writing about at the moment? >> guest: well, we don't usually discuss what we've got going on until we publish it, but we are definitely continuing to cover this issue and the bundlers issue and campaign, and the relationship between campaign money and campaign finance and washington. >> host: fred schulte is a senior reporter with i-watch news. iwatchnews.org is the web site in case you would like to see their reports or read the e-mails between the white house and lightsquared officials. mr. schulte is a four-time pulitzer prize finalist, he spent much of his career at the baltimore sun and the south florida sun sentinel. he's received the george polk award to investigative reporter and editors award, three gerald lobe awards for business writing. mr. schulte, thank you for being on "the communicators." >> guest: well, thank you, peter. it was my pleasure.

>> just ahead, journalist katie couric, supreme court justice apt anyone scalia and paul are among the speaker at the annual washington ideas forum hosted by the aspen institute and the atlantic. and later john mchugh gives a live speech to the annual meeting of the association of the u.s. army on pentagon budget cuts and other issues. >> supreme court justice antonin scalia, journalist katie couric and paul ryan were among the speakers at the recent annual washington ideas forum. it featured leaders from government, business, and education the media to talk about a range of issues that made news during the past year. the atlantic, the aspen institute and the newseum cohosted this two-hour event. >> thank you. [applause]

>> well, good morning, all. um, and rhyme delighted to do this. and, howard, let's start with the terrible news overnight about steve jobs, and i know that you knew him personally. briefly, your thoughts about him and your thoughts about his passing. >> i think america lost and the world lost a genius, someone who has defined entrepreneurialism, innovation, courage, leadership. it's a, it's a -- i think we're going to look back on steve's life and realize that what he contribute today the world society was as breath taking and innovative as anyone in the last maybe 50, 100 years. tremendous loss for the world. >> let's talk about you, and you announced a new program just this week, create jobs for the usa. starbucks donated $5 million, people can go to starbucks, and they can buy a bracelet for $5, and all of the money -- or they can just donate period -- and all of the money goes to

community lenders to make loans to small businesses. some people are calling it the starbucks stimulus. why'd you come up with the idea, and what are you hoping it can accomplish? >> well, i think as i look at the landscape of american business today and the issues of unemployment, we have a crisis of confidence that, certainly, is as tough for the unemployed and small businesses as anytime in my generation. and looking for opportunities in which starbucks can use its scale for good, and what we hope to do more than anything else is raise millions of dollars to get in the hands of community-based loan organizations because the number one issue facing the unemployed and small businesses has been access to credit which is really a tragic situation when you consider how much money the banks are sitting on. >> now, there is, as i was reading about it, 7 to 1 leverage here that are for every $5 that goes to these community lenders, they can loan out $35. given that kind of 7 to 1 ratio, what do you hope, what do you

think can be accomplished in terms of job creation and community development? >> well, i think we will, we will -- i mean, 70 million people a week visit starbucks retail stores. we will sell millions of bracelets. it's about americans helping americans, and i think overnight this can be a catalyst for significant job creation because of the leverage you just talked about. but, you know, if you look at the issues that we're facing, small business has been the engine of of job creation. they're struggling today because they can't get credit. this will be a significant catalytic change. >> your, the whole, this whole idea seems to come organically out of your discouragement with this town. that we're in. >> no one in this room though. [laughter] >> well, maybe a few in this room. your growing sense that the big divide in this country now is not between business and workers or any of the other normal and old divisions in the country, but between washington, the nation's capital, and the rest

of the country. what's the problem, what's gone wrong? >> i think following the debt ceiling debacle what we saw in america and i think the s&p downgraded america's debt not only because of the balance sheet, but because of the dysfunctionalty in washington and the lack of confidence that we are in a position to solve the problems we have. i mean, right now in the america if you just asked a rhetorical question, is this best we can do, do we deserve better, there is an overriding concern that i have that is shared with many business people that washington is not working. and what i'm saying and trying to be as loud as i can is that we cannot wait for washington any longer, that businesses are going to have to step up and do everything we can. but i'm also asking washington to recognize, please, put your feet in the shoes of the american people. stop looking at the lens of ideology and re-election. we do not have 14 months to wait for these problems to be solved. and i think these are senate

issues. -- significant issues. i no longer think it's a crisis, we are in an emergency. >> but let's talk about that because you were asked, you came up with this idea, i guess, in august, and you sent out your letter to -- and it's gotten a huge response from businessmen and just regular folks around the country. you were asked at one point, so what's the solution? and you said, well, i'm not a politician, i'm not an economist, i sell coffee. but it isn't just ideology. there's a basic philosophical disagreement near this town. one side believes in the role of government in creating jobs and targeting tax incentives and stimulus and cuts. there's another side that thinks government is exactly the problem, and you need less regulation and less spending and lower taxes. i mean, i don't think people here are doing it just because they're looking at the next election. they're doing it because they really disagree about what's the best direction of the country --

how do you bridge that divide? >> yeah. i'm not naive enough to think that we do not have differences on both sides of the aisle, but this is nothing new. what's new is the polarization and the ideology has gotten so raw that people have, have, i think, are unwilling to understand that the differences have become the reason for existence. in the meantime, as 9.1% unemployment, 42 out of 50 states are facing budget crisis, cuts in social services are going to come to america, it's going to widen the gap between the haves and the have nots. and so what i'm saying is i recognize the differences. but we need cooperation, we need compromise. and for god's sake, the people who do not have a job, the people who can't make their house payments are not worried about ideology or your re-election. solve the problem. if this was a business and like-minded people were in the room to solve the issues, the problems would be solved. we started off talking about steve jobs. at his core he was a leader, a leader who understood that we

are in business to solve problems and create opportunities. solve the problem. >> in i just want to -- i just want to pursue this a little bit because i understand, and i was thinking about in terms of your company. i'm sure there have been, quote,ic soluble problems -- insoluble problems, and you've said, all right, we're going to sell this product and not that kind of product, but if somebody said we really need to get out of the coffee business and somebody said, no, we need to get more heavily involved in the coffee business, aren't there some divides that are so the great, and i suppose what's happening in washington is people are saying let the people speak, and i understand it's 14 months we don't have to wait. >> not when people's lives are at stake. you know, i know we have short time, so i'm going to say something quickly. i brought something up on national tv on sunday, and it was in the mid '40s when the marshall plan was created, just ask yourself this question: is there any way possible in the

congressional agenda today that anything close to something like the marshall plan could even possibly get through a committee or anything quite like that? and i would suggest that the domestic agenda and the problems and issues that have to be solved are at least as great as what the marshall plan presented in the mid '40s. we need a domestic agenda here, and we need a laser focus with a comprehensive commitment that we're going to solve the problem. and i just, i don't -- the concern i have and the frustration i have is we have a crisis of leadership and confidence in congress, and nothing is getting done. in the meantime, we're drifting towards mediocrity. this is not the america that our parents promised us. >> and so what do you think is the problem? i mean, is it just that we have small people in washington whether it's on one end of pennsylvania avenue or the other? what is the problem as to why in the past we've been able to step up and solve those issues and today we seem unable to? >> i think that ideology and the

season of re-election is now the most powerful lens in which people see every issue. and that is a see change that is very different today than any time that i can remember. i mean, george will last week said if 88 better of the people in this country think we're going in the wrong direction, they're wrong. washington is working. is he out of his mind? [laughter] is he, is he, i mean, is he in a coma? are you kidding me? what is he looking at? we have stores in every community in america. i was in harlem this week walking the streets on sunday. george will needs to take a walk around the block and understand. and i think people in this town need to understand people are being left behind like never, no other time. and it's the fracturing of the humanity of this country that is at stake. >> what do you make of these occupy wall street and these growing protests around the country? i'm sure you're familiar with them. and particularly given the fact that when they're asked what do

you want, they don't have an answer? is. >> i think that what we're seeing on the brooklyn bridge the last few days, and i was in new york, is i think you're seeing the beginning of anger, frustration that very easily could have unintended consequences in which there could be unrest in america. and i think if we do have unrest in america, is that what it's going to take for people to realize that we are on the cliff and things need to be addressed? and it shouldn't take that. people are very, very concerned. >> you feel so strongly about this that you started a campaign this summer to boycott political contributions to anybody running for president, to anybody running for congress this year until washington gets serious about job creation and about long-term debt stimulus. what, what's going on with that? >> we have about 150 ceos and business leaders who have signed

up. that was a result of asking people to suspend contributions of incumbents, and i think when we started doing the research and found out $4 billion was spent in 2008 and 5.5 estimated in 2012 on the presidential cycle, i mean, that is just unbelievable to me. and i think we wanted to send a message to washington that we do not want to embrace the status quo. but it's beyond that. i'm also asking business leaders and corporations, let's not wait for washington. we, too, have a responsibility, and i want to get people to reinvest in america, hire people and demonstrate that we can create a level of confidence and, hopefully, it can be contagious. but we can't wait for washington. >> i want to pick up on this idea of the boycott because i know when you were on on sunday, you were challenged on this. and, you know, the argument is that they're not all the same. some politicians simply seem to be seeking their next election, then there's a fellow like lamar alexander, the senator from tennessee, pretty moderate guy who quit the leadership because he's so frustrate with the the

gridlock and basically felt he could accomplish more as a rank and file, one of 100. and carlyfy arena spoke out against you and said job creators at this particular time need to be more involved than ever in the political process, not to drop out. >> well, i don't agree that the suspension in raising money for incumbents has anything to do with some of those people who care a great deal trying their best. what i'm saying is i do not want to support the status quo, and i don't want to feed the beast, and the beast is re-election. what this is about is sending a signal that we are dissatisfied with the work you're doing, we want you to go back to work, and we did this during the level of congress taking a recession and the president taking a vacation. we said this is not a time to take a day off. this is an emergency, and we need you to go back to work. we've pivoted off the money issue, and we've gotten to job creation, and as a result of that we are focused on doing everything we can to try and stimulate job creation in america.

>> you supported barack obama in 2008. >> yes. >> are you disappointed with his inability since he came in promising to be a transformative president? are you disappoint with the the fact that his inability to find some way to bridge the divide and move the country to solve and confront its issues? >> i'm disappointed in washington. i'm disappointed in the congressional agenda and the leaders in washington. i'm not here to criticize the president or one party or the other. what i'm disappointed in is the lack of leadership and the commitment to solve america's problems. >> you've talked several times about we can't wait for washington, business has got to get going on its own. why isn't, and let me pose a couple of suggestions, and then you can either pick one of them or go with none of the above. why isn't business hiring now? why is it holding on, by all accounts, to more than a trillion dollars in capital? it's talked that it's because there isn't enough demand for their products, that there is uncertainty, too much regulation

and taxes in health care, and all of these things, and they're scared to hire because they don't know what their costs are going to be. why isn't business hiring? >> >> first of all, i don't think you can put business in one bucket. but if i was to answer that specifically, the issue of uncertainty needs to be understood. in the last two, three years, most public companies took out a level of gna within the middle of their pnl -- >> explain that to those of us -- >> okay. they took out admin costs, they fired some people in order to weather and navigate through the financial crisis. they learned how to be leaner. and a new muscle memory was built in many companies, and as a result of that, years have gone by. companies are more profitable, and they did not rehire those people. but the issue of uncertainty is real. the budget crisis, unemployment, housing crisis, regulation, business people not unlike

politicians in some ways are going to go where momentum is. and right now the headwinds are so strong that people are unwilling to take risks. and what i'm trying to say and i think many people agree with me is that we can be a signal to american businesses that this is a time to reinvest in the country and demonstrate leadership. >> i want to talk about one of the headwinds, health care. i should point out for people who may not know, you were an early convert. you were somebody who decided way before most companies to provide health care, full health care for part-time workers, people working as few as 20 hours a week, isn't that correct? >> yeah. >> 250,000 people, i believe it is? >> we provide health care to $160,000 people at a cost of -- >> that's what i was saying, the cost. but you are saying that this individual mandate as it's currently written would be a real crag on company -- drag on companies, particularly small businesses, if it goes into

effect in 2014. >> chris, you've really done your homework. >> yeah. we do that on fox. [laughter] >> i wouldn't know, i've never been on fox. >> that's not true, you've been on cavuto. >> the issue i think first off is we won't really know what the final bill is until 2014, but as it's currently written, i don't believe that the issue of the mandate is something that would be good for small businesses. i predict that that issue will be refined before 2014. >> meaning, i mean, without getting too wonky, what? >> what the mandate means is that you have to, you have to provide health care to everyone, even if a young potential is provided -- young person is provided health care by their parents. that's probably not a good policy. but i suspect it'll be refined. >> you talk about research, i did some research, and i learned some astonishing facts about starbucks preparing for this interview. 17,000 stores in 55 countries, $11 billion last year, correct?

is. >> in sales, yes. >> i didn't mean to denigrate it in any way. 60 million customers a week, 11 million cups of coffee a day. >> and you don't drink one of them. >> that's true. i drink tea though. [laughter] but back in 2007 the company was in trouble, and you had stepped back for several years. you were the chairman, you weren't the ceo. the company had probably expanded too fast, too big. the stock dropped 42%. and you came back in. and, actually, and i thought of this question before last night, kind of like steve jobs did with apple. what went wrong with starbucks? why does a company sometimes lose the vision of its founder, and why does the founder sometimes have to come back in and ride to the rescue? is. >> starbucks in many ways did something that is not that unusual but, unfortunately, it really hurt us and that is the growth and the unbelievable success of the company covered up a lot of mistakes. and i think we lost focus of our

core purpose and lost focus of the customer. and when i came back, we literally transformed the company, and ironically, one of the first people i called when i came back was steve because he, obviously, had done such an extraordinary job when he came back. i don't think it's necessarily about the founder, but i had a sense of the core values and purpose of the company, knew where the bones were buried and was able to make the changes necessary. but most importantly, the core values and the guiding principles and the culture of the company in which we demonstrated over a 40-year history that you can make significant profits and build shareholder value and at the same time have a social conscious, that is what we brought back. and as a result of that, record revenue and record earnings this year. >> give me a sense when you talk about core values because i think a lot of people would say, hey, it's a company that sells good coffee and has good thing toss eat on the side, also very good tea. [laughter] how do you lose your core values in a starbucks? >> >> by one day realizing that

perhaps your stock price or the demands and expectations of wall street is a reason for being. and that can happen very easily when the world shares with you how great you are and keeps trumping the stock price and people make a lot of money. all of a sudden you realize that this is not what we're about. we're about serving and exceeding expectations of our customers and our people. and the stock price and the pe and wall street became an albatross around the company's neck. and when i came back, i removed that, and we went back to what we were supposed to be doing, and that is doing everything we can for our people and the customer in the communities we serve. >> give me a sense, i understand in if a large macro, corporate sense, but in the individual experience of me going into a starbucks how had you lost touch with your values? >> sure. when companies go the wrong way, they start measuring and rewarding the wrong things. what we want to measure and reward at starbucks is the experience the customer's

