information sharing, and frankly, we don't have -- i mean, and i say this with great respect to friends and colleagues of mine of whom i worked with in mexico, but we still don't have that decades long trusted mature relationship with all the agencies of government down there, especially in the law enforcement community in general. it's an enormous challenge in the country, we're up for the challenge, but it taking a long time just to deal with the violence let alone inescapable conclusion that's it's just a manifestation of the greater problem which is the importation of drugs, and someone who appreciates supply, but it wouldn't become a problem if there was demand. it's complicated. >> i'm not sure i can add much, and i know your experience would be more reimmediate than mine. i'm a long, long way from the

border. i have been impressed over the period of years how difficult this has been for this country to deal with. i think we've increased the number of border guards every few years around here for a good many year, and i'm sure that's been helpful, and i know they do a lot of good work, and i know we built a fence. i don't know what the miles are, but extended fence that i think has had some impact. you would know that better than i. we've put into place a lot of new technology as with mixed results, i think, and i think all of those things have to be continued and strengthened to dole with the problem. i think the threat is very, very significant to the country, and we have probably not focused enough on it, those of us who have dealt with homeland security. that's about all i can say. obviously, i agree with what

governor ridge said. there's a lot of problems in this world that we can't solve by ourselves, and i don't think we can solve this problem by ourself, and i think we're going to need a lot of cooperation with the mexican government as well. >> thank you very much. thank you, mr. chairman, i yield back. >> i thank the gentleman and now recognize first round of questions, the gentlelady from california. >> thank you very much, chairman, and thank you for walking me to the committee and i look forward to representing my constituents in a 36 congressional district on this committee. you know, i remember very well on september 11th as we all do, where we were, and what our first thoughts were. i was just legislated to the city council of las ang las, and my council district includes support of las ang las, and i

represent over 100,000 people who just physically sit next to the port of los angeles and while the september 11 attacks were aviation-related, my first thought was the vulnerability of the port of los angeles. ten years later, and now representing those same constituents in congress, i am still concerned about the port of los angeles. between the ports of los angeles and long beach, we account for about 44% of the trade that comes into this country. we have about 5,000 men and women who actually work on those docks on a daily basis, and i think it's our sea ports that are still probably the most vulnerable entry way into this country, and while you talk

about how we have evolved in granting these homeland security grants to more represent threat, vulnerability, and consequence, and mr. hamilton, as you said, they have given us a road map that the target will be something that does great damage and is symbolic. i think an attack on america's ports in long beach and los angeles could create a significant impact to our national economy and our global economy, so, you know, i've spent ten years on the city council working with my predecessor, jean harman, in improving the airport and the port of los angeles, but i'd like to know from the panel what do you think we, in congress, should be doing, can do to

improve the security at our ports? >> my judgment would be that we not focused enough on the ports, and i think the enormous vulnerability would be inadequate inspection of cargo probably, would be a major problem. i'm not up-to-date on what's been done on that. i do recall being disappointed, again, at the state of our technology with regard to detection. you have these massive amounts of materials coming into the country in ships, and our ability to identify danger materials i think is lacking, at least that's my understanding at this point, so i think you play an important role by bringing up

the question of the as a result necialt of the ports. >> i might add, though it's a time of concern about the fiscal situation of the country and dealing with the deficit and the debt, i must admit early on of being very much someone who believes that during my tenure and subsequent to my tenure that the united states coast guard is one of the most overstressed, multitasked, underappreciated institutions of this federal government, and i think they are grossly, grossly inadequately funded for the multiple tasks they bring with their primary responsibility to this country. these men and women, for years -- no, for decades, have literally got pretty much what's left over when it's divided among the rest of the agencies.

they have multiple tasks, and they just don't -- i dare say the generals and admirals in the other branches of the service would be up here in nos if they received as little funding on strategic needs that the coast guard does, and for whatever reason there's this mind set that we can do, and i'll tell you if you want to do one thing to improve maritime security in the country and go back and look at the coast guard's budget and bring in not just the come daunt, but three or four proceeding him, i recall flying a helicopter overseeing the exercises, and the pilot asked me if i wanted to grab the controls. it was an infantry soldier, but i was reluctant, and i said to the pilot, i said 1 this a helicopter with an engine

failure rate that the faa would have grounded had it been flying commercially? he said, yes, it is. one of the passengers in the backseat says can we change the conversation? i remember going as secretary to appeal, you've opened a door for me, and i got to take advantage of it. rarely do budget secretaries appeal budget decisions to the highest level. well, i took the coast guard's budget number from up to the appeal board, and i brought in a piece of steel, a metal plate on one of their 30-year-old ships that was bent because of the use, because it's multitasked vehicle, ship. so if you want to do something significant to improve maritime security, go back and give the coast guard the money they need in order to do their job more effectively. >> i would say, congresswoman, we've done a lot of work on maritime security looking at the process, vessels, cargo, and

people issues. we found some progress being made in the areas, but it's very difficult to determine yet what the degree of progress in readiness really is at the ports. mentioned already the transportation worker identification card and the problems associated with that -- that has a lot of problems that needs to be addressed, and also the key issue regarding technology and how different technologies could be used to help scan cargo and containers, and we've done work, which i'll provide to the committee, looking at emerging technologies to really address that. the volume of activity really has to entail some technological solution. >> thank you very much. my time's up, but i will say until we are screening 100% of our cargo, i think we've got a problem. >> just say to the gentlelady, there's a bipartisan concern on

this committee. meet with the secretary, she takes the issue very seriously, and the 100% is difficult, but they are improving it and trying to do it on base analysis, but this is -- we passed back in 2006, and i know it's been continued since, legislation signed by your predecessors and others, and again, in a bipartisan way, we are concerned, realize the vulnerability, and just when there was a strike against the port of long beach, i mean, billions of hours were lost just in the brief period of time. imagine what that would be if it was a dirty bomb in a port, so we share your concern, and thank you. the gentle lady from california, ms. richardson is recognized for five minutes. >> thank you, mr. chairman. first of all, i want to talk about the cuts that the house of representatives supported and actually many colleagues here. i don't know if you gentlemen are aware, but actually of the appropriations bill, we -- not

we. i didn't sport this. $2.7 billion was removed, that's 6% less than originally requested by the administration specifically within customs and border protection. $89 million was cut, 1% less than requested. transportation security administration, 4% less. coast guard, something you just talked about, $37 million was cut, .4% less than requested. within fema, the most dramatic cut of 1.4 billion, 21% less than requested. what would you say to members of congress in the senate who despite your efforts in your reports seem to not value these services to the level that you say we need to have them? what would your response be? >> i'm sorry. you were -- did you want to hand

m -- handle that? you named cuts on homeland security in general? >> yeah, and what advice would you give to members of congress who supported 9 cut and what do you support us to do? >> i'm not professional, but i look on many cuts of the area because you're dealing with homeland security. you're deeming with the protection of the lives of the american people, so budgeting a always a question of priorities, and i know how difficult it is to make judgments with regard to priorities, but i'm very skeptical and probably would oppose cuts on homeland security. >> okay. mr. gene dodaro, i'll pause and ask the second question because

that's about all the time that i'll have. i was surprised with the exchange of the previous member because i'm sure the ranking member recalls we asked the current secretary twice what is her intentions of implementing 100% scanning of cargo, and actually the response hasn't been supported. in fact, the response has been really there's absolutely no intention what i've gotten from those hearings to actually implement 100% screening of cargo. in fact, what the secretary has said, for the record, the secretary has said that they are exploring other means which you, sir, reference in your report. for example, doing screening by paper and looking at, you know, continueed shippers and things that might be a concern and getting away from the agreement that if, in fact, they will be able to do screening. first of all, i thought we needed to clarify for the record what the current secretary said and what the intentions are.

