just want to comment that the annual report has proved to be an excellent framing device. it has provide a framework for our staffs to work very closely together. it's a collective effort of the staffs of all the participating agencies, a lot of information exchange, a lot of discussion. with the principles providing oversight and guidance, i think it's been a very useful exercise, not just in the substance that we will be presenting but as a way of forcing the staff interaction which has been so invaluable. think you. >> other comments, observations? thank you all very much. next set on our agenda is a

final rule for designating financial market utilities. and i'm going to ask the treasury to provide a brief overview of the final rule. he will be joined by jeff from the fed and robert wasserman from the cftc so they can answer any questions that any of us have. >> thank you, mr. chairman. the final rule that we are proposing today outlines the criteria and procedures for the determination of smu's systemically important. it does -- will be subject to heightened risk management standards as prescribed in title viii of the dodd-frank act.

today, we're talking about the designation of financial market utilities, the designation of settlement activities in our title viii we address in the future in a separate rulemaking. they manage robert multilateral system for the purpose of transferring, clearing or settling financial transactions. providing critical in services to the u.s. financial system and the broader economy. and venues are effectively the plumbing of the financial system. however, this function in in connection -- interconnectedness of fmu can also great risk in the financial system. accordingly, the dodd-frank act authorizes council to designate and venues as systemically important if the council determines it a failure or other distracting to the functioning of the fmu could increase the risk of significant liquidity or credit problems spreading among financial institutions or markets.

thereby putting the financial stability of the united states. we begin the process of coming to this final rule by issuing first, a notice of proposed rulemaking in december of 2010, and subsequently npr, notice of proposed rulemaking last march. that there's a proposed rulemaking had a 60 day comment period that close last may 27. the council received 15 comment letters from a variety of industry groups, clearing houses, payment systems and other financial institutions. in general the comments focus on the councils designation criteria and metrics, although the council's procedures for evaluating fmu's is under consideration. in response to these comments, the preamble to the final rule provides additional clarity on process and criteria the council used in making its determination's. procedural safeguards were added to stipulate that fmus had the opportunity to contest the basis

for proposed or potential emergency designation by the council. in addition, preamble clarifies initial focus of designations will be on the review of large value payment systems. and, finally, the application of certain subcategories and metrics were adjusted in response to the comments. the final rule does not provide specific numerical threshold that would trigger a designation. as the breadth of products, asset classes and market structures and fmus operate in make it impractical to apply the methodology for selecting fmus. the final rule, other than these changes, is substantially similar in structure to the rules proposed in the npr in march. notably, the final rule pertains the same two basic designation process and the key considerations and subcategories

or designation that were outlined in the npr. consistent with that npr, the first designation process will be publicly provided -- regularly available, readily available to counsel and member agencies. and then a second stage, we take friends that were identified in the first stage and subject them to more in depth review, the greater focus on qualitative factors and also contacting firms to get from specific data. the two-stage designation process will of course incorporate the five statutory considerations outlined in the dodd-frank act. the rule, in developing the rule, we have added additional subcategories to those five into the rules text, and we have also provided illustrative methods as examples in the preamble to the rule.

painting council approval, the rule will become effective 30 days after publication in the federal register. this will permit the council to move forward in identifying fmus so they can meet the standard for systemic importance. >> thank you. questions or comments? chairman schapiro? >> i just want to express my support for the final rule that we're considering today and my appreciate for staff and the various agencies that worked on it. we all recognize the importance of having a reason and sound approach or disney systemically important institutions, that will ultimately be subject to supervision and regulation. and we at the sec are very committed to working with our colleagues antigovernment title viii in a manner that will strengthen and protect the nation's financial system. a sound payment clearing and settlement system is critical to the health and well being of our financial markets. i believe these procedures are designating financial markets

released as systemically important represents a major step forward in fulfilling the objectives of the law. the two-stage review process established by the final rule will allow the council to consider both quantitative and qualitative factors for judging all financial market utilities under consideration for designation, and it will allow us to do so in a manner that gives the financial market utilities a meaningful opportunity to be involved in the process. but the rule also provides the council flexibility to apply the metrics and standards in light of each institutions unique characteristics. while at the same time helping to assure that designation decisions are made on a consistent framework. by the final rule is substantially similar to the one we propose, it does reflect certain changes that were based on the many thoughtful comments we received in the comment process. lance noted those changes and i think they are useful additions that will help us implement the final rule and help the public better understand the designation process. so again i just want to

reiterate my appreciation to my colleagues and to our staffs for their hard work. thank you. >> other comments, questions? chairman gensler. >> i, too, will be supporting the role and i thank the staff are taking into consideration the public comment. that was very helpful. i think it's an important role that the ctc currently regulates about six including houses and we expected to grow to about 20. i look forward to this councils determination which ones are systemic. and we also at the cftc are enhancing the rules for oversight and clearing houses, all of them, but have certain enhanced financial risk management for the systemically important ones. and i look forward to the council's judgment and particularly the federal reserve judgments because they have an important role to play in title viii. >> excellent. thank you. other comments, questions? me i have a motion with respect

to this final rule? >> yes. >> second? all in favor of publication? any a post? thank you. -- any a post? thank you. next item on our agenda is a study, the study is called the secured creditor haircut study, one of the studies required by the act and i'm going to ask the treasury to come provide a brief overview of the study and he's going to be joined up your i the fdic in the event we need to discuss any of the specifics. so, felton booker, give us a bit of sense of what is at the core of this study. [inaudible] >> hit that button.

>> before taking questions, the secretary mentioned to provide a brief overview to the study. section 215 of dodd-frank called on council to study whether secured card haircuts, and by that we mean the ability of regulators to treat a portion of a fully secured creditor, secure claim as an unsecured claim. whether that ability would promote market discipline and taxpayer protection. although the study doesn't discuss the legislative history, the inclusion into 15 at least in part is result of the debate over the so-called -- that during the legislative face of the financial form process proposed a type of secured creditor haircut and again the context of an enhanced resolution proceeding administered by the fdic. ultimately, the content embraced by the amendment was not adopted

and the final package of reform, and instead this council was charged with a general evaluation, the intended benefits and meaningful risks associated with secured creditor haircut more generally. although section 215 focuses on the treatment of fully secured creditors in an orderly liquidation under title ii, it's important to note that ola provides no authority to impose secured creditor haircut. accordingly, the report's discussion of secured creditor haircut is only for the purpose of meeting the requirements of section 215 and is not a description or an endorsement of law or policy. the reporting knowledge is that proponents security creditor haircut believe that haircuts depend on the design can promote market discipline by putting secured courage to engage in more extensive credit analysis, monitoring, and thereby limiting the ability of major financial firms to pose a risk to u.s. financial stability.

those same proponents believe that secured creditor haircuts can promote taxpayer protection by giving the amounts of the united states priority over a portion of the claim of secured creditors in the resolution proceeding. others however question the effectiveness of secured creditor haircuts in promoting market discipline, taxpayer protection, and argue that these haircuts they have significant risks. they believe that secured card haircuts would reduce financial stability, including i further limiting the availability of secured funding in a crisis, increasing the cost of the funds for financial and nonfinancial firms. and leave them to rely more heavily on other forms of financing which could reduce funds available for resolution, should those funds fail. should those firms fail. ultimately, report supports the view that a combination of orderly liquidation authority and new supervisory framework under title i, including the requirements to impose