having. we started measuring speed of service, transactions per hour, and in a sense the operational expectations of the company trumped the customer experience. and if that happens in 17,000 stores, the company gets turned upside down. thankfully, the equity of the brand and the experience was resilient and strong enough that we were able to rebuild the company, and here we are probably stronger than we've ever been. >> let's talk a little bit in the time we have remaining about howard schultz. you grow up in a brooklyn housing project, your dad worked one job after another and had a hard time. how did that experience shape you, and what do you think are the personal traits that took you from humble beginnings to this extraordinary success? >> well, i think i carry with me, i mean, i'm a poster child in so many ways for the american dream. and as i said, i was hat harlem -- at harlem on sunday, and i see tragic situations on the street, and i talk to people

and i realize maybe rhetorically the question is, do they have access to the same possibilities that i had? i would suggest, probably not. and i think the experience i had as a young boy imprinted me to try and build the kind of company that my father never got a chance to work for, and can that's why we have health care. and what i'm speaking about right now is just the concern i have about the fracturing of the american dream and whether or not america is at its best today. and i don't think it is. and i think as a result of the experience i had as a young kid and the imprinting i had, i want to do everything i can to make sure america is the place where a kid from brooklyn and the projects can still do anything in the world. and i wonder if that's still true. >> i'm always fascinated, though, by people like you. you were talking early about the horatio alger award which you quite appropriately won. why you? what did you have that a lot of other people don't? i mean, yes, you have these thoughts, but what was it in the

perm traits that allowed you -- personal traits that allowed you to create this extraordinary company? >> you know, my mother -- i didn't know we'd get into such personal stuff, but my mother who was an uneducated woman from the time i could remember demanded, insisted that all three of her kids were going to college. we department have the resources, we didn't have the money, and all three kids went to college, and it was just her life ambition. and i think she set expectations for us that was much greater than our station in life. but if i took you today to canarsi and we walked through the projects, the chances of getting from there to here are insurmountable in a way. but in a country like america, it's possible. and again, i ask the rhetorical question: is it possible today? i think the odds are much more difficult. >> and where did you get, obviously, this really burning social conscious? >> i saw a lot of bad things as a kid, and i remember people telling me as a kid that don't

dream too big because you're going to be disappointed. people tried to define our station in life, and i think my participants and specific -- my parents and specifically my mother did not allow that to happen. and i want to carry that out as much as i can for the people being left behind. and one of the things i'm deeply concerned about right now is 42 out of 50 states in america are facing a budget deficit, and as a result of that the cuts on social services in america are going to be more acute than think other time in our lifetime, and there will be tremendous adverse, i think, the amount of people who are going to be crushed as a result of these social services in which the safety net of america is going to be fractured is very concerning to me. >> a couple of final questions, we'll get out of here. how long do you sleep at night? >> five, six hours. i sleep well. >> but i heard sometimes it's three or four hours. >> well, no, i -- chris, did you read everything about me? [laughter] >> well, actually, we did have a private eye, howard. [laughter]

>> yeah, three, four hours. i don't sleep very much. i've never been a big sleeper. >> you don't need it? is. >> i drink a lot of coffee. [laughter] >> i was about to -- [laughter] that was my punchline. [applause] >> thank you. >> howard schultz. >> thank you. [applause] [inaudible conversations] >> that was good. i hope you've all had your cough cough -- coffee this morning. next up we have an old friend of mine, david rubenstein, who you may know. he was in the carter white house many years ago. i was in law school. um, we all knew that david would someday -- someday be working for david. david is a great speaker, he owns many documents, and today he's going to tell us about one that we are probably not as aware of as some others.

>> thank you very much. >> thanks, david. >> margaret, thank you very much. um, many of you will hear a lot of speeches yesterday and heard and hear of speeches today about the economy, and that's a subject about which i often talk because i'm in the investment business. but as margaret said, i am interested in american history. i worked at the white house and came to know much more about american history as a result of that, and recently i've come into the habit of buying some historic american documents and trying to get them displayed so other americans can get to know them, documents like the emancipation proclamation or the 13th amendment to the constitution which abolished slavery. what i'd like to talk about today is a subject i think i can encapsulate in 20 minutes, but i hope it will inspire you to think more about these summits and this subject later today and subsequently. and the subject is this. we today, of course, think about a revolutionary, steve jobs, and what he did in terms of changing the world of computers and

electronics and the way we live. but there's another revolutionary that i'd like to mention today, and that's martin luther king. in about ten days, we'll dedicate the memorial to martin luther king about a mile from here, and it's about a mile from here as well that he gave the "i have a dream" speech which became one of the most famous speeches in american history. and what led to that speech is something, i think, many people have forgotten, so i'd like in the time i have available to tell you about that speech because while i was alive when that speech was being given, i didn't realize until later the importance of it, how he gave that speech and one of the most senate things about that -- significant thicks about that speech. so as we get ready to think more about martin luther king in about ten days ago and that speech was given about 48 years ago, it's one that bears rethinking. in my own view, there are two great political speeches that i've often seen as the gold standard. one was the gettysburg address in the 1863 and the john kennedy

inaugural address in 1961. as a young man, i did work for ted sorenson at his law firm, and i got to know about that inaugural address, and those two speeches were terrific because they were both short, and they both were not specific. neither speech really said the speaker was going to do any particular thing, neither one talked about legislation or anything like that. they had some very good mnemonic devices that allowed them to be remembered. the words were almost poetry in the way they were written, they were very carefully crafted. and they were also speeches that didn't have an immediate impact but are remembered much longer and really have stood the test of time. and in many ways the martin luther king speech is very similar. the king speech which was given on august 28, 1963, was like the kennedy speech and like the gettysburg address, very short. the gettysburg address was only two minutes in length. the kennedy inaugural was only 14 .s -- 14 minutes in length.

about 31 minutes, you think about it, you listen to a state of the union address for 45 minutes, 0 minutes, and you kind of say, what to you get out of that? here these three speeches together were about 30 minutes. and the martin luther king speech is similar to the other speeches, and, in fact, when martin luther king was drafting that speech, he said i want it to be similar to the gettysburg address, same kind of inspiration. so what really happened in that speech, or how was it similar to the other speeches? well, it was short. he department have any specific legislation, he didn't call for the passage of any certain legislation. it had a certain eloquence to it. it also had a mnemonic device which was similar to the other two. in the speech by lincoln, the gettysburg, he used a mnemonic device that was very helpful, and it's called by gary wills in his pulitzer prize-winning book on that speech, hooking. which is to say he would use a word repeatedly.

so four score and seven years ago, our fathers brought forth in this country a new nation dedicated to the proposition that all men are created equal. so he would use the word "dedicated" over and over and over again, and if you go through the address, you'll see the word "dedicated" almost every other sentence. and that kind of hooking brought the whole speech together. again, it was only given in two minutes. in the kennedy inaugural address, he used another device called antithesis. it's the device where you contrast things, and the contrast helps the listener remember it. so ask not what your country can do for you, ask what you can do for your country. never negotiate out of fear, but never fear to negotiate. and those kind of contrasting things are throughout the kennedy inaugural address. 52 sentences, 23 of them have antithree us is. in the king speech, he used a speech writing device which, basically, sets up a predicate

and keeps repeating it. so, in other words, i have a dream, and then it talk abouts what the dream is. let freedom ring, and then he will talk about what freedom rings means in this particular context. so repeatedly, he used that device, and it, obviously, helped to make the speech work. ..

>> the kennedy speech was carefully crafted by ted sorensen and john kennedy, worked together over a three-week period of time and it was a brilliant speech and it reads like poetry. the same is true with the gettysburg address. it was probably written by lincoln almost completely himself. he drafted it not on the back of an envelope but when he went to gettysburg. it was his breach from which he read. john kennedy read from the speech he had cracked with ted sorensen. in the case of martin luther king, he worked on often on for about four days and he stayed up until 4 a.m. working on it. it was typed up and it was distributed to reporters and people had the text of it. but then about halfway through the tax he departed from the text and the part that you

remember, i have a dream, let freedom ring, had nothing to do with the text. it was off the top of his it. standing in front 250,000 people, the biggest assemblage ever in washington for a march, how could somebody have the courage to say i which is when you, i will make up something. let's see, what can be? i have i have a dream here. how did that come about? at the time the march was conceived it was not considered to be such a wonderful idea. what happened was this, martin luther king was a young preacher in montgomery. he had been not active in civil rights. he had been asked to head the naacp chapter. he turned down because he wanted to dedicate himself to preaching and really are fact that craft and he didn't want to get involved that actively in civil rights. but when the bus boycott occurred and rosa parks and others led the boycott he got involved. and got more and more involved in civil rights.

the civil rights efforts he led were successful in certain selected areas, at the time of the march in 1963 we were still a very segregated country, although brown v. board of education in 1964 had changed the way schools had operated. in alabama, mississippi and south carolina in 1963 not a single job went to public school in an integrated school. the situation was that white employment was half of what black unemployment was. blacks made an average about 50% of what whites made in income. only 8% of blacks in the south were registered to vote. there were no blacks serving on juries in the south. it was them a different country than we live in today. while we have many problems today to deal with in this area, that was a much, much different situation. but martin luther king thought he needed to do more than was being done and he was looking for some ways to do it. he wasn't quite sure. other civil rights leaders have

conceived the idea of having a march on washington. it wasn't martin luther king's idea. it was conceived by philip randolph it would been ahead of the sleeping car porters association were six major civil rights or decision at the time. the idea was one that was very threatened to the present of the united states. he didn't know exactly what would come of it. many people thought there would be violence. there had never been a march like this. the march went forward. it was going to be in october. it was decided that maybe august was a better time to do it. it was done in the end of august in 1963, and the u.s. government was more involved than normally in a marching in many ways. today you wouldn't have this but the u.s. government really help facilitate the operations, the u.s. government paid for many other things and the u.s. government was deeply involved in some of the speeches. one of the speeches that was to be given by leader john lewis

was to some extent edited by people in the us government because they thought some of what he was saying was too incendiary. and that speech was, that march was being put together, many people were not sure whether it would lead to violence. many people did not know if people would show a. as it turns out 250,000 showed up, the most ever in washington. it was very, very peaceful. in fact, that was the main story. if you look at the newspapers the next day it was not about the martin luther king speech, it was about the fact it was such a peaceful demonstration. there were six civil rights leaders who are leaders in those days. and they talked among themselves of how the speakers would speak that day and it was decided that each speaker would get five minutes. martin luther king was only given five minutes and he wanted to speak longer but he agreed to speak for five minutes. also it was decided he would be the last speaker because he was the most articulate. some people on assisted by the end of the day nobody would be covering it anymore, people would have gone home so some of

the other speakers want to speak earlier because they thought it would be on the evening news shows. but in martin luther king's case it was recognized he was a good speaker but many people in the white world had never heard him speak before. it was something they were surprised when they heard him. when the speeches were being given that day, many of them were okay, they were nice but many were not that memorable. the most memorable one was by john lewis who later became a member of congress. he was then head of one of the civil rights groups. he gave a speech that didn't quite call for violence or anything like that but it was more incendiary than some of the organizers had wanted. then towards the end of the day martin luther king got up to speak. when he got up to speak, he was supposed to speak for five minutes but he realized at the end of that he could probably speak longer and he intended to do so. his speech was probably about 10 minutes as he prepared. it was a speech that really at the beginning, parts of it were not things that were going to

change the way people look at history. he really gave fairly standard kind of civil rights language, the things that president kerry had said, a lot of civil rights leaders had said before. number one, we have the emancipation proclamation and we really haven't honored that commitment that people made to the country, and his effective use of analogy that said we have a check that hasn't been cached and we will have a promissory note the country owes us. fairly standard language. the analogy of a promissory note have been given to him by one of the people who helped them work on the speech. then he went into another part of the kind of thing he had standard, withstand any speeches which is to say, we should do what we need to do to cash this check to make sure the government honors its promise a note to us, but do it through nonviolence. nonviolence was not something that everybody in the civil rights community completely agreed on. malcolm x, for example, one leader was saying the nonviolent effort hadn't gotten very far and was talking about things

that were maybe more violent. but martin luther king made clear in the second part of a speech that nonviolence was really the way to go. had the end of the speech right then and there, that would have been probably nothing of great consequence but then right towards the end of his speech he concluded he didn't have what he would call a great many. the said he needed of indian. he decided to then take something he had done before and put it into the speech. how could he have come up with the i have a dream, let freedom ring off the top of his head? honestly didn't know what is probably that great a speechmaker to do that. he had over many years use the i have a dream, kind of language and tried a couple weeks before in detroit, either for many, many years before, not quite something that many people have heard outside of the self rights committee. the white community had never heard it but it was something he was somebody with. it kind of came to him and he began to do at the same with let

freedom ring, something he talked about before and in other speeches others had given. why did he depart from his speech? why did he use the same as language? he kind of never give a good answer for that. he was only interviewed about it once and he said i just felt something, the urge came on and i felt i had to do something more than i had in my prepared text. there's some people who say that jackson was a singer kept saying to him at the back of standing behind him, martin, remind them about the dream, tell them about the dream. it's not clear whether he heard her and that's when he went into his i have a dream remarks. but anyway, that remark i have a dream which all the probably know and i handed out some of the speech text about it, if you read it it's very effective because what he did is he kept repeating i have a dream and repeated what the dream was and then ended with let freedom ring. and the most famous line at the end, the line the incident, saying that in the end, we will be free, hopefully we'll have freedom, the free alas, free at last, thank god almighty i'm

free at last, was an old negro minstrel song that was used in cemeteries and what he was trying to do was to say well, we hope that we won't have to be dead before we can be free at less. we hope eventually with the help of everybody we can be free at last while we are alive. that's how he ended the speech. when the speech was over they went to the white house. president kennedy greeted him and said, i have a dream. and in effect he said this with a great speech in president kennedy want to listen to the speech on tv said this man is a damn good speaker. he knew what a good speech was. they spent 72 minutes meeting at the white house that president kennedy didn't really say to martin luther king you are now the start of the civil rights movement. the other people are careful martin luther king was careful not to say i did a great speech and is still the day. it was a speech that got a lot of attention the next day. it was not a speech that became the famous right away. when the civil rights legislation was being debated

martin luther king was seen as very revolutionary and may be too much of a revolutionary to really be the kind of thing that members of congress talk about. in the entire debate is not one mention any congressional debate about martin luther king's speech. he became famous on this after he died, more than when he was alive. because when he died, television cameras, television networks another people wanted to talk more about this great men and walk the talk about other than something that was relatively safe, many other things martin luther king was working on at not happen. he was fighting the war against vietnam. he was fighting against poverty in the north, fighting against desegregation and housing in the north. many of those things didn't come to pass. when he died and was assassinated he was not then seen as somebody who is completely safe for americans to talk about like everything had done was a wonderful, but the civil rights legislation was seen as safe because of past and so, therefore, people to his speech and begin to make it a

symbol of what martin luther king was all about. it was a speech that stood the test of time but interestingly like the gettysburg address and like the kennedy inaugural address didn't have an immediate impact. the impact of all of those is many, many years later. so today as we get ready to celebrate the martin luther king memorial, i think it's constructive to go back and read the text of the speech if you have a chance because it's wonderful language and it really was an inspiration to people that heard it. it didn't have an immediate impact on passing legislation, but today i think it ranks as one of the greatest speeches ever given by any american, private citizen or public official. and i think as we begin to remember again what martin luther king stood for, we should also remember many other things he worked for really have not come to pass. and while we are now almost 50 years later after the speech was given, many other things he worked for still haven't come into being and i think we still have a long way to go before we achieve many of the objectives that he talked about in his "i

have a dream" speech. thank you very much. [applause] >> now we're going to have an interview with katie couric who has come down from new york but as you know, she was the cbs anchor, first woman anchor. she's now going on to do other things. katie, are you here? >> i here. [applause] i hope howard schultz has left the building because i'm holding a dunkin' donuts cup. [laughter] >> i like starbucks to, for the record spent david is happy because david owns dunkin' donuts. there you go. you can't make both men happy. >> exactly. spent the challenge with you, katie, is not to be so familiar

and treat you like the girl next door. when we were rocking through the building, everybody thinks they know katie because of the today show i would say. and anchor, but, you know, it's like walking through with, you know, a candidate who is shaking all hands, they are so anxious to talk to you. and he really said the other day upon announcing his retirement, i'm so glad that all of you, like me. but please let me have my dinner. how is it when everybody thinks they know your? >> i always think it's incredibly flattering, and people for the most part are really gracious. so i'm grateful. i think, i think that people do know me, to a certain extent because on the today show, especially during those 15 years they not only saw me have two kids, my husband and my sister both passed away during that time period.

that -- >> they get to know you. >> they got to know me intimately through my colonoscopy. but i think they see me in serious fun, dramatic, situations. all kinds of situations. and i think the camera doesn't lie. especially on a show like that where the format is so loose and there's so much spontaneity and you have to really be who you are. so people say, to me all the time i feel as if i know you and i say well, you probably do if you watched the today show, particularly. >> you couldn't come down for dinner but we had a lunch dinner at david bradley's house on tuesday night, and we showed clips of the political humor of the last year. one clip was tina fey playing sarah palin. she said we have vanquished one of the world's great villains, and i for one am thrilled to say good riddance to katie couric.