sir, i'd like to ask you in regards to your report on page 114, you talk about this whole issue, and my question to you would be you said, you know, the secretary, the administration are preparing this report. it doesn't look like, you know, they're really going to follow through on what the commission asked of 100% inspection. could you expand more on where you plan ongoing further in your evaluation? >> basically, what we've recommended, as i recall, is that the department do a feasibility study on the 100% requirement. as part of that study, to look at different alternatives, and so that's our recommendation on that. now, we're talking about cargo to be screened outside the united states before it arrived because there's other different types of cargo that once it arrives in the ports, but as it relates to that type of cargo screening, you know, we've recommended a feasibility

study. there's a lot of practical problems we identified in our work about reaching 100% requirements, u -- but there needs to be, you know, a study, and alternatives developed. >> i have 30 seconds left. mr. hamilton and mr. governor, what do you think of the previous secretary's and current secretary's noncommitment to meet 100% inspection of cargo? >> well, i think, again, i can't speak to them. i truely believe that it is literally speaking, it is -- it is probably physically impossible to do if you think about the amount of cargo come ing into the country with

containers within containers coming into the country. having said that, i'm interested in some technology of detection that will enable, i think, if it proves to be successful, enable us to get much, much closer in reaching that goal. again, it is managing the risk and are there venues and ports of call around the world through which cargo might go that we want to make our best efforts to inspect all 100%? i dare say yes. it's managing the risk. i'm still one that believes as difficult as it may be empirically to get to 100%, we encourage the research and development in detection technology we can get very close to it. >> i do not recall that the 9/11 commission recommended 100%

screening for the reasons of the difficulty in achieving it, but we certainly supported the idea that secretary ridge has indicated, and that's risk management. i think in dealing with the bulk of cargo that comes into this country on a daily basis is a practical manner. you obviously want to improve the technology to the highest degree that you can achieve, but even after you do that, you're going to have to make judgments about cargo coming from different parts of the world, and that involves a risk management decision. >> time expired. the gentleman from new york, mr. higgins is recognized for five minutes. >> thanks, mr. chairman. i want to get back to the purpose of the hearing which is the fro depress that we've -- progress that we've made in the last ten years, the gaps that

exist, and the operational improvements that are still needed. last december, the ""washington post" reported that the top secret world of counterterrorism has become so large, so unwieldily, so secretive that no one knows how much money it costs, how many people are employed, how many programs exist within it, or exactly how many agencies do this work. a new book out by dana priest called "top secret america: the rise of the new security state" characterizes it as the new industrial complex. we have 800,000 people who now hold top security clearances. we have 51 federal organizations and military organizations that are involved in tracking the flow of money inside and out of terrorist organizations. we have 2,000 private companies,

and 1200 organizations and intelligence agencies that are involved in counterterrorism. it seems as though this hearing and the information that's been presented by both the panel and ancillary information is very disconcerning. what the american people should have expected in the aftermath of 9/11 is a bureaucratic response that is lean, muscular, transparent, and effective. it seems as though what we have is a bureaucratic response that is bloated, immobile, ineffective, and not doing the very things that the 9/11 commission said was most important, and that was to remove the barriers that existed between federal law enforcement agencies towards the goal of sharing good information because that was most effective in twharting, preempting

terrorism. the looming tower recounts there's a passage in the book that a physical -- an fbi agent was physically sick because after he realized what had occurred, he said that the intelligence existed to stop that very incident on 9/11, so, you know, the american people have been misled. i think what we did in the aftermath of 9/11 was said we got attacked, we don't know specifically who it is. here's a bunch of money, go out and do something about it, and we've created a bureaucracy that is not meeting its moral and operational objective, so i just ask all of you who have committed yourselves to trying to improve the situation to comment on the information that's been presented here.

>> well, i think you raisessed a question that -- raised a question that probably would not have been raised a few years ago. you're, of course, right, when you indicate the figures that show e enormous security expansion activities, and we have not much focused on the matter of cost effectiveness. up until this time, until fairly recently, the security people win every argument. >> yeah. >> because they come in and say if you don't do this, your as a vulnerability is greater. in the aftermath of 9/11, we tended not to worry about costs, and therefore you get an $80 billion budget for the intelligence community. i chaired the community when the budgets were somewhere in the range of $10 billion. i'm not precise about that, but

roughly, so we've had an explosion of costs here without any doubt about it, and the question of cost effectiveness needs to be brought much more into the debate than it has been thus far. >> yeah. >> having said that, may i go back toot -- to the point of oversight? this is why you need a congressional intelligence oversight which is focused, in my view, should be in an appropriation subcommittee on intelligence, and as well as having effective oversight of homeland security. in effect, you have a very fractured oversight of homeland security, and in effect you have an inadequate oversight of the intelligence budget, and in both areas, you've had an explosion of costs. one of the reasons oversight is necessary is to keep your eye on

exploding costs, so i do not think that members of congress can say you're innocent on this. you folks have not done the job with regard to oversight. that's part of the answer, not the entire answer, but i like to see questions of your kind coming forward because i think we need some pushback on the explosive growth that we've had in these areas. that's the fairly typical response by the american government, i guess, to increase things very rapidly and homeland security. >> reclaiming the time that i don't have, a final point. this is my concern. this is my concern. we had a hearing in this committee a couple of months ago on hezbollah. hezbollah's committed to violent jihad. they acted a proxy for iran and

venezuela. they had a presence in north america, including five cities in the united states and four cities in canada so as to have close proximity to the united states. one in canada was toronto, 90 minutes from buffalo, new york. we have niagara falls, a tourist attraction, the cheapest electricity in the united states, the peace bridge, the biggest border crossing for vehicles, and my concern is we are so preoccupied with this bureaucracy and so immersed in it that we are not agile and cannot adjust to threats on the ground and the terrorist threats that exist today are different than ten years ago. it's younger. it's more aggressive. it's more vicious, and it's technologically savvy, so we're preoccupied with a false sense

of security we built up within this bureaucracy. the terrorists are way ahead of us because they are smaller, they are mobile, and they are able to move, and that's a major concern that every american, regardless if you live in western new york or thought this nation should be very, very concerned about. >> the witnesses have responses, do it in writing. >> thank you. >> with that, recognizing the gentleman from louisiana for five minutes. >> thank you, mr. chairman, thanks, ranking member, and thanks to the witnesses today. in evaluating where we are today compared to where we were, i'd like to shift away from preventing the attack and talk about a response to a terrorist attack, and just grading 9/11 in terms of resources provided, in terms of unified command, in terms of money appropriated.

how would you grade the u.s. government's response after the attacks of 9/11 to the city of new york and to the other places that were affected? if you could range it in terms of good, poor, fair, or excellent, how would you characterize it? >> at the time of 9/11? >> yes. >> it was poor, very poor. >> the resources provided on the ground in new york? >> there was a great deal of confusion within our government. we were not prepared at many levels to deal with it, both in terms of the emergency response and in terms of the defense of the country. multiple mistakes were made from the ticket taker in logan airport in boston to the president's of the united states. we at 9/11 said, look, we were not charge with the responsibility of accountability, and we didn't get into it, but we said there was a systemic failure, and that

failure was literally scores, hundreds, maybe thousands of people in the country. it was a very poor response. it was a major failure of government. we failed to protect our people. >> governor ridge? >> i think there is evidence to suggest that for years and years there, at least within a small group of men and women within the broader intelligence community, there was greater and greater sensitivity to a potential attack, the nature of which we were still quite unaware, but the rise of these jihadists were known to a few, and i think the decisions made, probably not just when president bush became president, but -- or decisions not made, but prior to the previous administration set us up so that clearly we were not as prepared we'd like to think as americans for such a

catastrophic event. again, i know the 9/11 commission didn't look into that. i thought that i know individually people with fema and everybody associated with the recovery efforts did everything they could, but this was a -- this was -- i'm not sure anyone's imagination was so expansive as they thought about preparing even for a potential terrorist attack that they could envision commercial airplanes being turned into missiles or that the twin towers would fall. while we've proved ourselves, we're certainly not -- we became more aware of our as a vulnerabilities. wear not more vulnerable because it. whether you're republican or democrat, in the president bush administration or president clinton administration, you could have ever seen those within the intelligence community thinking about terrorists attack at that

level. we need to understand that. there's a blame game we play, but i'm not sure anybody anticipated an attack at that level. >> my question go towards -- i represent new orleans, louisiana, within in the aftermath of katrina, the government response was very, very poor in terms of getting resources there quickly, unified command and all of those things, and my question now would be if, in fact, position of the house is that we have a pay for for disaster response, how 1 that going to affect our response to the next big disaster or terrorist attack, and if it means us coming in and cutting our green or cuts in order to provide funding, how would that hamper the response to a future terrorist attack? >> might be kind, mr. chairman, to take extra time. this is a pivotal question here.

.. learned and they are perhaps more painfully aware than most members of congress since your constituents are in the city and the people that are responsible. there we saw i think the failure of the local and the state and the federal government to err on the side of preparation. you don't need to be a meteorologist to see that a cat 4 or five heading to a city that is 14 feet above or below sea level anyway there is plenty of blame to go around. since that time, i believe that frankly i think right now fema has got one of the strongest and best administrators we have ever had in this country, craig fugate. we worked with him and he was running the operation down in

florida. the year before katrina hit for hurricanes hit around florida and he -- i think they are far far better prepared than i have ever been before to do with a major disaster and one final comment. never in the history of the country have we worried about budget around the emergency appropriations for natural disasters and frankly in my view we shouldn't be worried about it now. i realize we have fiscal problems but the real challenge, we are all in this country and mother nature devastated communities. we may need emergency appropriations and we have to deal with it until the fiscal albums it on. >> one of the ways to look at this is the progress being made. if you look at the response of 9/11, the response of katrina and as you have said very poor. the response to the oil spill, better. the response to irene, better. we are learning. the progress may not be as rapid as we would like that we are

getting better at responding to disasters even though there are some gaps. >> thank you to the witnesses. thank you mr. chair. >> the time of the gentleman has expired. you are recognized for five minutes. >> thank you very much mr. chairman. by thank the ranking member and and a i thank r. panelist. nepa the tenth anniversary of 9/11 terrorist attacks on our nation, the possibility of another attack still casts an ominous shadow over the united states. i believe that we are definitely safer, however safety is a relative term in an ever evolving threat environment against our nation and her people. these changes made in the transportation industry and in the intelligence community have definitely prevented another successful attack to this moment. even with the death of osama bin laden we must continue our

vigilant and to build out of a robust defense as well as strengthen our capacity to be resilient. on behalf of the people of the 11th congressional district of new york, i would like to express to those who lost a family member, a loved one or a friend on september 11, 2001 terrorist attack that their loss will never be forgotten and is a member of this committee and a new yorker, i would like to emphasize the importance of fully implementing the recommendations of the 9/11 commission. we must partner with local, state and private sector partners to keep our nation safe. after witnessing first-hand the inability of first responders to communicate on september 11, 2001 and the excessive loss of life as a result, i fully support efforts that would give first responders specific

portion of the spectrum known as the block for a brazilian state-of-the-art communications network. our first responders definitely need to be able to communicate with one another in times of crisis. so my question is what are your thoughts on a set aside for the dedication of the d block spectrum for first responders? the well i favor it and i am pleased to note that the chairman and ranking members here and i think a good many members of the committee's favorite. i think it is the most expeditious and the surest way to get reliability of the communication now. once you set aside the d block you are not through. there is a lot more work that has to be done. it is essential i believe to make it possible for the first responders to talk with one another and the best way to do that is to set aside a portion of the radio spectrum, the

so-called d block, directly allocate that to the first responders. i favor that. i think it is very important. i would hope that the congress would take a lead from the chairmen and ranking member this committee and get about the business of dedicating the d block and let the private sector begin embedding the technology that we need. there may be political differences but i think the first responder community is generally saying work it out. we need the technology and we need it now, so. >> thank you and my next question is about how we deal with enhanced security while at the same time preserving our very cherished civil liberties. representative hamilton would you expand on the ideas you mentioned in your testimony regarding the civil liberties oversight lord?

>> i am impressed with the capacity of government to intrude on the lives of people. i mentioned earlier in the hearing today that i had a briefing on this yesterday and it is just absolutely incredible what the sophisticated devices can do with regard to intruding on your privacy and civil liberties. now even if you take the position that under present circumstances the civil liberties and privacy are being reasonably protected, i simply don't know enough about that but for the sake of argument i say they are being reasonably protected. the history of abuse of government power is enough to give us pause here and you try to set in force and play some kind of of counterpressure if you would, to the people who

want more and more intrusive measures. i think all the members of the commission felt that you needed a robust civil liberties lord to push back and to try to protect our liberties and our core values and their privacy. i am very disappointed that we have not put such a board in place. i don't think the job is easy and i think it will be very very difficult but you need some counterpressure, some pushback to the security agency which press for more and more power, more and more ability to intrude into the lives of americans. in many cases, at the very least, you need a rigorous

oversight of that in order to protect our core values. i think it is terribly important that board be created and i haven't fully understood frankly why it has not been created but it has not and let's get about the business of getting it in functioning order. >> i would like to add very briefly to i certainty one associates with my colleagues remarked. when congress passed the enabling legislation creating the department of homeland security, in his wisdom and frankly foresight, it anticipated the challenges associated with a department that may be using information that they certainly wanted to use an appropriate a way. the congress mandated and they were the first privacy officer mandated by congress and any of our government agency so i think that mindset, that appreciation of liberty and privacy is very much a part of how the congress

thought about the agency, but i think as my colleague has pointed out you need to take that concept to the broader oversight community over the intelligence community generally. >> did you want to share anything? >> yes, setting aside the board recommendation because i think that is started and commented on, we have look at how the privacy officers and the agency's have implemented their responsibilities and dhs is doing more in this area to do these privacy assessments. our recommendations have been that they need to be embedded in all the decisions that are made when new systems are put in place to collect information and that this concern needs to be addressed up front. we think that will help further solidify the balance between security and civil liberties protections. >> thank you mr. chairman. >> the time of the gentlelady

has expired. i thank the gentlelady and i yield to the gentleman from illinois mr. davis for five minutes. we have more than enough time for your questions. >> mr. chairman let me tanker you in the ranking member for holding this hearing. i also want to thank are witnesses for their expertise in this arena and also for the tremendous services that they have all provided to the country and continue to do so. i think all of us can reflect on september the 11th, 2001. i happen to have been in tel aviv, israel at the moment and of course we were there for a week because we couldn't leave. i have had the opportunity to reflect upon the tremendous impact not only to our country and our way of life but what has happened internationally around

the world. i am also reminded and i am pleased that the last few minutes we have had some discussion of budgets, of priorities, of the economy and its impact and i am always reminded of something that frederick douglass said when we talk about what we need and what we want. he would often say that you can't have the rain without the thunder and the lightning. meaning that priorities are very important and you have to determine what you are willing to give in order to get what it is that you are trying to get. we have now had almost a decade of spending money in the homeland security arena, and my colleagues have mentioned cuts

and cut backs and i guess my question as i have listened would be, what have we really learned since 9/11 about what spending works and what does not work? what seems to work best? how do we adequately prepare or make the best use of the resources that we are willing to spend, and what areas have we been most successful in and which ones perhaps we have been least successful end, and how do we prepare to the best of our ability for the future? if each of you would just respond to that question, i would thank you very much.