[laughter] so, you know, -- [laughter] so, she said she's not running. >> i heard that. >> i don't know who vanquished who, by the interview has been compared to roger mudd and ted kennedy and terms of how it changed our politics. you may be best known for it. was a serendipity that it became what it did? because you didn't ask the great gotcha question. you just said what newspapers do you read? >> no, it does kind of bug me when people remember only that question because i spent about -- that's all right, but i spent 45 minutes with governor palin talking to her about some foreign policy issues after she spent the morning at the united nations. and we talked about nation building. we talked about iran. we talked about the difference of the surge, how research might be effective in iraq versus

afghanistan. and it was at the height of the fiscal crisis as you'll recall in lights of timber before the election. it's funny to me that that one question that so much attention. and i think she was so annoyed with me at that point in time, she just wanted me to be gone. but i thought that was, what can i say about that interview? governor palin hadn't been much prep. i decision was made by her campaign that she do sort of major media outlets, and lame stream media and most anchors. i happen to go third. charlie gibson would to wasilla for the first interview and i was terribly jealous of that. and then sean hannity i believe from fox did the second. and so i was the third to go. you know, i thought it was an opportunity for the american people to learn more about this candidate, about this person, where they stood, where they were philosophically in terms of their politics, what made him

tick, what their vision was for the country, and how those views were shaped. when i asked the question about what do you read, i was curious and it was really just kind of a spontaneous question. in television when you get the role of us walking and talking you sometimes just want to use some material from there, but oftentimes just for the shot of the two of us walking, the voiceover. but i thought gee, i'm interested. she has such strong political views and are ideology is so, sort of, you know, specific, i wanted to know what did she read before she was tapped, what newspapers and magazines did you read on a regular basis? i don't know if i said regular basis, that helped shape your worldview. i was curious what made her believe the things she believed. she later said that i was, during the interview she said people in alaska reid. and i was quite aware that

people in alaska reid. [laughter] but, you know, i think she was trying to deflect it. and i still to this day don't quite understand why she would answer that question straight on. i think of a million ways ipod would answer that about reading every newspaper in alaska, because it's ultimately so critical for me to understand what's going on in my state, and you know, i try to get a variety of political viewpoints. i read xyz. i'm just not sure, i think that she was just was done with me at that point. >> yesterday a burning question was how women are treated in the white house, because of the book that recently came out. and i fell asleep last night reading parts for new taking over the cbs news. >> that's a strong endorsement. [laughter] >> thanks, margaret. >> actually it upset me because

i wondered how did you, you know, have all but incoming edges go out there every night? some of it must have been painful. it seem more personal than it would have been about, you know, charlie gibson o'brian wins or anybody else. did you find it that we? >> all, yet. it was at times are difficult. it was hard to understand, hard to kind of appreciate where it was coming from. i think that women are, let's face it, held to a different standard still in this country. i think they are more fun probably to dissect visually, just saying. >> and they are more fun. >> and so, you know, i think especially there was so much focus on my taking over at cbs. i think there were a lot of expectations for what one person could do for a news organization. and i think that i had enjoyed considerable success for 15 years on the today show. and that i think brings a

certain level of resentment. and so i tried not to take it too personally because i think sometimes journalists follow a particular narrative. sometimes they're not all that original in their observations. >> no. >> so i just decided what can i do. i can either pull the covers over my head and cried and decide not to go to work, or i could do what i think i'm very good at. being a good journalist and doing good work, so i really focus on the news instead of the noise and they just kind of forged ahead. but yes at times it was very painful. there's no doubt about it. >> did your daughters no? >> when i cried at the dinner table they knew. mom, are you hormonal? what the hell is going on? but, you know, again, i tried to be a good example for my daughters. you know, when my husband died i tried to turn tragedy into something positive. because i hoped, i think the best part, the most important

part about being a good parent is providing someone that make and model. and so, you know, i think that it was a time where i could be honest with them about a difficult it was but i also didn't want to be a quitter. and i wanted to keep doing the best job i possibly could. and i hope that they have been able to learn from me through various ups and downs that i have experienced. >> i want to get to your being a multimedia conglomerate on your own, but tell me first, as i was reading this i was really touched by this, you know, the hospital, the castro colonoscopy center you established and the katie couric affect. >> well, after my husband died in 1998, colon cancer when he was just 42, i decided i had a unique opportunity to educate the public about this number two cancer killer of men and women.

unit, people had heard about it because president reagan come if you recall have a polyp removed and there have been other cases as well but nothing very extreme a high profile, obviously the present well but i think it wasn't a serious situation for him. so i decided that people, i would try to demystify the screening process, which the gold standard is a colonoscopy, a screening colonoscopy for people 50 and over. and so my executive producer had also had ironically called and asked -- colon cancer at an early age so he was asked in a supportive when it went to him and said she, i want to do something about this, i want to educate the public and let them know. because i think colon cancer was one of those cancers that people didn't talk about. it was sort of like breast cancer was 20 years ago. and so i just took the opportunity and use the bully pulpit that i had to educate americans.

and as a result the number of colonoscopies went up 20%, and the university of michigan did a study and they called it the couric effect which was very gratifying to me to know that you know, i was able to raise this public health issue. people actually listened. >> i went and had one. not on camera. >> a lot of times, people now have become very comfortable discussing all sorts of things with me. they send x-rays other colon. [laughter] they tell me about the rectal bleeding. i'm like, thanks for sharing. but i really don't mind because i think part of it, it's important to actually get it out in the open, to make people feel comfortable about discussing part of their body that we all have, most of us. some people get theirs removed, but for the most part everyone has a cold and spent i think it's safe to say no other anchor has had such an impact and we thank you. so tell us, a few people would

be at the height of their profession and walk away, and go into not unknown terrain, but certainly not as known as being the anchor of the cbs news. tell us, what prompted you? >> well, i really enjoyed and appreciated my five years at the helm of the cbs evening news. i'm really proud of the work i did there. you know, not only the sarah palin interview but other political interviews as well. covering haiti, covering the arab spring. you know, i had this incredible front row seat to history which i've been fortunate to occupy really for many years, and it's been such a privilege. but i think for me personally the evening news was just a bit of a confining genre. it's 22 minutes. what i enjoy doing is interacting with people like you having intelligent conversations, hopefully, trying to distill or synthesize

complicated medical concepts for example, for people, understand what makes people tick, understanding, getting to the bottom of someone's political views. and i just don't think that format really afforded me the opportunity to do the things i really enjoy. i like to smile. people sort of thought i had a lobotomy when they did evening news. you know, the news is very serious, obviously. and i'm also a very serious person. i care deeply about a lot of issues, but i think i'm a little more multidimensional in terms of what i enjoyed. >> i have read an endless list of interviews you have done. you go high and low. you have quite a range. >> high and low, i preferred serious and fun. [laughter] it's not so much highbrow and lowbrow. i always lowbrow if i can. by cerda, you know, i enjoy talking, i did a profile of

sarah jessica parker for "nightline," and you know, some people might consider that a fluff into view but i think sarah jessica parker is a person of real substance. she was very thoughtful. she had some very interesting background and upbringing. and i really enjoyed talking to her, so, you know, i would enjoy doing something with sarah jessica parker. i enjoy anything president obama or john boehner about legislative issues. so i have a wide variety of interests. and i think sometimes that's hard for people to handle because i think they want to put you in a box and say, this person does that. but i think and you kind of challenge that and you push the envelope and kind of try to get out of the box i think some people feel uncomfortable without. >> the network presidents were here yesterday and they would take him and he did say that network news is stronger than ever and on the rise. but if we took a poll here, i don't know anybody who actually watches the nightly news anymore. they are not home at that time spent especially now that i'm

not doing it any more. [laughter] >> the rating is just not as interesting. >> when i got into television in 1970 -- that were not that many options, and as i sort of in a funny way looking back on my conversation with brian gumbel about the internet, it's being seen by trillions of people online, what is the internet? isn't that a round? we sound like such idiots. but, you know, there is so many more options now. as everyone knows this is not a newsflash. >> but you are doing all of them. you have your own youtube channels that i did not is bush at cbs. i hadn't been doing a lot of that. i tried to be active on twitter and facebook. i have tried to embrace new media. i did a web show once a week on cbs when i was with the cbs. there was a cbsnews.com and i did not to satisfy my desire to have more lengthy conversations and do the kinds of things i

really enjoyed doing. so i have really embraced new media in a way that i think everyone in traditional media should, but isn't necessarily doing. >> since you're everybody's tv star, and have a couple of questions from the audience pick anybody have a question for katie couric? christie. [inaudible] >> hi, christie. >> christie was chairman of playboy enterprises. >> yes, i know christie. hi. >> i will follow up on your last question in terms of how people get their news. and i've been working with the "columbia journalism review" on these issues of what is a journalist today in a world in which people can post information, sometimes quite accurate information, twitter any breaking news situation. but sometimes completely

inaccurate information. so i would just be interested in your thoughts, if you think about the next generation of journalists, what's going to defy them and how should the study for the craft? >> i think the definition of a journalist is changing because anybody with a computer and a pointed you can post something. and you're right, sometimes it is terribly accurate and we use it, for example, if there's an earthquake and we don't have access to reporting, or if there's something going on in iran, of course. you know, we relied on twitter to get information. and it is i think getting increasingly difficult to sort of ascertain what's accurate and what's not. but, you know, that's why i think we need editors. and i think it's very challenging because how can you validate things? i mean, there's a reason that there's a system in place with editors, with a double sourcing

information, and all the things that sort of traditional newsgathering involved. so i think, i guess the question is, how do new journalists or young journalist deal with that? [inaudible] >> well, i think they should learn their craft from a legitimate news organization. there are plenty of those still around. i think that you have to doublecheck any kind of material that you're validating when you're a legitimate news organization and you're not going to try something on twitter or facebook, or whatever. and i still think there's no substitute for being taught by people who are experienced to have been around the block and who understand the importance of validating material. but it is very tough because things get out fast and furiously online. it was reported a couple ago that steve jobs had died by someone on the internet, and you

know, i think there's just the possibility of an accurate information is just much more likely in this day and age. and i don't really know how to solve it in general, but i do think that consumers have to be more skeptical than ever before and help filter out things for themselves. and then i think they should rely on legitimate news organizations to help them understand what's true and what's not. >> following on this, last question, how many hours of sleep now that you don't do the today show do you take? >> in obnoxious star, i'd like to not answer that question, marker, and just mention one thing. i don't want you all to think i'm unemployed right now. [laughter] you know? i just want to mention that i am working on a very exciting project, and i just speak when you are awake. >> i tried to sleep eight-10

hours a night. i'm not like one of these goober robots. i don't equate little sleep with the success or achievement. but i am doing a syndicated talk show that is going to be -- very originally named katie. a little smiley face on the i. [laughter] and we're going to be doing actually a syndicated talk show in the late afternoon. it's called afternoon fringe, and is going to be on all the abc owned and operated stations and is going to be on a variety of local stations across the country. i'm really excited about it because it's more entrepreneurial than things i've done in the past. and is really an opportunity for me to really paint a canvas talking about issues i care deeply about. and i think given the tsunami of information that we are drowning in every day, to have an hour to

kind of take a look at a certain subject, whether it is lowering the training age on college campuses where binge drinking and accidents are happening way too often, or talking to are the navy seals, or a whole host of subjects, i think, you know, it's going to be an opportunity for people to take a breath and maybe to understand the world we live in in a better way will help them in their daily life. i hope so anyway. >> i will be tuning into qa serious person. that is our take away and you don't need a smiley face. thank you, katie. >> thanks, margaret. [applause] >> thanks again, katie.

that was so much fun. and so serious. next up we have the director of the museum, and justice scalia, which is a real treat for me. i ask him a lawyer so i will pay particular attention to this interview. jim? >> thanks, margaret. [applause] >> good morning. saying good morning to me or these people? >> everybody. >> good morning to you, jim. >> thank you so much for being here. i know it's a busy time for you at the beginning of the new court term. we are most appreciative of you taking time to visit with us in this forum. i'll start with a question about the nature of the court system generally in the united states, and it was about 175 years ago

that democracy in america, that there is hardly a political question in the united states which does not soon or later turned into a judicial one. is that a fair observation? is it applicable still today the? >> oh, it's a good line. i don't think it's true. i don't even think tocqueville thought it was true. he had a whole chapter on the courts in america, which even at that time were a peculiar phenomenon, the degree of power that american courts had come and he tried to explain how this was compatible with democracy. and one of the reasons he found why it was compatible is that there are some controversies that are not judicial. we have a doctrine of standing, and he said there are just some things that will never get to

the courts because the courts cannot deal with them. and that has remained true today. for example, certainly whether there should be federal expenditures for this or that is a political question, but unless you're harmed by the expenditure and are not harmed if you're just a taxpayer, because, you know, the argument is they would waste the money some other way anyhow. you have no standing to challenge it. so it's a good line but it's not true. it is to we're probably more litigious than most societies, and we have open courts and you can always come in and try. but it's not true that we stick our nose into everything. >> i think that is a fair observation. the courts don't seek out these cases. they come to the courts, but we do find that many political questions and issues ranging from immigration to health care,

are finding their way into the court system. is that a good thing? does it distinguish us from a other forms of government? >> well, it did up until the end of world war ii. now other countries that used to mock our system of judicial review, the french used to collect contemptuously, government by the judges. they have now adopted our system and most european constitutions provide for judicial review of legislative action to comply with human rights guarantees, the equivalent of our bill of rights. so they are sort of in the same soup as we are. now, i don't think, our framers thought it was a good thing and we think is a good thing. if you have a constitution that is law, and if the object of courts is to apply the law, you know, it follows that the courts

have to review the conformity of legislation with what the constitution requires. that's a good thing. and it usually isn't the entire legislation that is up for grabs. it's whether this particular provision comports with the constitution, or what does this particular provision mean. is improper for the executive to apply it in this fashion. i guess you could call that a political question. you know, whether the epa can regulate this or that, but it's essentially whether the executive is complying with what the statute provides. >> right. have you seen in your experience over the years on the bench a decline in the clarity of statutes that is coming out of congress? has there been a consistency there? is there a difference in the clarity these days the? >> i would rather put it that i haven't seen any improvement.

[laughter] >> it's always been a problem, and remains that. people are sometimes surprised as how our cases, caseload has gone down over the last decade or so. we are doing little more than half of the cases that we used to do when i first came on the court. which is not all bad. i think we're doing to me. i don't think we can do a hundred and 50 well. but i think the main reason it went down is not the reason we decide to take fewer, but there are fewer major statutes. i mean, when i first came on the court there was the bankruptcy code, there was erisa, there was a lot of major new legislation. and the main business of my court, believe it or not, you read about the pizzazz constitutional cases in the newspapers, but most of it is just digging out what

legislation means. and it takes about a decade to get all the kinks out of a new piece of major legislation to that's why we've got a lot more cases. >> you've not been a particular fan of looking to legislative history to determine the median in the statute. why is that? and is there any conceivable way that legislative history can, more reliable? >> well first of all let's be clear what you mean by legislative history. i will take account of what you might call a statutory history. that is, the statute used to reduce weight. it was amended in 1994 to read this way. and why did they make the change? it seems that they meant something different. yeah, i will take account of that. what i won't take account of his statements on the floor, including statements by the

bills sponsor, committee reports by the committee that reported out the bill. statements in hearings before the committee that reported. none of that is proper for me to consider because of the constitution says that the manner in which legislation is enacted is it has to be approved by both houses of congress and signed by the president, or pass by two-thirds over his veto. none of these statements pass that test. congress cannot delegate to one of its committees the meaning of its statutes. congress says what it says, and my job is, you know, figure out what the meaning of what it enacted. i don't care. i frankly don't care what they thought it meant your i mean, you know -- [laughter] even if you believe that legislative history would tell

you what they thought it meant, and it can't possibly, it can at most tell you what one committee thought, although not even that. i mean, the committee reports are never voted on by the committee. they are put together by staff. a committee member can't object to this end of vote. so at the most it will tell you is what that committee thought, what one individual member thought. i guess the theory is that well, everybody else heard him say that on the floor and they must have voted with that in mind. you know that's fictional. if you've ever been on the hill. there's nobody out there when he said that. [laughter] >> in fact, he might have put it in afterwards. >> extended remarks or something. so it is a great fiction, just a great fiction. major attraction is, it's so tempting. here's the answer to the very detailed question, what is the

in meaning of that section? nobody has thought about it but here's somebody on the floor of congress says what it meant. how tempting it is to say, let's move onto the next? but, in fact, it does not display what the intent of congress was. and as i say, even if it did we are a government of laws, not of unexpressed intense. >> how do you differentiate between that and looking to the constitution as written? and the intent of the framers? you've been critical of the phrase a living constitution, as recently as i think of yesterday in the senate hearing you expressed the desire to see the notion or the concept of a living constitution died.

how do you differentiate between looking to the intent of the framers as to the meaning of the constitution in the present-day? >> well, i don't because i don't look to the intent of the framers. i don't care if they had some secret intent. once again, i look to the words of the constitution. but i asked what do those words mean to the society that adopted them? and so, i will use, i will use the federalist papers, the writings of madison, hamilton and j., but i won't use it because they were the drafters of the constitution. j. was not one of the drafters. those papers to show what those words meant to the society that adopted them. and that the same thing i do with legislation. what do those words mean, what's that their understanding of them. and once i find that, that's my answer. and that understanding does not change, so for example, whether

the death penalty as prescribed, is proscribed by the eighth amendment which prohibits cruel and unusual punishment. death penalty may be a bad idea but no, no american ever voted to adopt a constitutional provision that eliminate it as an option. so, you know, now, the living constitution will say, times have changed and it's up to me to decide what's going on in unusual punishment. that's a constitution that has no bite. if the constitution means whatever we would like it to me today, why have the constitution? you don't need one for that. all you need is a legislature. they will express -- in fact, they will express the current attitude of society much better than my court will. we don't know what's going on out there. [laughter] >> when attempting to apply

certain clauses of the constitution to new technologies, for example, the first amendment's application to sound trucks, you described as following the trajectory of a right in the constitution. how do you differentiate that from a living constitution or one that is adaptable to modern issues and current times? >> and enduring constitution is which what i favor is not one that cannot be applied to new situations. of course, it can. you apply the first amendment to radio. that what you ask is, what did the first amendment mean as applied to these other phenomena? what i mean by following the trajectory is then you say well, what ought it mean given that as the baseline. what ought it to mean as applied to radio? where as the living constitution was will simply say you know, what's a good idea today? what would the american people like today? for example, gee, i probably

shouldn't use this example in this place, but new york times v. sullivan, okay? the famous supreme court case which held that you can libel public figures without liability, so long as you're relying on a statement from sun reliable source, whether it is true or not. now, the old libel law used to be you are responsible, you say something false that harms somebody's repetition, we don't care if it was told to you by nine bishops. you are libel. new york times v. sullivan just cast that aside because the court thought in modern society it would be a good idea if the press could say a lot of stuff about public figures without having to worry. that may be correct, that may be right, but if it was right they should have been adopted by the people.

it should have been debated in the new york legislature and the new york legislator could have said yes, we are going to change our libel law. but the living constitutionists on the supreme court, the warren court simply decided oh, yes, it used to be that george washington could sue someone, but we don't think that is a good idea anymore. so that's the difference between my approach and the living constitution approach. i will be guided by what the constitution means today by what it meant when it was adopted. where as the living constitutionists feels free to say well, you know, it's a new day and we can have new rules. >> we've heard in this forum speed is i feel bad about using that. >> we've heard over the past day, and again this morning a phrase that has become popular i

think among political observers, that in the current political climate that washington has become dysfunctional. and by that i think they are referring generally to the political, the more political branches, legislature and executive. in my experience within the judicial branch, i really never heard the judiciary described as dysfunctional. it works well, certainly there's an abundance of cases and some courts are very much overworked and when the additional resources in congress in that regard. but there's an underlining -- underlying stability in the court system. how do you account for that? is it something, do you agree with that observation? and if so, is there anything that could be taken from that by the other branches and perhaps

lowering the temperature of the discourse in the country at the moment? >> well, you mentioned in my remarks yesterday. justice breyer and i spoke to the senate judiciary committee. in my opening remarks, what, one of the things i addressed was what it is that precisely makes america the freest country in the world, which it is. and i pointed out that most people think it's the bill of rights. is not the bill of rights but everybody has a bill of rights. every tinhorn dictator has a bill of rights. [laughter] that's not what does it. what does it is what i call the real constitution, if you think about the worst constitution. it doesn't a bill of rights. it means structure. structure. and the reason the bill of rights of these other countries,

soviet union had a wonderful bill of rights. it was worthless because the real constitution of the soviet union did not permit, did not forbid centralization of power in one person or in one party. now, when you have that centralization, the bill of rights can be disregarded, can be ignored. it's just words on paper. what makes us different is we have a structure that decentralizes. it hits as our framers said, ambition against ambition. what are the consequences of that is that sometimes they don't agree. you have different centers of power. most nations in the world don't have that. most nations do not have a genuine bicameral legislation but most nations do not have a separately elected chief executive. when i go to europe to talk about separation of powers would end up talking about is simply an independent judiciary, because the europeans don't try to separate the two political

powers to legislature and executive, the chief executive is the creature of the legislature. now, when you have our system that disperses power, you have two houses of congress, they sometimes disagree and sometimes you have a president with a veto power. yeah, it looks like gridlock and that's what the europeans say, it's what has saved us. it is precisely the difficulty of enacting legislation that the framers thought would be the principal protection for minorities. if this legislation is really going to come down and you're a minority, it doesn't take much to throw a monkey wrench into the system. so i guess there's such a thing as going too far, but i'm not one of those who out of the box complaint about gridlock. gridlock is what our system was designed for. now, you say people don't complain about gridlock in the

supreme court. that may be a guest we have to act. i mean, we just can't say you know, we haven't decided about this case, so go away. no, i mean, sooner or later we've got to vote and there is. congress doesn't have to do th that. i think that's a principal reason people don't accuse us of gridlock. they accuse us of a lot of other stuff, but we decide cases. >> justice scalia, this has been a delightful morning with you. i know you're beginning to new term and i know how busy you are. i regret we only have 20 minutes with you this morning. i'm being told in this little airfone -- >> i see someone waving at you back there. >> we are most appreciative of your time. thank you for participating. [applause]

>> so, we no gridlock is good in case any of you thought it wasn't good. we will soldier on. next up we have the ceo and chair of exxon mobil being interviewed by maria bartiromo of cnbc who came down just to do it. maria, come on out. thank you. >> thanks, margaret. hi, everyone. good to see. rex, thanks for joining us today. >> it's my pleasure. >> let me kick off with what's going on in the market. we've seen oil prices down about 50% in the last 30 days. of course, natural gas prices also weaker. this is suggesting we are seeing a slow down in the global economy. is the market getting it right? can you characterize what we're seeing on a demand perspective?

>> well, demand is certainly i think been sluggish here in the united states. you know, gasoline demand is off about 2%, 2.5% relative to last year. globally demand is about what we expected it to be. certainly those parts of the global economy that continue to do well, asia, china in particular, their demand is holding up along with her economic growth. part of a think what we're seeing though in the oil price picture as well is just the supply fundamentals are actually pretty strong right now. you have to remember that last april following the libyan uprising where there was a loss of significant libyan supplies of oil to the market which are very important, particularly to european refiners, the mediterranean refiners, the libyan supply came off. there were interruptions in the north sea this summer. there were some interruptions in

nigeria, so we had a very significant loss of supply from april up until most recently. now with the situation in libya beginning to work its way out, some of that production is beginning to find its way back into the market. some of the north sea problems are behind us. so i think what you're seeing also office supply from the mills are strengthening, and much of the market i think is looking at that supply fundamental and that's why there's been some downward pressure on the prize. >> without asking you to tell us where oil prices are going, because i know you're not going to do that and you shouldn't do that. would you expect that the supply situation stays the way it is or strengthens? >> barring some type of civil unrest, somewhere else in the world, the supply from the mills are quite good. the spare capacity that opec currently has available to it to put into the market, to offset some type of disruption, there's still significant new supplies of crude in the non-opec part of the world are very strong. and interestingly, the supply funnels for crude oil in the

united states have an upward vector, depending on policy decisions that are taken here in the u.s. to support more rapid and aggressive expansion of oil supplies here in the u.s. spent let me ask you a little about natural gas as well. of course, exxonmobil made a big bet on natural gas with the acquisition of x. gl. at this point it's unclear whether that has panned out. of course, i don't think you would expect natural gas to be where it is, what is right now. back then when you do the deal. are you going to be a champion of natural gas as part of an energy policy in this country, given the fact that now you are the largest natural gas producer? >> we don't have a preference over one energy source or the other. we are fundamentally a petroleum company so we are an oil, natural gas, fuel products and petrochemicals. or move into the unconditional space with the purchase of xto i think was a recognition on our

part of how significant the unconventional resources were going to be, already were in the united states, and more broadly in north america. .. >> size and scale, we need critical mass. and then build from there. and so that was the strategic thinking behind xto. in terms of where gas prices are today, we're not particularly surprised because we could see the supply capacity developing

in the shale plays at the time that we did the xto merger. our view was gas prices would continue to decline, they would stay down for a period of time. now, i would say they're staying low longer than we expected they would, and that's strictly, that's just a function of two things, the weak economy here in the u.s. which means industrial demand, power generation demand has not developed as quickly as we thought, and then the supply side has held up remarkably well with a lot of private equity money, a lot of foreign investment money coming in to the unconventional space here in north america. >> if we continue to see prices move lower, can the smaller natural gas producers da -- go it alone? are you expected to see a string of consolidation in the sector if, in fact, we continue to see oil prices -- [inaudible] >> that's a very individual company-specific question. depends on how they have structured themselves, how much leverage they've already taken

on to fund programs, whether they have sources of outside funding. as you know, many of the small companies have put in place significant joint ventures with foreign investors to fund their capital programs which allows them to maintain their activity level. so i think it's difficult to say. clearly, at this level on a stand-alone basis cash flows are going to be under pressure for a lot of these companies where this is their sole play. >> so we could see more deals. >> it's possible. >> in terms of job creation, and i do want to get back to energy policy and get your take on what an energy policy ought to look like, but in terms of job creation what is your vision in terms of the potential for job creation as a result of what's happening in your sector whether it be natural gas production, shale, oil? how do you create jobs in the country? >> well, it's by, again, allowing our industry to do the things we've done for decades in this country, and that means we have to go out, have access to acreage to drill wells, develop

the capacity, put in facilities, build the infrastructure so that energy's available to the economy. to date, the oil and gas sector accounts for something over nine million jobs in the united states. the gas sector alone accounts for almost four million jobs. but if you bring this down to a very personal level because our situation in the country today where we have, you know, the high unemployment, high underemployment, it really is to the american people what's in it for me in terms of a job. and there's a couple of examples i think that are worth talking about, and one most recently, of course, is pennsylvania with the development of the marcellus shale. over a period of 18 months in pennsylvania, 72,000 jobs were created. over a billion dollars of activity created. so once we're given access to an area in our industry, things happen very quickly. there's a recent study that was done looking backwards at the ten-year period that the barnett shale which was where the whole

gas technology shale was birthed, it's the largest producing area in the country, and a study by an independent economist, economic group was recently commissioned by the fort worth chamber of commerce. and i want to give you a few statistics because i think they're really important to to this question of jobs. and this is now actual data, so this is not forecasting. we don't have to figure out whether this is really true. from 2001 to 2011, the state of texas as a whole in the year 2011 saw gains in output of $14 billion and 120,000 jobs. if you look at the ten-year period, the cumulative benefits are this year the state of texas is going to receive about a billion dollars in tax revenues out of that activity. over the cumulative period of the ten years, the region received $65 billion in output, 600,000 jobs. so when our industry is allowed