>> while it is a very very broad question. you can look at the response in terms of the cup being half full and the cup being half empty. we have really made a very great deal of progress i think at all levels. when you get on an airplane today you are safer than you were when you got on it prior to 9/11. i think that the sharing of information and the intelligence community is much much better than it used to be. in all aspects of preventing attack, we have made some progress. we spent the morning talking about areas where we think more progress needs to be made and that would need in your category i think where we have been less successful. in terms of unity of effort and who is in charge of the

communication problem, and many other areas that have come up today. so, i think you have to think of homeland security in terms of a work in progress. a lot of process having been made, but it takes constant effort to make the american people less secure is that we ought to be and could be. that is why oversight is terribly important. so that is a quick summary. i think we are safer today than we were but we are not as safe as we could be, and that would be my summary of where we are after 10 years. >> thank you very much. >> i think the question highlights an issue that we have been hearing through the course of this hearing and that is the need for a much smaller group in

the congress of the united states to take a far more holistic approach toward its oversight over the still relatively new agency, to set in a very thoughtful and judicious way the kinds of priorities that you need because there are plant yield wants that you need to address and the priority should even needs first. you highlight that. and a couple of areas we have decided we have aired when we thought more was better. that article that one of your colleagues referred to about the explosion of the infrastructure around the counterterrorism was a perfect example where we thought if we employed now thousands and thousands more private-sector contractors we would be safer but in spite of the all of that we had fort hood and a few other instances where

it we were lucky that things didn't happen so i think we have learned perhaps a more judicious the identification of priorities and candidly and respectfully with more aggressive oversight on the part of the congress of the united states which united states which again is very difficult to do throughout the entire legislative ranch. i think it is a very appropriate question. i am not in a position to assess a basic outcome. and balance i think congress has identified some of the most immediate needs. i do think there have been dollars that have not been expended very appropriately. i think congress along the way has lost sight of the admonition that was involved in the legislation and that has taken commercial off-the-shelf, technology and apply it. i think we are still in a search for the perfect technology. i don't think we are going to

find it at the border. i don't think we are going to find it at the airport. i think we might want to be a little bit more judicious and encouraging and review the procurement in the testing process about these technologies within the department, but i think if someone who was privileged to have served and worked in congress and worked with my colleagues during those first couple of years, i think they did a remarkable job. remember there was no architecture and there was no plan. no one was prepared for that attack and the nature of that attack and frankly what this country endured afterwards. we went from unprecedented -- to unprecedented guard. we found solidarity at the outset and we have made some mistakes along the way but as my colleague lee hamilton has said one reason we are safer in our country is because the work the 9/11 commission accomplished.

we have made a great deal of rug rats. let's not a reckless about the threat. american can manage this threat. to that and i would love to see a broader role for a smaller roof of congress in the house and senate to help to continue to build on the success and the security and effectiveness of the department. your question was very well stated and i'm sorry i gave you such a long-winded response to it. >> thank you very much. it's a congressman the other panelist to talk more broadly about this and i read we have spent a lot on addressing the aviation area and airtime security. that, all of biological and nuclear area and the cyber area needs more attention going forward. as these threats evolve, as it relates to resource investments narrowly, think what we have learned is the cantor rush

deployment of untested technologies. that has not worked effectively. there are the airports, so-called sbinet, the advanced spectroscopic radiation monitors all have failed because they haven't had adequate testing and also in the secure flight area was on the success side. i think they took the time for congress to enumerated specific areas that needed to be met including the protection of civil liberties and privacy in that system and i think that was a good effort on that site so going forward there needs to be a risk-based approach to investment decisions. funds are unlimited and also there has to be a careful application of good management practices and testing in the technologies. >> thank you mr. chairman. i want to thank you in the ranking member for your leadership as well as the witnesses and i've personally

feel much safer now than i did then. >> thank you sue davis and let me take the witnesses. the ranking member and i were discussing the testimony. the test of knowledge and have about the subject complex issue and how unfortunately there is too often a political debate especially on the issue of homeland security. how many few sound bites there. you take a complex issue, too many people in politics saying both parties take the most complex issue and reduce it to a 102nd soundbite and while there are specific answers, as the three of you have indicated today none of this is easy all of his is complex and there are many people who are well-intentioned trying to do the right thing and actually i want to thank you for your service especially thank you for your testimony today and now i will yield to the ranking member for any fine or marks he has.

>> thank you mr. chairman and i would like to support your comments. we have a lot of people on this committee who consider themselves experts but i have not had any greater depth of knowledge resented her this morning by the three of you. that depth goes beyond your affluence and i think it is a tribute to what you do every day and i want to personally just as the chairman said thank you for your service and thank you for hopefully getting this committee where we need to be as the committee on homeland security. your leadership in getting us there in this testimony will go a long ways towards

accomplishing that and i thank you. >> thank you ranking member. in closing i would say chairman hamilton and secretary ridge, members of the committee may have additional questions and we will ask you to respond to this [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations]

>> in 1844, henry clay ran for president of the united states and lost. but he changed political history. he is one of the 14 men featured at c-span's new weekly series, the contenders. this request from, penry clays home.

>> a reserve for a chairman, ben bernanke had at september 21st meeting and will consider new steps aimed at promoting economic growth. he also said lawmakers need to come up with a long-term plan for deficit reduction and avoid short-term cuts that may hurt economic growth. mr. sub 10 spoke thursday at the economic club of minnesota for 35 minutes. [applause] >> thank you very much. thank you, richard for that very

nice introduction. if they speak quickly, we can make it. [laughter] i am very happy to be back in minneapolis. i visited your number of times. i have close connections with the federal reserve of minneapolis. i am very delighted to be kicking off your speakers series of the economic club of minnesota comes to thank you for inviting me and thank you for coming. i would like to do today is provide a brief overview of the u.s. economic outlook and provide with a few thoughts on monetary policy and the longer-term prospects for our economy. in discussing the prospects for the economy and for policy in the near term, it bears recalling briefly how we got here. the financial crisis that gripped global markets in 2008 and two dozen nine was more severe than any since the great depression. economic policymakers around the

world on the mounting risks of a global financial meltdown in the fall of two to meet and they understood the extraordinarily dire economic is that such an event could have. governments and central banks consequently worked forcefully and in close coordination to avoid the looming collapse. the actions to stabilize the financial system where a company both in the united states and abroad by substantial monetary and fiscal stimulus. despite the strong and concerted efforts come as severe damage to the global economy could not be avoided. the freezing of credit, sharp drops in asset prices, dysfunction in financial markets and the poster confidence in global production entry into freefall in late 2008 and early 2009. it's been almost exactly three years since the beginning of the most intense phase of the financial crisis. in the late summer or fall into

classmates and a bit more than two years since the official beginning of the economic recovery in june 2009 as determined by the national bureau of economic research. so where do we stand today? there have been some positive developments in the past few years. in the financial sphere, our banking system in financial markets are significantly stronger and more stable. credit availability has improved for many borrowers, though it remains tight in some categories such as small-business lending in much the balance sheets and income prospects a potential buyer were. importantly given the source of the crisis, structural reform is moving forward in the financial or with ambitious domestic and international efforts underway to enhance financial regulation of supervision, especially for the largest and systemically most important financial institutions. nevertheless, it is clear that the recovery from the crisis has been less robust than we had

hoped. a recent comprehensive revisions of government economic data, we learned the recession that even deeper in the recovery weaker than we previously thought. indeed, aggregate output in the united states has still not returned to the level 18. importantly, economic growth has for the most part been at least insufficient to achieve sustained reduction in the unemployment rate, which has recently been fluctuating but that's about 9%. the pattern of sluggish economic growth is particularly evident in the first half of this year, with real gdp estimated to have increased at an annual rate of less than 1% on average in the first and second quarters. some of this weakness can be attributed to factors including the strains on consumer and business budgets by the run-up's early this year and the prices of oil and other commodities and the effects of the disaster in

japan on global supply chains and production. accordingly with commodity prices coming off their highs and manufacturers problems of supply chains for long tours resolution, growth in the second half seems likely to pick a. however, the incoming data suggests that the more persistent factors have also been holding back to recovery. consequently, as noted in a statement following the august meeting, the federal open market committee, the fomc now expects a somewhat lower pace of recovery over coming quarters than it did at the time of its june meeting them with greater downside risk to the economic output. one striking aspect of the recovery is the initial weakness in household spending. after contracting very sharply during the recession, consumers expanded moderately through 2010, only to decelerate in the first half of 2011. a temporary factors and

mentioned earlier, the rising commodity prices colchester castle purchasing power and deception manufacturing following the japanese disaster, which reduced auto availability and hence auto sales are partial explanations for this celebration. but households are struggling with other important headwinds as well, including the persistently high level of unemployment on the slow gains in wages for those who remain employed, falling house prices and debt burdens that remain high for many notwithstanding the households in the aggregate have been saving more and early months. even taking into account the many financial rushers they face, households seem exceptionally cautious. indeed contributing some consumer confidence has fallen substantially in recent months as people have become more pessimistic about economic conditions and their own financial prospects. compared with the household sector come in the business sector generally presents the mark but the picture.