to go to work, things happen. they happen very rapidly, they happen very broadly, and it's not just our direct employment, but our industry requires a significant amount of support infrastructure around in terms of services all the way from hotel spaces for oil field workers to come in and stay as these rigs move around to restaurants. so there's a very broad-based economic impact. >> how does that jibe with the criticism that the oil companies are already sitting on an enormous amount of cash, not putting it to work, getting tax breaks? there are all these tax loopholes in a time when we've got so much upset about unemployment. so how do you quiet the critics in that regard? >> well, there was a lot in that question. [laughter] as to the tax breaks and the tax loopholes, the tax code that the oil and gas industry operates under, most of those provisions are uniform to businesses broadly. and the oil and gas industry already is treated differently under provisions of the tax code whether it's the section 199

manufacturers tax deduction which was put in place to stimulate jobs. we already get a less, a lower deduction than industry, than other industries in the country. so they're not tax loopholes, they're not subsidies, they're just the tax code, and we operate under the tax code. now, relative to the amount of cash we're sitting on, we generate a lot of cash because it takes a lot of cash to run our business. we spend about just in operating costs over a billion dollars a day is what it takes to run exxonmobil. in terms of capital investment, we are informing over -- investing over $37 billion this year. that is, you know, a significant amount of investment. we would do more in the united states if we are given the opportunity to do so, and we've said this many time. it is all about access. when you have two-thirds of the remaining conventional oil resource potential sits under federal lands that we have no access to, 40% of natural gas resource potential sits under federal lands that we have no

access to, we don't have access, we can't invest. we can't spend the money. >> you want the access, but some people are saying, look, this is going to impact the environment. this is going to impact animals, wildlife, um, is that true? >> if you look at the facts in our industry, like any industrial activity you're going to have incidents. it's about risk management, and you're never going to bat a thousand. things are going to happen from time to time. but if you look at the enormity of the activity that goes on in our industry against the impacts, i think our record is very good. a lot of the opposition around shale gas today and the hydraulic fracturing story is all manufactured fear. people have manufactured this fear. if you look at the facts, and there have been studies that have been done by the epa, there have been studies done by air bureaus -- air quality bureaus, there is no measurable health

threat related to air emissions associated with hydraulic fracturing. and that's what the facts are. so the opponents i have to just characterize them as manufacturing fear because they have no facts to stand behind their assertions. >> one thing, of course, that was not manufactured was the enormous bp oil spill in the gulf of mexico. let me take you back to that. the permits have been given at this point, are you back in the gulf of mexico? what is the activity looking like there and the potential for activity? >> well, we currently do have, i think we're back to 19 or 20 deepwater rigs now returned to work in the gulf, so we're still below pre-incident levels. the rate at which we can get back to work is measurably slower. and i think, you know, it's understandable given that the interior department, former mms department has been completely reorganized as most of you are aware with the creation of the

two independent divisions within the regulator. so they've been going through a reorganization. they suffered a number of losses of what i believe were very competent individuals in the agency who have chosen to retire, move on to other things. so they're having to rebuild their capacity, their human capacity. and so i think in some respects i have to give them the benefit of the doubt that they are going through a lot of reorganization, they've got a lot of new people coming into the agency that have to be trained, they're developing a whole new permitting process which we as an industry and we as an applicant are having to learn how the permitting process now works. and so there's been a lot of recycling of permits. i would tell you even in our wells that we have permitted, we have had to go back through the process multiple times partly because, i think, the agency wasn't real sure they still had everything they wanted. so the permitting is still very slow. we hope that will get better with time as the process becomes

more known to everyone, as people become more experienced. but clearly, we're not back where we'd like to be, and i know the industry would like to be doing more. >> how would you compare then the potential for activity in the u.s. versus around the world? of course; you've got operations all around the world. you had some news yesterday about brazil, you've got a big project in russia, got a big project,al, in iraq. i wonder if terms look better to you in iraq. so compare for us the potential for production in the u.s. versus outside of the u.s. then i want to talk a little bit about the competitiveness of this country. >> well, there's enormous potential here in the u.s. i think as we have, again, examined the potential in the unconventional space, the shale gas, tide oil, and i like to talk not just about the u.s., but north america because can and the u.s. are very interconnected from an energy standpoint, and, of course,

canada has enormous resource potential as well that can be developed. i think, you know, in this country, in the united states the key issue, as i've mentioned, is really access. the federal government controls so much of the land and the resource. and that's not, that's not uncommon in countries all over the world. what is uncommon is the fact that so much of resource development in the u.s. occurring under private property, and it occurs with private ownership because the rest of the world minerals ownership is largely held in the hands of the government. so we're accustomed to dealing with government as the mineral owner. the difference is in other countries the government wants its natural resources developed. they want to see the activity, and they want it, you know, they want it done properly, so they have just as rigorous a regulatory scheme, but their whole attitude toward resource development is what can we do to get this to happen, what can we do to cause you to come develop our resources? in this country it's very different. it's almost what do we do to make it as difficult for you as we can. either we don't give you access,

or we create -- there's a new regulatory scheme every few years that comes along that we have to adapt to. so it's a cost-of-business issue here this country to develop natural resources, it's largely an access issue, and ultimately, you've got to have stability around what's your fiscal terms going to be. everything -- >> we'll leave this event at this point. you can see it in its entirety at our web site at c-span.org. we are going live now to the washington convention center this morning with the association of the u.s. army is holding its annual meeting. they're hearing from army secretary john mchugh who is talking about defense department budget cuts this morning. this is live coverage, it started just a couple of moments ago. >> two chairmen and two vice chairmen of the joint chiefs. and i have to tell you with all those changes, i would have thought i'd have a better parking space by now, but -- [laughter] i understand my place. but i do think i need to caution

the new chief because as i do the calculations, at this rate i'm going through a chief of staff per speech. so you might want to watch your backful. [laughter] back. [laughter] but it's great honor to be here. can't think of any place i'd rather be. but i'm a little confused as to why we're kicking this great army celebration off on columbus day. frankly, i always thought of columbus day was kind of more of a navy holiday. i don't mean it because of that, you know, 1492 ocean blue stuff, but in my mind christopher columbus was the quintessential army man. after all, when he left, he department know where he was going -- he didn't know where he was going. when he got there, he didn't know where he was. [laughter] when he came back, he really didn't know where he'd been. but before he left, he had to have three new ships. [laughter] [applause]

now, i'm willing to bet my dear friend, and he is -- pardon me -- he is a good friend, secretary ray mabus probably wouldn't agree with my assessment. but we've had a good natured service rivalry, and we can do that because we both recognize the partnership our services have enjoyed on so many levels, and more importantly, how those important those partnerships are to the strength of our nation and our nation's defense. that having billion said, go army, beat navy! [applause] i knew that'd get a line there. in all seriousness, all of the services -- the army, the navy, the air force, the marines, the coast guard, in fact, the department of defense writ

large -- are facing a critically important year, a year that i think will shape the face of our national defense for many years to come. we've often talked, as we should, about the great stress and strain that a decade of war has placed upon our soldiers, placed upon their family, and that's still true. we're still at war. and we work diligently every day to try to make certain they get what they need. get it when they need it. that we give them all the support they require to build resilience into all the care that's necessary when they come home. but there is one stress and strain that others have felt that in recent years we haven't so much. we haven't had to give it a whole lot of thought. and that's the stress and strain that a decade of war has had on our federal budget and the american taxpayer. for some time now, it seemed as

though the department of defense and the united states army has had near limitless resources for whatever we needed. but after ten years of war and a shaky global economy, that's changing. and, in fact, your army, the department of defense is under understandable and significant pressure to do better. all you have to do is go on tv, go online, turn on a radio, read a newspaper, and you know that each day the president, our congressional leaders are struggling with ways to try to deal with this budget crisis, trying to stimulate the economy, agree upon a path by which they can reduce the deficit. and be some of that effort will -- and some of that effort will inevitably fall upon our doorstep. and, in fact, it already has. as secretary gates warned just before he left, quote, the

gusher has been turned off and will stay off for a good period of time. despite declining defense budgets, we still have an obligation to preserve the strategic options provided to the president of the united states by maintaining sufficiently modernized forces capable of rapidly deploying decisive combat power. no major conflict has ever been won without boots on the ground. and accordingly, our national interests demand that while we set about the task of reshaping this army for the years ahead, we remain steadfast and continue to support this, the greatest land force the world has ever known. as -- [applause] as secretary panetta observed when he was sworn in, quote, we

don't have to make a choice between fiscal discipline and national security. end quote. decisions on defense spending must be made carefully, thoughtfully and strategically. the decisions that we make must preserve our ability to protect our core national interests and most importantly, not break faith with the men and women who are fighting for us. because we asked them to. to meet current and future threats, our military must remain the fine in the world. it must be an agile and deployable full-spectrum force that can deter conflict, project power and win wars. now, that's a great challenge, and that challenge will bring about difficult times and difficult decisions, but i would tell you as well it's also an opportunity, an opportunity to shape, to change, to transform the army not just to come to terms with the fiscal

constraints of today, but to better meet the challenges that we know somewhere, sometime we will face tomorrow. it's a reality that every time we've endeavored to predict the nature of future conflicts we've often missed the target. and, in fact, at a speech at west point, then-secretary bob gates said when it comes to predicting the future, we're perfect. we have always gotten it wrong. post-korea, the end of world war i, world war ii and beyond, budget and force structure decisions were made in a fashion that over time depleted our forces and strained the quality of life of our soldiers and their families. unlike in the past, this time we've seen this downturn coming for some time, and under the leadership of, first, secretary gates and now secretary panetta,

we've been analyzing the best way in which to meet these challenges. and as such i can tell you we are better positioned than in any time in our nation's history to do, to deal with the fiscal realities and do it in a way that truly makes sense. all of us have to understand, and i think we do, the army's strength is going to look different. in the near future than it does today. as we draw down in two theaters of war, we think we can handle that challenge. but what's critically important is that no matter what the force ultimately looks like, we have sufficient time to ramp down, to insure that we do it in a balanced way, that we have what is necessary for training, equipment and recess. and perhaps most importantly as i said, we can continue to stand by those troops who even in the darkest hours of 2006 and 2007

stood by us, never wavered, never abandoned the battlefield. we've been famously instructed that if you don't learn from history, you repeat it. let's hope all of us have learned from history as we debate and decide the future of land power and the future of our army. there's no question that this past decade has placed great strains on all of the service branches. and there's no question still that each of us has unique needs to rebuild from this decade of conflict and to prepare for the wars ahead. but what truly concerns me as i listen to and read some of the columnists, the analysts, the part-time experts, the talking heads is the suggestion that somehow some of the services recovered at the sacrifice of others. that the united states probably

doesn't need a strong and decisive standing army, and the future to them looks more like transformers than saving private ryan. history looms before us once again. great leaders like douglas macarthur and george marshall warned about cutting too much, too far, tooz, and about -- too fast, and about the importance of having an army in place that is ready to answer america's call anytime, anywhere. even some not-so-great leaders like a little known upstate new york congressman saw and warned of the dangers of cutting too far, of hollowing out our forces and of putting our nation at strategic risk. just weeks before the attacks of september 11th, 82 of my colleagues on the house armed services committee and i wrote to secretary rumsfeld warning

about using cuts in the army as a bill payer for other programs. we said, and i quote: while we support the secretary's efforts to insure our military is prepared for future conflicts, reduction in the army's force structure would clearly undermine that goal. one of my own new york state newspapers was critical of that effort. accusing us of clinging to, and i quote, relics of the old 20th century force. end quote. they wrote further that with high-tech air power and precision munitions increasingly dominating the mod be earn battle -- modern battlefield, it makes sense to consider reducing the nation's conventional forces. then came september 11th, and an enemy who department quite share that newspaper's editorial views. now, nevertheless, i concede their point. there's no question our needs

for supremacy in all forms has to be achieved and maintained. and we must develop and utilize all the available technology to establish every means of tactical superiority that's available to us. but i would argue one need not happen at the expense of the other. ask we must insure -- and we must insure we have a balanced approach to meet our nation's future defense needs. in his work, "this kind of war," t.r.tarianback wrote a passage that is probably familiar to many, if not most of you. he said you may fly over land forever, you may bomb it, atom poise it, pulverize it and wipe it clean of life, but if you desire to defend it, protect it and keep it for civilization, you must do this on the ground. the way the roman legions did by

putting your young men into the mud. fairenback's observations are as relevant today as they ever were because while we shot, at the end of the day we did the most important thing to gain and support victory, we marched. and there's no getting around the fact it is the army that had been saddled with much of the burden of these past years. providing between 50 to 70% of our deployable forces. and while i am loathe to view our men and women in uniform as mere budgetary statistics, i think it's important to remind people that while the united states army represents half of our nation's entire force, we consume only about a quarter to 30% of the entire defense budget. the army, a decisive army remains vital to our national

security both today and into the future. it's something i believe from both sides of the potomac, first as a congressman and now as a secretary. but if we're going to do the right thing by this army, if we are going to maintain a proper set of structure and balance in an era of declining budgets, something's got to give. i know that, i think we all do. and we've been working hard to try to figure out ways to reduce costs, to create greater efficiencies and to change the way that we in the army do business. last year i told you that i'd found a project, and that project had since given me hope that there are things the army can do, we must do to meet the challenges that are currently before us. over the course of nearly ten years, the operational army, the war fighters have changed and changed each and every day as they confronted a very dynamic, a very decentralized, adaptive and make no mistake about it

deadly enemy. often hour by hour those war fighters have morphed as new threats arose to them and to our national security interest. but our institutions and processes from personnel to training and development to personnel systems must be able to adapt just as quickly and just as efficiently. but it is structured today much as it has been for the past decades, and i've set out and we've set out to change that. as you may already know, i've issued a number of directives to begin transforming that institutional army not only, not even primarily to cut costs, but to fundamentally change and reshape the way we do business. among those efforts are rooting out overhappen and redundancies in research and development and reviewing so-called temporary organizations and task forces to see if they're still needed or

even relevant to the challenges that we face today. i've directed efforts to consolidate and streamline the requirements process, reforms installation management and optimize army service acquisitions. and we're working on sweeping changes in human capital management. a survey we conducted earlier this year found that 65% of active duty general officers rated personnel management as one of the worst performing funks in the army -- functions in the army. as one general noted, human capital management is the most important, yet the least agile system. i said before, you can't have an air force without airplanes, you can't have a navy without ships, and you sure can't have an army without people. people is what we are about. and to hear someone, particularly a general officer, tell us we're not developing or managing that area is pretty tough to take.

and i'm not just talking about attracting and retaining and selecting the best available people to be army professionals as important as that is, it's how we further develop them once they come in. how we manage human capital, how we continue to build on the investment we have made in our civilians as well as our soldiers, how we insure that the opportunities for creativity, leadership and advancement that are present in the battlefield today are still present when we bring those great warriors home is a path to guaranteeing we are ready for the future. if we don't do these kinds of things, others will do them for us. others will do them to us. we will risk being salami sliced, hollowed out. this is our chance, it is our moment to lead and innovate, to restructure and transform. let me just give you one other example of what we can do, what

we have done to restructure. most recent directive restructures the army service acquisition program based on findings from a task force that i created a number of months ago. of the $243 billion the army had to spend in total in 2010, $140 billion of that was spent on contracts. and of that 140 billion, more than half was spent on services. that translated into about 260,000 actions awarded by 225 different offices carried out by thousands and thousands of different people. i thought there might be a better way to do that kind of thing, and i think we found it. last week i directed a new government structure that will immediately consolidate about 45% of all service obligations into just six portfolio management centers.

those six are facility support services, medical services, transportation services, electronics and communication, equipment-related services and knowledge-based services. this will, i believe, firmly improve oversight and effectiveness while helping us tailor and apply and monitor the results of better buying practices for improved acquisition as well as leveraging portfolio demand for better pricing. these kinds of actions identified by us, structured by us, implemented by us will help us work in positive ways to deal with the budgets that will be formulated for us by others. we can, we must, and i promise you we will do better. as the army's top civilian, i have one of the greatest honors here this week in this ausa

exposition. yes, i get to help kick off this week with what amounts really to a prime time address. that's the honor. but there's a challenge as well. the challenge is trying to make all this bureaucracy sound remotely interesting when i know what you really want is tom -- some hoo what. and i have to tell you, i've been blessed by my share of moments this past year. we mark the tenth anniversary of the attacks on america with somber observations in new york and in shanksville and right here at the pentagon. and for the first time we reflected and remembered those losses without the world's most notorious terrorist still at large. we ended a policy that forced young men and and women to force

ed them to lie about who they were. we know who they are, they're american soldiers. and we marked great feats of personal courage and sacrifice. not long after last year's convention here concluded, president obama awarded the medal of honor to staff sergeant sal giunta for his actions in afghanistan. staff sergeant giunta became the first living recipient of the medal of honor since vietnam. a few months later sergeant leroy arthur petri became the second living honoree of these conflicts, recognized for saving the lives of at least two fellow rangers, throwing away a live grenade that had been hurled at his comrades costing him his right hand in the process. asked at a later time what he might have been done differently if he had the chance, without a heartbeat lost he said, i would

have thrown it with my left hand. [laughter] that's an american soldier. we inducted both of these great heros into our hall of heros. and the a great privilege for all of us -- it was a great privilege for all of us to horn these two men -- honor these two men. in their courage, leadership and humility, they clearly show why warriors of today are quickly becoming known as our nation's next greaters generation. and over the course of this past year i've seen this next greatest generation at work in service to america. deployed, yes, to two very difficult theaters of war, but also across 80 countries spanning the globe whether fighting terror in the philippines or keeping peace in the sinai, challenging nature on the banks of a flood-gorged mississippi river or scouring the terrain of long-ago battlefields to bring home a fallen but not forgotten

comrade, their missions are complex, their service remarkable, and i'm humbled to be even remotely in their company. i recognize the great challenge, the great respondent -- responsibility we in the army leadership have to these men and women who wear the uniform of that american soldier, to their families, to their civilian work force. during a recent trip to afghanistan, i had a chance to spend some time with a young captain and a first lieutenant just a little more than a year out of the military academy who were in charge of operations in a part of the valley. they had led the combat missions that captain and that first lieutenant that had cleared their part of the valley. thereafter they engaged with the village elders throughout the region, they attended shuras negotiating with them, assuring them of the best interests that we had in coming to their part of the world. they worked to equip and train

the afghans, forming up the local afghan police. they're the very essence of full spectrum operations. the level of responsibility, of adaptability, of authority that we have given these incredibly young leaders is unprecedented. they are doing jobs today that in the not-so-distant pass, ranks of '05 and '06, perhaps even '07 would be expected to achieve. yet we count on them every single day, and they have performed remarkably. [applause] how we insure that the opportunities for creativity, leadership and advancement that have been present on the battlefields of today exist throughout the army tomorrow no matter what deployments look like, that will be the cumulative challenge for us, to

insure that we are ready for tomorrow. and it will make certain that the army as a whole is prepared and postured for conflicts in an unpredictable mission of the future. equally important, as we continue wrestling with budget realities, the army and our nation must heed the he is sons of history -- must heed the lessons of history in deciding our future strength and structure. it's the same lesson george marshall warned about repeatedly, perhaps never so strongly as in a widely-publicized address in new york shortly after the allied victory. respect, marshall said, is an intangible. but consider what it would have meant to us intangibles had we commanded the military respect of germany, italy and japan in 1939. marshall spoke of the axis nations' surprise not only our willing 'em, -- willingness to

organize but our capability to fight and to win. he pondered that had they anticipated american willingness and american resolve, perhaps the world might never have known world war ii. but respect, he said, is fleeting unless we bend our efforts to preserve it. this must be our solemn obligation, to insure this nation's continued respect, build on the valor and sacrifice and bloodshed of this magnificent volunteer force. the young men and women of the united states army who committed and recommitted themselves to defending this great nation after the attacks on our shores. we owe it to them to insure that our nation's strength, our nation's resolve is never again so challenged. so thank you for your partnership in the path ahead, thank you for all that you've done in support of these amazing

men and women in uniform and their families. god bless america and god bless this incredible army that keeps it safe. [applause] [applause] >> thank you very much. >> army secretary john mchugh on budgetary changes in the military this morning. he is speaking at the association of the u.s. army's annual meeting today. by the way, we joined this a few minutes into his remarks, and you can see it in the its entirety on our web site at c-span.org. check the c-span video library. well, today is columbus day, government offices are closed, congress is not in session. also shortly president obama

will be traveling across the potomac to visit with wounded soldiers at the walter reed medical center in bethesda, maryland. there is no live coverage of the president's visit today. a quick reminder that former utah governor and republican governor jon huntsman, republican presidential candidate, that is, jon huntsman will be speaking on foreign policy and jobs today. he is in new hampshire, the beginning of a six-day campaign swing. you'll be able to see his remarks live this morning on c-span starting at 11 eastern. it will also be on c-span radio and c-span.org. and a little bit later, former massachusetts governor mitt romney holds a town hall meeting in hopkinton, new hampshire, the 14th he's held since announcing in the june. 5:30 eastern on c-span, c-span radio and, again, c-span.org. >> last monday on "the communicators," lightsquared head sanjiv ahuja spoke about his company's efforts to build a

high-speed wireless network. >> for the first time, americans will have access to connectivity even if there are natural disasters and other things happening through our satellite network. >> tonight, questions on light lighted's goals and possible -- lightsquared's goals with chairman paul broun, coalition to save our gps member jim kirkland, and i watch news senior reporter fred schulte at 8 ian on "the communicators" on -- 8 eastern on "the communicators" on c-span2. >> tonight on c-span2, a look at the proposed 1700-mile pipeline that would carry crude oil from alberta, canada, through illinois, oklahoma and on to the gulf coast. >> we all need to stand together for mother earth now because mother earth is crying. our prophesy tells us when mother earth christ, we stand up and fight for her as she will die, and we will die with her. so i ask everyone to remember

crying earth, rise up. rise up with mother earth, rise up and say, no, no to the pipeline! no, no, no, no! [cheers and applause] >> this is not a regional impact, it's a national impact. and if approval of this pipeline were to come through, it would help stimulate our economic recovery, it'll put us back on our feet, and many here today focused on job creation -- >> the man is lying through his teeth. >> -- will have the opportunity to have some of the best paying jobs here in the united states. >> we'll show that entire public hearing, the last in a series hosted by the state department, and a discussion representing differing views of the pipeline tonight starting at 8:30 eastern on c-span2. >> coming up next, we'll show you a hearing with treasury secretary tim geithner testifying before the senate budget committee. he talks about the u.s. economy, the housing market and calls for

national mortgage financing standards. the first order of business is the decision on the president's nominee to head the consumer financial protection bureau. this is about 90 minutes. >> today we hear from secretary geithner on the first-ever financial stability oversight council annual report to congress. it was created to be an early warning system for our financial system and the timing of today's hearing could not be more appropriate as the global economy faces real systemic threats as the european union struggles with its debt crisis. the committee continues its oversight of the dodd-frank reform and consumer protection act, welcome this opportunity to receive updates on efforts to identify systemic risk and enhanced financial stability and

the possible impacts of the european situation on our economy and financial system. in addition, i look forward to hearing about progress as it continues to work on rules to designate large, risky financial institutions for enhanced supervision. it is also important to note that this committee work z on the nomination of rich cord ray to be director, he will also be the tenth member of fsoc. this is the last remaining spot on the fsoc to be filled. having all hands on deck at fsoc is important especially when we consider that our last financial crisis was caused in part by widespread lack of consumer protections. cfpb has an important role to play on fsoc and mr. cordray

needs to be confirmed. while we will never be able to anticipate every possible cause of a future crisis, i believe that creation of fsoc was an important step toward a better understanding of the threat facing our interconnected financial system. secretary geithner, i hope that -- hope that the interagency cooperation that we have seen on fsoc at this point will continue in the coming months and years. i want to remind my colleagues and secretary geithner, um, -- scratch that. senator shell by. >> if thank you. thank you, mr. chairman. welcome again to the committee, mr. secretary. today secretary geithner appears before this committee as the chairman of the financial stability oversight council to discuss the council's annual

report. it's been over a year since the council was established as a centerpiece of dodd-frank. the council is charged with three primary tasks; to identify risk to u.s. financial stability -- the so-called systemic risk -- to promote market discipline, and to respond to emerging threats to the stability of the u.s. financial system. secretary geithner will have an opportunity to tell the committee here how he and his council are fulfilling these ambitious mandates. i had hoped that the council would have provided the information in their annual report. unfortunately, the report fails to address these senate -- significant areas. rather than being a forward-looking study of the risk to the u.s. financial system, the report is largely a lengthy summary of statistics with lots of colorful graphs. for example, the annual report does not provide much evidence

that the council was ahead of the euro zone crisis. the countries of spain and italy are not even mentioned in the discussion of sovereign credit risk. in addition, the report does not address or even attempt to address many of the key economic issues that we presently face. perhaps the most fundamental question left unanswered by the council is, what is systemic risk? the term "systemic risk" is mentioned 37 times in dodd-frank. it is among the most important concepts embodied in the new law because any firm designated systemically significant are to receive additional scrutiny by the federal reserve. if council cannot define systemic risk, it will be hard pressed to identify growing risk to the u.s. financial system making it exceedingly difficult to make sure that those risks do not threaten the health of the

economy as a whole, to use your words, mr. secretary. consequently, the promise of dodd-frank and its creation, the financial stability oversight council, i believe, could go largely unfulfilled. in the year since the passage of dodd-frank, it has become clear, i believe, that the administration and the regulators exaggerated their ability to measure and to regulate systemic risk in the rush to pass the legislation. the council devotes only one page in its 149-page annual report to, quote, measuring systemic risk and admits that directly measuring systemic risk is challenging and that the development of systemic risk measures and models is, are in the early stage. secretary geithner himself stated that, and i'll quote, you won't be able to make a judgment about what's systemic and what's not until you know the nature of

the shock. i hope that we can all agree that it would be a bit too late by then, i hope not. this sentiment was echoed by the federal reserve board governor daniel you are the ril low -- tiew ril low where he spoke on the need for additional academic research in this very area. he admitted, the fed governor said, the complexity of some of these issues will require continuing attention by researchers who are still at the very early stages of defining systemic risk and analyzing the government's role in reducing it. these difficulties arise from the fact that congress instructed the council to mitigate all systemic risk before it bothered to determine whether they could identify such risk, let alone mitigate them. this is a reoccurring theme with the passage and the implementation of dodd-frank. practically speaking, this means that regulators will be making

ad hoc decisions about which firms should be designated as systemically significant and how they should be regulated. accordingly, i hope to hear from secretary geithner today whether he believes the council can establish a framework for effective systemic risk regulation that provides clear mandates for regulators and legal certainty for market participants, mr. secretary. in the interim the president's challenge is whether the council can cleary assess the risks posed by politically-sensitive problems like the european debt crisis, the mounting federal debt or the excessive regulation of the u.s. economy. if annual report is an accurate representation of the council's progress, i remain skeptical of its chances of success as i watch my friends on the other side of the aisle propose the legislation. much of the dodd-frank act was focused on the idea that if financial regulators were given

broad enough grants of authority, they can prevent any harm and avoid any crisis. i don't believe that you can write enough regulations or build a bureaucracy big enough to achieve that goal. it would be ideal. nevertheless, secretary geithner sits at the head of a new government body whose promise is just that. perhaps today he can allay my fears and fears of others and tell us how he intends to prevent all future financial crisis. it'd be a big chore. thank you for appearing with us, mr. secretary. >> thank you, senator shelby. i want to remind my colleagues that the record will be open for the next seven days for opening statements and any other materials you would like to submit. welcome back to the committee, mr. secretary. you may begin your testimony. >> mr. chairman and ranking member shelby, thanks for inviting me to come testify on this, and i want to just start by thanking the committee for approving or forwarding the

nominee recommendations you acted on this morning. in that context, i want to encourage you, those of you who did not vote for mr. cordray, to spend some time with him. i think you're going to find he is an exceptionally talented and thoughtful leader, an excellent record. and i know some of you have said that there's no person confirm today this job ever without fundamental changes in the structure of the bureau. and, again, i would encourage you to spend some time with him and take a look at him and ask him a lot of questions, and i think you'll find yourself reassured. and i would just remind you that if senate fails to confirm a director for the cfpb, then what will happen is we will leave a vast array of non-bank financial institutions, consumer finance companies outside the scope of consumer protection. which was exactly the same mistake that left us so

vulnerable to the financial crisis we went through. so delay in confirming a nominee does not help close that fundamental gap in the financial system, and as i said, i think if you spend time with him, you'll find him exceptionally qualified, thoughtful person. in setting up this council, congress asked us to provide each year a comprehensive view of financial market developments and potential threats to the financial system. let me just start with a few comments on the broad back backdrop of the global economy which, of course s the fundamental determinant of financial stability. in 2011 the world economy, like the u.s. economy, is still healing from the devastating effects of the financial crisis. on top of those basic challenges, we experienced a series of additional challenges to recovery early this year from high oil prices, the disaster in japan, europe's protracted economic and financial crisis has added to these pressures on global growth, and the destructive debate we saw in the united states this summer about whether the united states as a

country should meet its obligations as was very damaging to consumer and business confidence just to give you the anecdote. if you talk to businesses across the country as i did, particularly in the months of august, they said why should we make an investment, hire a new person if congress is debating to meet its obligations to the country? you feel it now in terms of how slow growth is. some of these factors have eased in recent months have oil prices have fall season and japan has begun to recover. but the cumulative effects have resulted in slower growth in the united states and around the world and lower expectations for growth over the next 18 months to two years. the crisis in europe presents a very senate risk to global recovery. a very significant risk to global recovery. we are working alongside the imf to encourage european leaders to put in place a comprehensive strategy to stabilize their crisis. the critical imperative is to insure that the governments and the financial systems that have been under pressure have access

to a more powerful financial backstop conditioned on policy alaskas that can -- actions that can credibly address the underlying causes of the financial pressures they're facing. now, in the face of this situation in europe and the general slowdown in growth around the world, the most important thing we can do here in the united states is to act to strengthen our economy. and in our judgment the most effective strategy for doing that is to enact steps now that will accelerate economic growth and tie those to long-term reforms to restore fiscal sustainability. the american jobs act which the president proposed provides a substantial package of tax cuts and investments that according to estimates by outside economists would raise economic growth by one to two percentage points and help to create one to two million jobs. and the president's proposal to the joint committee of congress that was charged with recommending reforms to reduce our long-term deficits, he outlined a comprehensive package of reforms to spending programs and to our tax system that would bring our deficits down to the

level where our overall debt burden starts to fall as a share of the economy. now, this council is comprised of each of the agencies at the federal level responsible for oversight of the financial system and the firms and markets that comprise, make up our financial system. and it is the judgment of this council that the united states financial system is in a significantly stronger position today and better able to withstand the new risks we face in the global economy. because of the actions we took at an early stage of the crisis to repair and reform our system, the weakest parts of our financial system, the ones that took the most risk, no longer exist or have been fundamentally restructured, the largest banks in the country, the largest 19 have increased their common equity, their capital buffers by over $300 billion since the beginning of 2009. and the level of common equity to risk weight assets across these banks is now approximately