manufacturing production has risen nearly 15% of its trough, driven partly by growth in export. indeed, the u.s. trade deficit is near substantially relative to where it was before the crisis, reflecting in part the improved competitiveness of u.s. goods and services. business investment in equipment and software has also continued to expand. corporate balance sheets are healthy and although corporate bond markets have taken some wonderfully, companies with access to the bond markets have generally had little difficulty in obtaining credit on favorable terms. problems are evident in the business of drizzle. business investment and nice residential structures such as office outings, fat trees and shopping malls have remained at a low level, held that elevated vacancy rates and existing properties and difficulties in some cases it tainting construction loans. also some business surveys including those conducted by the

federal reserve system point to weaker conditions recently, with his his his reporting slower growth and production company workers in employment. what has this recovery been so slow and erratic? historically, recessions have tended to sow the seeds of their own recoveries has reduced spending on investment, housing generates pent-up demands. as a business cycle bottoms on confidence returned, the pent-up demands often augmented by the effects of stimulative monetary and fiscal policies is not through increased production and hiring. increased production turns both revenues and increased hiring braces help old incomes, providing further impetus to businesses and households pending. improving income prospects and balance sheets also make households and businesses were credit worthy and financial institutions become more willing to lend. normally these developments create a virtuous circle of

rising incomes and profit, more support of credit conditions and lower uncertainty, allowing the process of recovery to develop momentum. these restorative forces are at work today and they will continue to promote recovery over time. unfortunately, the recession besides being extraordinary and severe, as well as global in its scope, was also unusual in being associated with both a very deep slump in the housing market and in historic financial crisis. these two features of the downturn individually and in combination of activities of financial recovery process. notably, the housing sector has been a significant driver of recovery for most recessions in the united state since two. but this time, with an overhang of distressed and foreclosed properties, tight credit conditions for potential builders and potential home buyers and ongoing concerns by both ours and wonders by

continued house rates decline. new construction has remained at less than one third of its precrisis peak. depress construction is also her providers of a wide range of goods and services related to housing and home building, such as the household appliance and home furnishing and is trees. moreover, even a straight credit for builders and potential homebuilders has restrained the housing recovery, the weak housing market has in turn adversely affected financial markets and the flow of credit. for example come to sharp declines in house prices in some areas have left homeowners underwater on their mortgages, creating financial hardships for household and through their effects on race and mortgaged on pentothal stress for financial is dictations as well. as i noted, the financial crisis of 2008 in two dozen and played a central role in sparking the globe of mission. a great deal has been and continue to be done to address

the causes and effects of the crisis, including extensive financial reforms. however, although banking and financial conditions in the united states have improved significantly since the depths of the crisis, financial stress continues to be a significant drag on the recovery, both here and abroad. this track has become particularly evident in recent months as the sharp volatility and risk averse and the markets have reemerged in concerns by european sovereign debts and related strains, as well as developments associated with the u.s. fiscal situation, including last month downgrade of the u.s. long-term credit rating by one of the major credit rating agencies as well as the recent controversy in reasoning that the u.s. government. it's difficult to judge how much this event and financial volatility have affected economic activity so far. there seems little doubt they have hurt household and business confidence and pose ongoing risk to both.

while the weakness of the housing sector and continued financial volatility are two key reasons for the frustratingly slow pace of the recovery, other factors also may restrain growth in coming quarters. for example, state and local governments continue to tighten belts by cutting spending and reducing payrolls in the face of ongoing budgetary pressures and federal fiscal stimulus is being withdrawn. there is ample room for debate about the appropriate size and role of the government in the longer run. but in the absence of adequate demand from the private sector can a substantial fiscal consolidation in the shorter term credit to the head was facing economic in hiring. the prospect of an increasing fiscal drag on the economy in the face of an already sluggish recovery highlights one of the many difficult trade-offs currently faced by fiscal policy makers. as i have emphasized on previous

occasions come with a significant policy changes to address the increasing fiscal burdens associated with the aging of our population and the ongoing racism now are caused, the finances of the federal government will spiral out of control in coming decades, risking severe economic and financial damage. while prompt and decisive action to put the federal government finances on a sustainable directory while prompt and decisive action to put the federal government finances on a sustainable directory. fiscal policy makers should not as a consequence disregard the fragility of the economic recovery. fortunately, the two goals, achieving fiscal sustainability, which is the result of responsible policies in place for the longer-term end up winning creation of fiscal headwinds for the recovery are not incompatible. acting now to put in place a credible plan for reducing future deficits over the longer-term, while being attentive to the implications of fiscal choices for recovery in the near term can help to serve

the subject is. let me turn now from the output of growth to outlook for inflation. prices of many commodities, notably oil increase sharply earlier this year. gasoline and food prices translated to it and to increase inflation and producers of other goods and services who were able to pass through their higher cost to customers as well. in addition, global supply disruptions associated with the disaster and japan put upward pressure on motor vehicle prices. as a result of influences come inflation picked up significantly. over the first half of this year, the price index for personal consumption expenditures rose at a rate of about 3.5%, compared with an average of less than 1.5% over the preceding two years. however, inflation is expected to moderate in coming quarters as these transitory influences ween. in particular, prices of oil and

many other commodities have leveled off or come down from their highs. meanwhile, to step up and not a mobile production should reduce pressure on car prices. importantly, we see little indication that he rate of inflation next year if the far this year has become ingrained in the economy. longer-term inflation expectations have remained stable, according to the indicators we monitor, such as the measure of household doctrine expect haitians in the survey to 10 year inflation forecasters and five-year forward measures of inflation compensation derived from the oath of inflation protected securities. in addition to the stability of long-term inflation expectations, the financial amount of lactic system in u.s. labor and product target should continue to have a moderating influence on pressures. notably because of ongoing weakness in labor demand come over the course of the recovery, nominal wage increases have been

offset by perfect to be the gains, leaving the level of unit labor costs close to what it stood at the onset of the recession. given the large share of labor costs in production, subdued unit labor cost should be an important receiving influence going forward. although the fomc expects moderate recovery to continue and indeed to strengthen overtime, the committee has responded to recent developments se/30 noted that marking down its outlook for economic growth over coming quarters. the committee also continues to anticipate inflation will moderate over time through rate at or below 2% for a bit bit less than most fomc participants considered to be consistent but the committees to a mandate to promote maximum employment and price stability. given its outlook, the committee decided at its august meeting to provide more specific forward

guidance that its expectations for the future path of the federal funds rate. in particular, this statement following the meeting indicated economic conditions, including low rate of resource utilization and subdued outlook for inflation over the medium run unlikely to warn exceptionally low levels for the funds rate at least through mid-2013. that is and what the committee judges to be the most likely scenarios for resource utilization in inflation in the medium term, the target for the federal funds rate would help if its current low level for at least two more years. in addition to refining our forward guidance for the federal reserve has a range of tools that could be used to provide additional monetary stimulus. we discuss the relative merits and costs under august meeting. my fomc colleagues and i will continue to consider those and other pertinent issues, including economic and financial developments at our meeting in september are prepared to employ

tools as appropriate to promote a stronger economic recovery in the context of price stability. let me conclude that just a few words on the longer-term prospects for our economy. as monetary and fiscal policy makers consider the appropriate policies to address the economy's current weakness, it's important to acknowledge its enduring strengths. notwithstanding the trauma of the crisis in the recession, the u.s. economy remains the largest of the highly diverse mix of industries in the degree of international competitiveness that if anything has improved in recent years. our economy retains his traditional advantages of a strong market orientation, robust entrepreneurial culture and flexible capital of micromarkets. in our country remains a technological leader come with many of the world's universities and the highest pending on research and development of any

nation. guys, do not expect a long-run growth potential of the u.s. economy to be materially affected by financial crisis and recession is and i, our country takes the necessary steps to secure the outcome. economic policymakers face a range of fiscal decisions and every household and business must code with the stresses and uncertainties that are current situation presents. these are not easy tasks. i have no doubt however that these challenges can be met in the fundamental strengths of our economy will ultimately reassert themselves. let me assure you the federal reserve were certainly do all it can to help restore high rates of growth and employment in the context of price stability. thank you for your attention today. [applause]

[applause] >> i'm going to allow the chairman to stay and answer these questions. i have been assigned the task of posing questions that have been submitted by others and am going to start with one from our cochaired, joe frenzel, who many of you may know is also the cochair of the committee for a responsible federal budget in there and may lie the nature of this question. bill's question is this. and your excellent presentation at jackson hole can be used in the country would be well served by a better process for making fiscal decisions. the negotiations that took this over the summer disrupted financial markets and probably the economy as well. here's the conclusion of those questions. individuals and groups have little apparent success with

process changes, policy makers don't seem to like change. what form might these policy changes take and can you tell us where we might look for the first signs of possible federal budget process improvements. >> as i discussed in a speech at jackson hole a few weeks ago, the fiscal policy is difficult because it involves multiple objectives. first and very importantly we need to have long-term sustainability. our budget is not in a sustainable path. we need to discuss that is a long-term issue come a very important issue. secondly it's a mention in my remarks today coming to an oa need to be attentive to what's happening in our economy today and make sure what we do is construct it in terms of a recovery. third, fiscal policy is very important for long-term growth. we have to make good choices. we have to think about how to

invest on the spending side, how to reform and improve our tax code on the revenue side so that our fiscal policies are most conducive to long-run growth. finally and very importantly, we have to do this all in a way that's not disruptive to financial market as the discussions over the summer did prove to be. we need a better process is that we don't have the same consequences that we saw with the downgrade and some of the financial volatility that was associated with the process this summer. now i'm not really going to be able to give you a detailed recipe for a new fiscal process. of course that's a priority of congress, but i can make a couple of observations. first of all, as i indicated, fiscal sustainability is the very long run process. it takes a long run output to think about how we're going to

address the rising cost of health care, pensions, military, all the various et cetera budget. and therefore, i hope in thinking about fiscal policies, congress will look at a long horizon and think about the entire horizon in the press is. secondly, it is important that there be some kind of guy, some kind of miniature. there are many possibilities. one possibility would be the amount of debt outstanding relative to gdp. but there many other possibilities. we need to have some metrics. economists love metrics, so we need something to measure our success or failure in terms of both actual and predicted monetary policy. now, the actual process -- again i can't get into great detail. we've seen some interesting devices applied with the super committee, the up or down vote,

demonstration and so on. i would point out their number of countries around the world, switzerland is one example, where fiscal rules have been put in place and they have at least provided a framework for policymakers to make good, coherent long-term decisions. i think it is important that we all get together and make sure in the future that we make our decisions in a way that is not as disruptive as it was this last time around and it will provide a good, sensible fiscal outlook for us that will help our economy both recover from this recession and also to grow in the long-term. >> our second question was submitted by andy dacus astounding properties llc. you just spoke to dennis in part just now in response to congressman frenzel's question and also touched on this briefly during your remarks. but the question is a bit more

detailed. do you think the recent market convulsions from marquee function that the u.s. credit was downgraded or that the debt limit agreement had minimal expenditure cut in 2012 and the bulk of the cut 65% to 70% occurring after 2016? >> boat, this has been an interesting experience. the downgrade as i indicated in testimony sometime ago when i was asked about his, i pointed out that a downgrade is not going to provide any information. everybody knows that the fiscal situation is, with the to be done. so in that respect, there wasn't much new information and recently, treasury interest rates are actually lower today than they were before the downgrade. so there has not so far at least far at least semipermanent impact on the interest costs, although some of the downgrade

effects of actually float through some other borrowers decide the u.s. treasury. i think if you listen to it s&p said though, they in fact did not make the claim that the u.s. didn't have the economic resources to achieve fiscal sustainability. i mean, we do. it's not a question of economics. this is a very rich country and ensure we can find ways to achieve project is to have a growing economy and to have a sustainable budget. but s&p pointed to as the process again. they said they were concerned given the way things have evolved, they were concerned there was not an adequate political consent to serve political process that would ring about the necessary changes. so that may not make light of that in any way. there are real legal controversies, obviously real disagreement in this need to be worked out. you know, we do need to work together to find solutions and

to achieve what we know we can achieve, which is a stable, sustainable budget for the u.s. government. >> there is a second part to end this question. and to preface it by saying respectful of your remarks about the near-term fertility of the economy, his question is, do you have a sense of the night to buy this expenditure reductions that should take place in the next 10 years? the super committee has been charged with 1.5 trillion, some groups including the committee for responsible federal budget deficits have been closer to five or 6 trillion. how do you view that? >> welcome at these numbers have come to responsible budget committees, comes from the congressional budget office and so on.

i think i wouldn't hazard any particular number, but i would say a general agreement among all the players, among congress, administration, cbo, outside experts and so on that the steps we are taking, while certainly constructive is only a first step. i mean, more will need to be done to create long-term sustainability, but clearly we have to move in that direction. the exact numbers depend on how quickly we went to stabilize debt to gdp ratio, what other considerations may have. but the 1.2 trillion or 1.5 trillion, depending how you measure it, is always one step in a direction of sustainability. >> the third question comes from ronald off it up already offered company and there is a related question that comes from john

lindell of northwest equity partners and i'm going to merge the two because they have to do with it policy and the value of the dollar. there has been much in the press about the value trend of the u.s. dollar and the potential for it to receive current piece to emerge. so kind of a two-part question here. how important is it to the feds effectiveness of the u.s. dollar remains the world's primary reserve currency and do you see the fed changing it position on the dollar to try to strike and it the city other currencies around the globe clacks >> well, elevate the general disclaimer that the u.s. treasury speaks for the u.s. government on dollar policy. i think that's important to say. a couple comments in response to the question. so first of all, the fact if the dollar is the primary reserve company does provide some benefits to the u.s. economy, and makes her interest rates probably the lower than they otherwise would be. so there is some effect there.

the dollar does remain is some margin still, the currency in which the majority of international reserves are held. there is after all no official reserve current view. it is a choice made by each government, each central bank and its private-sector sector investor or company. and again, the dollar at this point remains the currency of choice. isis x that will continue to be the case for some time. a lot of reason for that, including the underlying strength and vitality of the u.s. economy, but also important to decide what to do in the quiddity of financial markets, which is against the rideau went to lose. we want those markets to be liquid, reliable and deep. and the ability to buy and sell transactions easily as important to holders of liquid asset and that is why -- that is one of

the reasons the dollar has remained the key current fee. the federal reserve's policy is mandated according by congress to address to object to. when its maximum employment, by which i mean i'm sure it's meant trying to promote recovery, trying to reduce unemployment. and the second is price stability, keeping inflation low. and those are the sectors that we address. now come the price stability, low inflation actually save something about the dollar. though inflation means the buying power of the dull in terms of domestic goods and services remain stable over time. we have achieved the federal reserve genuinely, not just the current thread, but the federal reserve going back over the mid 80s has maintained a very provocative low and stable inflation, which means stable purchasing power for the dollar as measured in terms of domestic

services. low inflation domestically does not always mean immediately that the foreign exchange value of the dollar will be high or low. that moves according to a variety of factors including how much risk aversion is in the market, what is happening to our trade balance in a variety of other. in the longer term, there is in fact a very close connection between our mandate and the value of the dollar, specifically in the medium-term from the value of the dollar depends basically into things. it depends on our inflation rate relative to other inflation rate in other countries and it depends on the strength of our economy. again, we've kept inflation growth and inflation in the u.s. has been lower than most countries in the last couple of years. so on that count, they keep inflation low, we are going to enhance the dollar. our policy of trying to promote recovery and trained to help the economy get back to a point

where it can grow and be strong again, that will make the u.s. an attractive destination for investment and that will be the other half of the equation. ultimately, the policy of maximum employment and price stability is consistent with the strong dollar policy and that is the way we think about it. >> i'm going to take the moderators rocketed to inject a question of my own. there has been publicized in recent weeks, the fact that there was dissension on the open market committee at your recent august meeting. it may not be a new development that there is disagreement within the committee, but it seems new that it has become a more public conversation. how do you view dissension within the committee and how should the rest of us look at that development? >> well, there is a reason why it's a committee. i mean, they're 19 people around