10% up from roughly 6% at the beginning of 2009. banks are running themselves much more conservatively and maintaining much larger cushions of safe and liquid assets. these improvements are very significant. together they represent much more progress on the path to a more stable and resilient financial system that has been achieved in the other major economies caught up in this crisis. u.s. financial institutions, including our major banks and the money market funds of the group, have substantially reduced their exposure to the economies of europe that have been under the most pressure. our direct financial exposure to these governments and their institutions is quite small, but it's important to recognize that europe is so large and so closely integrated with the u.s. and the world economies that a severe crisis in europe could cause significant damage to growth here and around the world. and this makes it even more important that congress act to strengthen growth now and put our fiscal position on a more sustainable path.

economic and financial developments since the release of our report reinforce the importance of the council's recommendations, and let me just summarize those recommendations quickly. first, the council recommends -- and it will always recommend this, in my judgment -- that it's important that the core institutions in our system and the basic institutions critical to markets continue to act to strengthen their financial position over time. we want the largest institutions in the country to manage their businesses so they have the ability to withstand more challenging future economic environments without government assistance in crisis. and towards this objective, the responsible regulators will gradually phase in over a period of several years a much tougher standard we've negotiationed for capital and liquidity with the other major financial centers around the world. second, the council recommends reforms to strengthen a number of key funding markets in the united states, markets who were a critical source of

vulnerability to source of contagion in our crisis. the most important of these recommendations relate to the triparty repo markets and the money market funds. and the essence of these recommendations is to make these markets, tri-party repo and money market, less vulnerable in which an abrupt run for the exits. we have made very substantial progress towards this objective, but we have some more work to do. third, the council recommends reforms to the housing finance system. it recommends actions to establish national standards for mortgage servicing, and the council, of course, emphasizes the importance of broader reforms. these reforms will require legislation to strengthen mortgage underwriting, reduce over time the government's role in the housing market. as we've proceeded with these reforms, however, we want to make sure that we are encouraging -- not

undermining -- the prospects for broader recovery in the housing market. finally, the council emphasizes the importance of closer cooperation and coordination in the pip policemennation of -- implementation of financial reform both here in the united states and around the world, and this is crucial because if we allow large gaps to emerge as we did in the years before the crisis, risk will migrate to these gaps, to those grabs leaving the system as a whole more vulnerable to crisis. differences in the design of standards create opportunities for firms and investors to take advantage of weaker standards, and as we act to contain risk in the united states, we want to minimize the chance that risk simply moves to other markets around the world which could also make us more vulnerable. ..

>> mr. camp and closing i want to thank the other members of the council and their staff for the work they have done over the past year in philly and institution for closer cooperation, and in creating a very substantive, very strong first report to provide this overview of potential challenges to the system. thank you. >> thank you for your testimony. as we begin the questions, i will ask the clerk to put five minutes on the clock for each

member. secretary geithner, what are the risks to the u.s. economy if financial turmoil in the e.u. intensifies? or their policies in step that we are to take to limit in the negative impact on the u.s.? >> well, as we've already seen, developments in europe can have big effects on the united states economy am a big effect on confidence, big effects on financial markets. and we are living with the precious today and they have hurt growth here and they have reduced expectations about future growth. the three most important things we can do are the following, the first of course is to help europe get on top of this. we can't want it more than they do. we can't compel them to act, but we have a strong interest as a country, we don't want to see europe weakened by a protracted financial crisis. they've invited the imf in.

they are taking advantage of swap lines provided to the federal reserve and we have a strong stake in seeing them to address this. second thing we can do is act to make our economy stronger at home. as i said in my testimony, we've given the congress what we think is a free strong, very powerful set of tax incentive investmen investments, proposals that have always enjoyed quite broad bipartisan support in this body. and that's our best protection as always against developments outside the united states, act to do things to make this economy stronger. and, finally, of course the supervisors are watching very closely the broad financial linkages between our institutions, our markets in your. as i sit in my testimony using a substantial direction in our exposure and our institutions hold cushions of capital against the potential risk they might face a. but, of course, that's something we've got to keep monitoring closely. those are the things i would

focus on. >> secretary geithner, fsoc continues to work on rules that designates non-bank financial institutions, as systemically important financial institutio institutions. can you provide us and update on this process? >> the council meets next week and it will consider at that point a new piece of guidance we would make public that if adopted would lay out a framework for making these judgments. but let me just explain what we are trying to do. we had a financial crisis that was caused significant part by the fact that this country allowed a huge amount of risk to build up outside the banking system, without constraints on leverage, without the basic types of protections that all financial systems require. and that was very damaging to us because when the crisis hit,

markets just suck all the oxygen out of that era low financial system, came crashing down, put enormous pressure on the rest of the systems and that was one of the huge excellence in our crisis. one of the most important things this legislation did was to give us authority we did not have to make sure we can apply a prudential framework of safeguards on capital, liquidity, leverage for institutions that post that type of risk to this end. senator shelby is absolutely right that it's very hard to judge what systemic in a crisis but we have a basic obligation to make sure that institutions that operate like banks provide the same function as banks in the economy are of large and leveraged and vulnerable to liquidity pressures, and the basic utilities markets require are subject to very strong prudential safeguards. and a framework that the council is going to consider on tuesday is designed to give the markets more guidance, more clarity

about what types of institutions, what type of structures we would want to consider making sure that they are subject to these kind of prudential safeguards. >> in addition to international bodies working efforts to designate globally systemically important financial institutio institutions, how is fsoc working with global entities to ensure that sifis guidelines both domestically and locally are coordinated and do not put u.s. non-bank financial institution insurance committees at a disadvantage? >> very important point, and i thank you for raising it. there are two things we needed to make sure there's a level playing field. one is to make sure we have uniform standards required capital ratios and liquidity requirements that are applied, set at the global level, agreed

at the global level, and enforce at the global level. that's not enough the. you need to make sure they're designed in a way that will be applied in a way that is as uniform. and we are very concerned that we make sure we build in additional protections into the system so that the playing field actually be leveled. i'll just give you an example. there's a lot of evidence that the major financial centers apply to risk weights that are critical to determine how much capital is at risk with varying degrees of rigor. so you want to make sure that as we proceed, and we have the time to get this right, that these countries are not just a meeting to meet the letter of the requirement, but the actual enforcement of the requirement as vigorous outside the united states as we take it to be here. this proposal to make sure we have the largest is something

will phase in overtime, quite a long period of time. so we have time to make sure now that as we apply to the united states, it will be applied as uniform as possible outside the united states. >> senator shelby. >> think you. mr. secretary, dodd-frank, as i understand, established the council to quote, identify risk to the financial stability of the united states. in your written testimony you state, and i'll quote you, we cannot predict the precise threat that may face the financial system. i understand that. but what types of threats can the council predict? i think it's very important. >> it might surprise you define, i agree with a lot of what you said in your opening statement, and i agree very much indoors your skepticism -- endorsed your skepticism about the capacity of people who sit in much of our money council to look to the

future and anticipate the types of sources, risk we face. so the basic strategy that underpins the design of this framework is not a strategy that depends on the wisdom and foresight of government officials. it's a strategy that relies on building much stronger shock absorbers, safeguards in the system, so that we are protected against a whole range of potential risk, like capital. the most important of those. liquidity is another. those things go together. we are trying to do, of course we want to do the best we can, look at emerging risks. we are quite humble in our capacity, as anyone would be looking at the history of financial crises. we wanted a system that recognizes the basic limits on the capacity to anticipate and preempt. >> but you also don't want to do no harm, to? >> that is a risk.

if you look at the u.s. economy today, i'd say the biggest risk we face is institutions not taking enough risk, not taking too much risk at the moment. that's a natural aftermath after crisis when people are still scarred by the crisis. but i agree want to make sure people are willing to take risk. you don't want to lose that capacity. >> mr. secretary, chairman johnson got into the sun, but i'll ask you again. what are the two top, two or three potential in emerging threats as you see it to the financial stability of the united states? i know debt is one. >> well, i would say you have to start with the european crisis because europe is big. >> it's right on this now. >> slower growth globally matters because with the growth now in the united states some in the 2% range, it's just not strong enough. we are more vulnerable with the growth that is weak, two other things happening that could

bring it weaker. i would focus overwhelming on those two things. but you're absolutely right that if the united states does not put in place the framework to reduce our long-term deficits over time that two in the future it will not happen soon, but that too in the future could reduce growth and hurt the financial strength of the united states. >> so basically the failure to stabilize the federal government's debt burden, if we don't get on the right trajectory the next few years would represent, could represent a threat to the financial stability? >> it could. if congress, and i don't think congress would do this, if congress it's your -- >> if we didn't do our job. >> at some point. >> ride along like we're doing now. huge deficits, putting up debt after death. >> what congress did in august was a bit messy was a pretty good down payment on fiscal reform, but they only got, they only get about a quarter of the

problem. so you have about three course of the problem left. that's why the super committee is so important. >> if i could for a minute is to get into derivatives area. one of the unfortunate side effects i believe the dodd-frank derivatives clear mandate is that market participants could possibly stop doing their own credit analysis work because clearing houses will take on all of the credit risk. instead of hundreds of analysts that we have today, trying to analyze the credit risk, only if you clearing houses as i understand it would be monitoring credit risk. does this create any systemic risk, or could it, by consecrating so much credit risk in so few clearing houses? and our clearing houses, are they too big to fail? we hope they would never fail. and with the administration ill out clearing houses? we talked about this before, but

this could be any port in part. we hope we never go down this road. >> you right. clearing houses don't solve all. you're right that they do centralized consecrate risk, but they provide a lot of offsetting benefits. we think on balance the system will be more stable if you see the standardized products move into exchanges. we've had the expense with a market that primarily bilateral. and it was a very messy, damaging experience because all bilateral, all the risk is off, not all of it but he big part of it, we found, you saw this, firms did not really know what their exposure is. and the virtue of moving the standardized stuff to clearing houses is it's much more simple to understand what your exposure is an have protected you are against that. so we think on balance if you get the safeguards right, the system is more stable with a central clearing.

>> mr. secretary, my time is limited here. has the council thought about and discuss whether operation twist or other monetary policy actions could create systemic risk? >> that's an excellent question, and we do not, have not in the council talked about implications of monetary policy, judgments. and partly just out of deference to protect independence. but to say it a little more carefully, as you saw in the report the council members did make the sensible observation that when they want to make sure banks do is not just be careful managing their credit risk, but their interest rate of risk over time. we are in an extraordinary period as rates where they are today, and it's very important that over time, this is not the biggest risk we face right now,

that banks look at the rate. >> thank you. thank you, mr. chairman. >> thank you very much, mr. shelby. let me follow up on one of i think very thoughtful insights that senator shelby race in his opening statement and reiterate. and that is part of the fsoc mission is to understand systemic risk, to try to anticipate growing risk. it would seem to me, if my recollection, the operation most capable of doing it is the office of research. if you have an apolitical, analytical organization that is thanking her for a long with your colleagues in academia and financial sector, that you have a much better chance of doing this. and i would again urge you, and you been doing i think yeoman's work to get a nominee up here to do that soon. >> we've talked about this, and

i'm glad that you remind us of the importance of this office. you cannot effectively oversee the financial system without much better information that we have access to before the crisis about where risk is and where -- one of the key roles of this office is to make sure there's better data available not just to the supervisors but to the market as also markets can make better judgments about where risk is. and, of course, that won't happen until we have a confirmed director. we expect to give a nomination to the senate relatively soon and we are of course not waiting. we're starting to build the capacity and the people. we think certain amount of academic interest and support for this project. and so i'm really quite confident we're going to have, be able to take advantage of the lot of the best out in the country to build this. >> we need the nomination so that we can go on with the confirmation process. an abundance of caution is, and i think senator shelby is

exactly right about the need for this type of very thoughtful approach. and i would just regret immensely if that domination wasn't moved with deliberate speed and we get this up and running fully. so the burden is on you initially and then comes on us. we are really sincere about the need to get good knowledge and good information, and we will do it quickly and we will get it done. let me change directions just a bit, and again, it's another comment that senator shelby made their one of the most challenging aspects today, trying to record the derivatives marketplace. the clearinghouse he talked about, definitions of swaps, exemptions, particularly would you get in the area of synthetic derivatives. i'm still trying to get mike hand around old-fashioned rivets and there's a whole other world of synthetic and ex-prime synthetic derivatives.

if we cannot effectively deplore -- deploy these in a timely, he seems the only stopgap for the uncertainty is increased capital levels, in those firms that deal extensively with derivatives. is that the fsoc view, to? you certainly for your agencies have the ability to do that. >> that's right, but we are very confident that we're going to be able to put in place a regime, for example, that mandates the margin requirements in derivatives. and that combined with the stronger capital buffers and the move to central clearing with stronger safeguards in the clearing houses, that that mix of factors leaves us with a much more stable system than we had. not immune to any crisis, much more stable than we had. we are trying to get that balance right.

and we are, this is a terribly complicated task. and we are slower than we hoped to be. but we are slower because we are trying to err on the side of getting it right and not to rush the. we want to make sure that we not just get the substance right, but we have the ctc and the fed outlined so we have a better chance of getting london, frankfort, paris, zürich, singapore, hong kong, aligned, too. because we can't put ourselves in a situation where this stuff just those two markets where it's more risk. so we are slower than we hoped just because we're trying to make sure that we land sensibly. >> i concur. i think you have to be careful. this is very, very complicated. but i think if it is, if you reach a point where you cannot pull together all of these very difficult aspects, in an

abundance of caution i think the only remedy is capital. >> and that's the way the system works. if we get margin and collateral, you don't have to hold as much capital against a. it works that way. we have that safeguard built-in spee-1 of the issues you raised in testimony is your concern about the reliance on short-term funding. by major financial institutions. money market funds, et cetera. particularly in the wake of the european crisis, which many other institutions depend as you point out more so on short-term money than we do. we learned a very painful lesson in 2008, 2009. what is fsoc doing in terms of trying to deal with this issue? this might be in the category some of my colleagues suggested, what is, you know, the biggest new threat approaching us? >> well, very important issue.