the table when we meet to discuss monetary policy. in my attitude has always been if two people always agree, one is pretended. but the reason we have a committee is to bring different points of view and different analytical approach is, different perceptions of the economy, different views on communication and strategy and i've always tried and i think that's the best way to make policy as they try to encourage both inside and outside, debate and discussion about what is the right approach. now, one thing is certainly evident is that currently we are in a situation, which in many ways is on president. the problems afflicting our economy, the nature of monetary policy, given we have her be reduced short-term interest rate

to zero and looking at alternative ways to stimulate the economy. different views on what problem is in some sense. so it's natural to have some disagreement. and we have had different points of view. there's obviously no hiding that they have no desire to hate it. but again, i think it is ultimately construct it and i encourage debate discussion. and i would add that i think is very important that when we have these discussions internally, it's always at the highest level of collegiality and mutual respect. conversations are extremely cordial and i think that represents the best that a policymaking committee can do, which is bring all the points of you together and try to fashion as best we can make sense to us. it won't always be available, but we'll do our best to find a middle ground. >> and a closing question, decimated by steve sanger, former ceo of general mills and a member of economic club board. i would would you rate actor

paul giamatti's portrayal of view -- [laughter] and for that, for trail of other principals in the recent movie to be to fail? >> they didn't see that movie. i saw the original. [laughter] [applause] ..8

>> in 1844 henry clay ran for president of the united states and lost, but he change political history. he is one of the 14 men featured on c-span's weekly series, the contenders this week live from ashland, henry clay's kentucky home tonight at 8:00 eastern.

richard cordray is currently the chief of enforcement at the consumer financial protection bureau. last month president obama nominated him to head the agency. in the senate banking committee held his nomination hearing tuesday. the committee's top republican member, richard shelby of alabama, says he will oppose the nominee are giving the director would have too much power.

at this 90 minute hearing the committee also questions to nominees to the u.s. export-import bank. [inaudible conversations] >> on our next panel we will consider the nomination of richard cordray to be the first director of the consumer financial protection bureau. mr. cordray, welcome to the senate banking committee and a warm welcome to your family and friends who are here this afternoon.

the cfpb was born out of the failure by prudential regulators to hault financial companies accountable for complying with consumer protection laws. congress graded the cfpb to be a robust and independent agency focused on protecting consumers like military families and older americans from abuses -- maccabees of financial products. the cfpb was also created to streamline disclosure so consumers can make the best financial choices for themselves and their families. in fact, one of the cfpb's first projects is to simplify the mortgage disclosure forms. the cfpb is an agency that the american public wants. recent bipartisan surveys showed that americans strongly support

the creation of the cfpb. the director of the cfpb will play an important role in maintaining the agencies independence and equitable consumer financial marketplace and exercise enforcement of consumer protection laws. on july 18, president obama nominated mr. cordray to be the first ever director of the cfpb. the purpose of today's hearing is to consider whether mr. cordray is qualified for that job. a vocal minority is playing games with the presses and holding mr. cordray's nomination hostage. this political gamesmanship is providing americans -- preventing americans from

receiving the consumer protections they deserve and putting community banks and credit unions at a competitive disadvantage and impacting financial companies. this local minority insists on rehashing the same debate congress had last year when the cfpb was accountable regulator. the fact is that every regulatory agency has different features that make it accountable. each agency has a unique combination that sets its mission as independence. last year congress decided on the structure for the cfpb, which borrow some accountability features from private regulators but also includes several new features unique to the consumer agency.

it lists many of the waste of cfpb is accountable. for example, the financial stability oversight council has the power to overturn cfpb regulations. by law, the cfpb's budget is kept and the president has the power to fire the cfpb director. so the misleading claim of no cfpb accountability brought forth by special interest and a vocal minority should be exposed for what it is, and an attempt to destroy the bureau's stability from protecting american consumers. i remind my colleagues that in 2008, a bipartisan senate including members of both sides of the aisle sitting here today helps to create the federal housing finance administration,

fhfa is also an independent agency headed by a sole director subject to a gao audit and purposefully not ask susceptible to the appropriation process. now let's talk about the nomination. richard cordray has spent his career in public service. he has taken the time to understand and come up with the best most practical solutions for their problems. mr. cordray support small businesses and honest companies. he has been a member of the local chamber of commerce for 22 years. he believes in leveling the playing field so that small companies can compete fairly and playing by the rules is good for

business. i ask unanimous consent to include several letters of endorsement into the hearing. mr. cordray also believes that people and corporations must be responsible for their own behavior and if they act responsibly, they should get a fair shake. it is my hope that if confirmed, mr. cordray will use his knowledge and experience as a law enforcement official and public servant to better protect american consumers and to enhance the quality of our consumer financial markets. we have seen many important nominations in the senate and denied an up-or-down vote on confirmation. the stability of our financial system and of our economy is simply too important to put at risk by political games.

it is time to allow the cfpb to do its job with a senate confirmed director in its place. i now turn to senator shelby. >> thank you mr. chairman. i don't think it will surprise anyone to hear that we believe that today's hearing is quite premature. we do not believe that the committee should consider any nominee to be the director of the bureau of consumer financial protection until reforms are adopted to make the bureau accountable to the american people. earlier this year mr. chairman, 43 of my senate colleagues and i sent a letter to president obama expressing our serious concerns about the bureau's lack of accountability. we also proposed three reasonable reforms to the structure. we had hoped to work with the majority to address this issue before the president nominated the director. unfortunately, neither the president nor the majority has

made any effort to work with us to improve the accountability of the bureau. instead the president nominated mr. cordray to be the first director. it is regrettable that the president and the majority have chosen to ignore our request rather than work with us to improve the bureau's accountability. it may be good politics for them but it is certainly bad policy for the american people. one of our nations founding principles is that the government should be accountable to the people. yet the majority structured the bureau to grant its director unprecedented authority over the lives of the american people without any real effective change. all of the bureau's power is concentrated in the hands of the director. the director determines which rules are enacted and which enforcement actions are wrong. the director makes all hiring decisions and decide how the agency spends its resources. because of the expansive jurisdiction of the bureau,

every american will be affected by the director's decisions. the director will single-handedly determine the financial products as well as which consumers have access to credit and which do not. accordingly, the director's decision will impact whether americans can buy a home, a car or even basic household goods. it is staggering the amount of control the director will exert over the daily financial choices available to the american people. despite having such broad powers however, there is no meaningful check on the director's authority. the director cannot be removed, except on extremely limited grounds of inefficiency, malfeasance or elected duty. in other words the director cannot remove for poor policy choices. in addition bank regulators do not have a meaningful ability to ensure that the director's actions do not needlessly and

defined the safety and soundness of our banks. while some claim the financial stability oversight council could, could overrule the director, this is simply illusory. the requirements needed for the council to act are so onerous that in practice the council will never be able to exercise this authority. that shouldn't surprise anyone, especially here. it was the way it was designed. for example, the director of the bureau sits on the council and will vote to determine whether or not the council should overturn one of his decisions. it is not hard to guess how the director will vote. as a result the director will be virtually free of any constraints on his authority during his five-year term. no one person i believe should have so much unfettered power over the american people. it blatantly violates the spirit of our democratic system. our pursuit of better consumer

protections should not require us to compromise our basic constitutional values. they should be something on which we can all agree. moreover the principle involved but have real consequences unless the bureau is reformed. it is only a matter of time before this concentration of power is abused or misused to the detriment of american consumers and the economy. the job figures we have seen over the summer demonstrate how the administration's heavy-handed regulatory agenda is crippling the economy if unnecessary costs and legal uncertainty. there could not be a worse time i believe to give an unelected and unaccountable bureaucrats a blank check to impose even more ill-considered rules that could further undermine our weak economy. at a time when our nation's unemployment rate is over 9%, this would be a very dangerous thing. in closing, the chairman today here has attempted to turn a

phrase i believe local minority into a majority. over the years however, senators from both parties, democrats and republicans, have agreed upon rules governing this chamber that are designed to protect the rights of the minority, he had democrats or republicans. a the request made by this particular vocal minority seek only to preserve the system of checks and balances embodied in the constitution. that is not what i would call a radical undertaking. thank you mr. chairman. >> senator reid. >> thank you very much mr. chairman and i am someone who believes very strongly the work of the consumer financial committee should go forward under the direction of mr. cordray. i think to block his appointment simply to express displeasure with the process is the wrong way entirely. as the chairman pointed out, the federal housing finance administration was created with virtually the same authority on

a bipartisan basis supported by most if not all of my colleagues on the other side. there was no discussion of preemption of the constitution or checks and balances or anything else. designed to do with a very serious problem which we are trying to deal with today and that is protecting consumers are route this country. that is the one voice when we think about voices that is seldom heard loudly enough in washington, seldom heard certainly in the council of bank regulators. that is one of the great examples of what took place in the decade from 2000 to 2008 in which consumers would be systematically preyed upon. there was no agency and as attorney general i think you were frustrated by your attempts that were preempted by federal banking regulators, they were preempted by federal law preempted by many. we want consumers to have a

voice, and frankly the notion that this is unchecked, unbounded power is simply wrong. all of the rules that the director will in force are created by congress. they voted on it. sometimes we disagreed that they are all congressional laws and frankly if it goes beyond what the law is, as we have demonstrated and there's a huge number of financial decisions today to protect their self-interest and to protect the process. if it is arbitrary and capricious the rules will be struck down but if those rules aren't consistent with the laws we pass through the democratic process to protect consumers, the consumers will receive protection. and so i think this whole debate has been sort of extended much too long and as a result consumers are being potentially

harmed. i particularly, because i worked on this issue along with my colleague senator brown from massachusetts, am concerned about military personnel. they will not have the benefit of some of the protections that we put in place, because there will be no one sticking up for them. right now holly petraeus is leaving the office, but she can make and does beaches and is allowed to talk to soldiers, sailors marines and airmen but until someone stands up with the ability to enforce the rules for their benefit they will still be preyed upon, and they are. i think the other thing that we have to recognize too is as we go forward, we are i think trying to ensure that we do not replicate the crisis of 2008. that we do not have a financial collapse. much of that was predicated based at on the predatory behavior of institutions. one of the great aspects i think

in terms of the dodd-frank act is the first time we tried to shine some light on the shadow banking system. the fdic regulators, occ regulates national banks and the federal reserve regulates but for the first time we decided to say let's take across the board position with respect to the shadow financial system. so i guess i have to say something. this notion of let's wait until we get it perfect before we appoint somebody would have delayed i think the election of george washington for many decades. so mr. cordray let me ask one specific question. you already have authority to transfer you to seven agencies in this organization as being implemented. is that correct? go ahead. >> mr. chairman? >> yes. i am sorry.

i want to be -- forgive me. [laughter] i am a man with a mission. let me quickly conclude in 20 seconds. i think we have got to move forward. we essentially know what is pointed out in what the chairman has pointed out. we are waiting for a think the sensible proposals to make reform but it is hard to do that as the agency operates in the field on the ground and i hope quickly we can do that. >> senator corker. >> mr. chairman i don't have an opening statement. but, since i doughnut looks like everybody is going to take a lot of time and i sure would like to have a little leeway with the questions here but i certainly welcome the witness and look forward to his testimony and thank him for bringing his impressive family.

i don't know how is children continued to smile as we are up here but they do a great job. [laughter] >> senator. >> thank you very much mr. chairman. i am pleased to join you in welcoming mr. richard cordray and his family, lovely family who has been and has been nominated by president obama to serve as the first director of the consumer financial protection bureau. i am confident that he will make the cfpb a strong defender for consumers. this has been needed in our country. he knows the markets and has a demonstrated track record. he has been a fierce advocate for consumers and middle-class

families as attorney general of ohioan, and then as the head of enforcement at cfpb. we will count on him to fight against the predatory lending practices that contributed to the economic crisis to which we are still recovering. i look forward to mr. cordray's testimony to hear about his vision for the landmark cfpb and what he hopes to accomplish as its first director. mr. cordray is a highly qualified nominee and an excellent pick to become the first director of consumer protection bureau and i ask the committee to consider his nomination favorably. thank you very much mr. chairman. >> thank you.

senator brown. >> i have questions that i will submits to the record later. >> thank you mr. chairman, thank you member shall be. in a moment i have the honor of introducing richard cordray a devoted family man and a sandwich lawyer and advocate and public servant. i will hold that until right before he gives his testimony. we shouldn't have to remind our colleagues that just three years ago our economy was on the brink of collapse. millions of americans lost their jobs and hundreds of thousands of people in my state lost their homes. people all over the country lost much of their retirement security and hundreds of banks failed and thousands of businesses have been shutter. this committee was forced to take extraordinary actions. this was a man-made catastrophe. it could have been avoided if we had a better as senator reid said a better regulatory system, and network of agencies tasked with protecting consumers. ohio for example is far too slow to enact meaningful consumer protections and local efforts to

try to curb a rip off loans blocked by federal regulators and efforts to convince federal regulators to act were ignored until too late. three years after that depression profits of financial firms now make up the same percentage, about 40% of all corporate profits in this country go to financial firms. the profits of financial firms now make up about the same percentage of all corporate profits as they did before the financial crisis. the banks that were too big to fail because of the mergers, because of what shook out of these last three years have become even bigger. after decades of wall street main street still needs our help. americans are struggling to find jobs and their homes are still underwater and their pensions are still being drained. trained. to protect against future wealth destroying crises congress created with bipartisan approval, with bipartisan approval and financial protection bureau to help ensure the consumer protection is a priority rather than an

afterthought. it is the independent agency with a single director, not all that uncommon in the federal government. its mission is to bring oversight and transparency to checking accounts, credit cards, two mortgages and student loans. is empowered with the tools to ensure our financial system supports job creation by ending the tricks in the traps families and small businesses will keep or their hard-earned money and will be able to build little class wealth and help businesses thrive. the bureau is subject to as chairman johnson said, subject to stringent notice, consultation, analysis requirements under dodd-frank and the administrative procedure act, and are under the small regulatory enhancement and fairness act and the regulatory flexibility act. financial stability oversight council the other banking regulators have unprecedented authority to overturn cfpb's rules. already cfpb is ensuring that mortgage contracts are written in ways that consumers can more easily understand.

their positive reviews from industry and consumer groups alike. the substance in the process involved in creating a new model mortgage loan disclosure form is helping men and women in uniform as chairman reed pointed out, preventing them from being targeted by bad actors who profit from financial practices that defraud and deceive those serving the cause of freedom. mr. chairman i called the senators story recently and asked him when was the last time and was there a time when the senate actually, the minority in the senate pledge to block a nominee because that party actually opposed the agency's very existence. when was the last time that a group of senators as senator shelby.has signed a letter threatening us filibuster implicitly saying they will not confirm somebody until we get our way and until we change the law and the structure of the agency? it is never happened before until right now.

that kind of partisanship is why people are so unhappy with their government. they see a dysfunctional government that simply can't do this. we are to have this debate once about the structure of this agency. amendments were offered that would have watered down agencies authority. they were considered fairly in committee on the senate floor. they were rejected by senators from their own parties. now's not the time to undermine an agency in a bipartisan majority in congress created. what kind of president says this set, demanding and then accusing the majority of not even working with them. the mandate we will all be sure someone is as is qualified in. no one questions his qualifications as a spec round, his qualifications and his performance in office of the various jobs he has -- no one questions that. they only want to block his nomination or anybody else's nomination simply because they don't like the agency. they apparently don't want a

consumer agency representing consumers. that is what got us into this. the minorities -- the result of their actions is to tilt the playing field in addition to what else this has done to tilt the playing fields of traditional banks right now are regulated while non-bank lenders which bear the lion's share of the responsibility for the recession are left untouched. that is why prominent bankers in this country and many many many in ohio are supporting richard cordray and want to get this agency empowered and want to get this agency in director in place of the agency can do its full panoply of responsibility. instead, right now the agency regulates traditional banks but not non-bank lenders. this is where many of the problems come from this whole meltdown in our economy. minorities own witness and the subcommittee a chair and financial institution consumer consumer protection said as much on august 3. hope my colleagues will