the fed and the principal supervisors have been very effective in getting banks to fund themselves much more conservatively, so the reliance on short-term funding and the united states has fallen very dramatically. and in the repo markets and the money market funds there's been substantial shift towards a more conservative regime in that context. and what the fsoc has done is to ask the agency to lay out a comprehensive plan for proving the basic resiliency of those markets. and we get rate updates. and because these things matter to the system as a whole, we are trying to make sure that, and the fed is doing a great job. they are the ones in charge of this. they are being very careful and good about making sure they're shunted judgments with us in advance so we try to make sure we're looking at the overall interest in the system, not just the interest of those particular parties in the system. >> mr. chairman, i am at the rare circumstance where i am ready to yield, but my

colleagues are all voting. i don't need much more, so bear with me. the housing market is constructively, inevitably linked to our progress of economic growth. it is underperforming. frankly, my impression was that there was a sense of a year or so ago that we were turning the corner, but i think, you know, there's another corner. and until, from my view until we stabilize housing prices begin to deal with foreclosure issues, we're not going to have the foundation. i mean, that's certainly the perception on main street when you see your neighbors house, the grass isn't cut in two months and you know they have been foreclosed, that's a daily reminder that things are terrible.

so, fsoc, this is a systemic issue. you've got to provide the leadership, and i can ask you what are you doing. both in terms of the programs that are in place now, but the next steps. because we haven't done enough. >> i agree with you that things are still terrible. this is going to take, it's going to take years steel. and what you see now is two things. you see the broader sweep that an economy, unemployment at 9%, income growth slowed. that's putting additional pressure on the market, slowing the pace, making more people feel vulnerable losing their homes. but even apart from that, we still have this, a foreclosure process essentially broken, servicing framework that is not doing a good enough job of helping people stay in or transfer over to other housing. we're doing as much as we can with the authority we have to

help people caught up in this crisis still. and you by to say it's still terrible. i think the most important thing we can do now apart from trying to do anything we can to make the economy stronger is to help more people refinance, even people underwater, to help transition more of the empty think it properties across the country into rental housing, making financing more available to those which is we're working on, too. but we need to continue to make sure as many people as we can have a chance to stay in the home if they can afford to come and we need to see banks and servicers and everybody to a much better job, aggressive job of reaching out to them and make it possible. as you know i can't comment on the details of this but there's a very complicated effort to try to bring to earth a global settlement of the legal problems in the foreclosure process. and if that is done well, in sensibly, that could make a big

difference. >> just a, mr. secretary. your efforts and your colleagues efforts have been intensive and extensive but we don't -- >> but disappointing. >> right, and if the tools that you have, the toolbox, you know, will help a bit to get this problem fixed in two, three years and we've got to get the tools, got to think beyond the traditional, and we got to do it. i will rest my case there. since there are no, i colleagues on the republican side, i would ask senate bid to chair the hearing and question and to recognize the first republican that returns. >> did i mention one quick thing? this is important. the right to say we need more authority, we should ask for. one of the pieces of the american jobs act is a proposal to provide substantial more resources into neighborhoods, most effective by the foreclosure crisis.

that's expensive but we couldn't afford it. and it's a good use of scarce resources. >> i concur. >> i must've been longer here than i thought, mr. secretary. 30 years isn't what it takes to get into this chair. >> congratulations. >> thank you very much. [laughter] i'm not leaving. [laughter] lets you and i solve all the worlds problems. i apologize because i was voting, i may have missed some of the discussion but on the economy, just getting back for a minute, the last essence i saw was do something like to $.3 trillion of cash sitting on the balance sheets of companies in the united states, not being invested in the economy, not producing jobs for the economy. i wonder if you could give us your thoughts on why that is. it seems to me that until that capital is deployed will have a very hard time bringing this

unemployment rate down and creating jobs. >> you're right that corporate balance sheets are very strong, people are sitting on a lot of cash still. but i think the best measure, best measure of what, how corporations feel about the outlook is to look at what they are spending. and in the early stage of this recover if you look at what corporations, businesses across country in terms of spent on capital goods and software equipment, software, they are spending at a rate roughly triple the rate of the economy as a whole. said even though they have a lot of cash, they are investing in things that will make us stronger in the future. what businesses say is -- >> just on that point, a lot of a lot of that investment that you're talking about is investment in i.t. and other things that is ashley making people more productive, and companies more productive. it may not be creating jobs

because as they become more productive they figure out how to do what they're doing with fewer people and we still have to figure out what we are going to do. >> that's true. although a very tough economy still but if you look at private sector job growth and job growth started recovery, it's faster than the last two recoveries. so again, if you look at how corporations are behaving they are cautious because growth is slower. and they are more worried about risks out there, but they are investing and you see in a private investment numbers and in the export numbers other signs of underlying resilience and strength are which are important to we want to foster those things. i do think that it would be good for congress to put in place some permanent reforms to the tax system that would give corporations more certainty, better as it is for investing in the united states, and we're hoping that super committee can

start to lay the foundation for corporate tax reform that would make it more compelling economically for corporations to put that money to work in the nfa to perform companies to invest more here at home. ultimately, if we're going, we're going to be stronger as a country if we need more of the huge demand we'll see for the rest of the world outside the united states for stuff that is made and created. >> let's talk about that for a second. when i was home last week the new york times had a front-page story that said one afternoon at the house is going to pass the four day extension to the continuing resolution, and then we would come back and pass what times called a more ambitious seven-week extension of a continuing resolution. i thought i was reading the onion, not "the new york times." you mention in your testimony at the outset the damage that had been done by the debate over the debt ceiling. you can't prove it but my sense, talking to people, is that it was a real confidence destroyer.

and i wonder in that context if you, just by the way, at the moment when we needed that least, that's what we managed to deliver. i wonder if you could talk a little bit in that context about the importance of what the super committee is doing. and more broadly how important it is to get to a more comprehensive approach to deal with this fiscal problem than the charged with giving the committee which i know is objective. both the senator from tennessee and i care a lot about. >> well, i agree with everything you said. the u.s. economy in general in those times is much stronger than washington. it can withstand for long periods in washington not doing nothing but we are not at one of those moments now because the things that are burdening the economy making growth weaker are things only, that only congress can sal. and that basic sense that you see across the country that the political institutions of this country are not up to the challenge we face unable to act,

unable to solve problems is absolutely weighing on confidence. there's no doubt about it. and i think to help that you have to show it you can do some things. passing these trade agreements would be good. passing some tax incentives, investments to strengthen growth would be good. but as you said, to lay out a longer-term framework for fiscal sustainability with entitlement reform and tax reform would be very good for confidence. as long as it is designed sensibly phased in over time, that would be very good for confidence at a time when the world is watching us. the world needs the u.s. to be stronger. we can't be stronger without the clinical system in washington, and on the economy that's the congress demonstrating they can solve some problem. >> thank you, mr. secretary. mr. chairman, i will turn it back over for you. senator corker isn't like. >> senator corker. >> thank you, mr. chairman. thank you for being a. i know you made a comment on the

front about consumer protection, and i agree with you that those things outside the normal financial system, you know, will not be regulated in the way the bill attempts to regulate them without somebody being put into this position. i know that you on the of and have come from a world where at the new york fed and other places where you are really focused on checks and balances and those kind of things. i would just say to you with good spirit, i think with treasure sector weighing in and just causing there to be some appropriate checks and balances put in place in this position, you don't even have to make a comment on a. i think things would sail through and we've reached out to the administration and other places. i actually think there's a lot of sympathy towards it. is to become a clinical issue. i understand that by the way, but i would just say that there's an easy way of resolving this that would institutionalize the department instead of making

it personality base. and i think there are a lot of folks even on your side of the aisle that would think that would be such a bad idea. but let me move on to the fsoc. >> can i speak to that quickly because i believe didn't want you to. [laughter] >> we did propose initially in the bill a different set of checks and balances, congress adopted. it is very important we put checks and balances, but i believe, i know that you disagree but i believe that the bill has very strong protections in place, could checks and balances. that's what i think of a pretty good framework but i know -- >> the checks and balances i think we talk about in the wake dissipate the ability of this organization to function in a sound manner. so i don't want to debate that much longer. you and i spent a lot of time last march on this and i appreciate. may be two marches ago, i can't remember. the fsoc has set up, just give me a sense of, this is your first annual meeting. i know congress has all kinds of formal annual things that in

many cases mean nothing. is this organization actually functioning in a way it is a real discussion, not just at the staff level but among folks like you and bernanke and others about real systemic risk that is taking place in a real fluid manner? >> i think it does. i think the other test of this council though, that's one important test. one of the other test is does it help engender closer cooperation immigration in the design of the rules. so we don't have this usually complicated network of different rules over what are essentially the same type of activity. because that is enormously burdensome for the economy, and complicates for everybody and harder to manage risk. one of the things we try to do is not make sure there's much more integration to keep the future risk, but the rule writing process has done in the way that leads to better

outcomes across the system. >> there's a lot of discussion about jobs bills right now, and i know a bunch of it from my perspective is sort of a distasteful political exercise. to me, you know, as you look out and you talk with most employers, the thing they're concerned most about is the structural long-term. and would you not agree that, you know, maybe there are some things that can be done short term, i don't want to take away from your side of the aisle in any way, but is it the best thing we could possibly do here for our country's economy and the world become is to go ahead and tackle some of the long-term structural issues that we have like tax reform, like endowment reform, like when you place a long-term highway bill, those kind of things that we can just give confidence to the economy that we here in washington have the ability to actually take on the bigger issues? >> i agree with you should do that but that's not enough. just to point out, in the long run we are all dead.

if congress does not act, on these tax provisions or on the investment and infrastructure things, then what happens to the american economy? what happens is that every american who has a job will see their taxes go up $5000 on average next year. that's without action on the jobs act. without action business will see taxes go up. so as many on your side argued last december when we're facing the bush tax cuts, there are things we have to do in the short-term to make sure the economy is not weakened by the inaction of congress. and you're right that that is not enough and we should be doing the long-term things, too. but you just can't do the long-term things if you want to make sure the economy comes out of this more strongly. >> we actually tried to vote on the president jobs bill yesterday, and we were denied that the ability. >> you will have another chance. >> thank you. let me ask you, some of the

proposals around housing, there's been lots of things and i know that's one of the areas the fsoc addressed recently. there's been discussions about a massive refi where instead of having appraisals and all that take place, people that are actually current and paying their mortgages, not those that are delinquent, would be able to go ahead and refi from 6.5 to four. and i wonder if you might give a brief comment, mr. chairman, i would like to ask one more question if that's okay. >> as you said mortgage interest rates are very low. as low as 4%, lower in some cases but you're not sing as much refinancing to take advantage of that as you might. for a whole range of reasons. and the director of the fhfa, ed demarco, is examining a set of proposals that would make it much easier for people to refinance and take advantage of lower rates, including people who at the moment have loans

that are worth less than a outstanding mortgage obligations. we're very supportive of those reforms. we think that would make a big difference. they are like a tax cut, like a larger tax cut than even the tax cuts that are now before the congress. but we need to see them move to make it easier for it to happen and they seem to be moving in that direction. and we're hopeful we'll see, layouts and clarity to the broader markets and to homeowners the next few weeks. >> we had a major, one of the major hedge funds in our office last night. and we are seeking guidance on how to work through the gses. and you know, there's all kinds of models out there and i think all of us, you know, agreed with your opening comment that we need to move away from as much government involvement and maybe to almost none. but we certainly need to do it

anyway that doesn't implode our economy and we need to be thoughtful about it. but in the conversation we began talking about the european crisis. and he asked me this question. he said what will happen if the contagion spreads here and it affects numbers of banks? would y'all use the resolution mechanism? and i said no. the resolution mechanism is basically for one offs that situation, it's not for systemic issues. i want to talk to you more in private about this whole issue and our office is working on and enhance bankruptcy code which i think you action support. i'm not sure about that. but are we would right now, are we getting to the point, and i know you have to keep a stiff upper lip on these issues, but on the european crisis that is unfolding and just our exposure to it, 17 different countries, very difficult for them to act in unison. are we beginning to think about, should the contagion come here, how we might respond since the

mechanism for web and plays are not adequate? >> of course, but the best thing we can do is to get the europeans to move and to do things to make growth stronger here. those are the best protections we can have. but dodd-frank did leave in place very substantial and important protections that come here, of course we hope to never use again but they exist for a purpose. >> thank you, mr. chairman. >> senator kirk. >> thank you, mr. chairman. i just want to quit lay down a marker because i think the committee has a hearing next week. is that right, mr. chairman? my colleague david cohen is going to testify. >> you got a letter from 92 senators saying the collapse of the central bank in the rain and

iran and u.s.-backed basically saying call you back. which -- >> i think stay tuned. [laughter] >> correct. that is music to my good if i just want to lay down the marker for next week, if you could work with david. i want to focus on the subject du jour today which is zero contagion. according to the crs, our exposure degrees, 1.1.5 billion in direct loans to the government, 7.3 but in direct loans to the economy, 34 billion other exposures. about $42 billion in exposure by u.s. banks to greece. the crs memo highlights italy about $36 billion in direct loans from u.s. banks, $230 billion in direct, or in other exposure, about $256 billion total to an italian problem for u.s. banks. if you add up exposure in greece, ireland, italy, portugal and spain with other exposures, it's a $641 billion problem.

and yesterday we saw this with problems at morgan stanley. can you talk about the morgan stanley problem, whether we are seeing a potential lehman brothers situation with regard to the major u.s. financial institution in europe and taken? >> no, absolutely not. i would just say the following. as i sit him a testament, the direct exposure of the u.s. financial system to the countries in the most pressure in europe is very modest. europe as a whole though is a big deal. and and our friends, and it's true across the large institutions in the united states, again are in a much stronger position if you look at their capital levels, levels of leverage, how they're funded, much stronger position to withstand the pressures we are seeing there. but, of course, we want europe to move and we want to make sure that they move more aggressive to address this.

because europe is big enough to matter. but i would just caution you, you know, those numbers, you know, it's very hard to just look at the direct exposure you can see and capture how these things unfold. but the overall picture is very limited direct exposure, a lot more capital, a much stronger more resilient system and the united states that we're very fortunate because women so aggressively at the beginning, and that's going to serve us well spent i just don't hear the dis latest data, your point is exactly what they can. it shows our direct exposure in, for example, significant less than u.k., germany and france, but if you at our direct other exposure, we are actually far more exposed in the u.k., and as exposed as germany spent i don't think that's right because that doesn't so capture the full balance. again, europe is big.

now, the countries under the most pressure are not that large but europe as hell is big and when europe is weaker, growth will be weaker and that will matter to us. but it's very important to recognize this. this is a competent crisis for them. there's no doubt and it's politically difficult, but this is not the cost of resolving this are not large relative to the resources of europe. and they had committed at the highest levels of europe to hold the system together to make sure they protect their broader banking system, to make sure they can support the government as they are doing nothing to recognize the need to do more to make that credible. >> credible. >> i want to turn to one of the thing, which i read the fsoc report which is hearing is concerned, and while they didn't identify up front state and municipal debt as a systemic

risk, they did, at least they had a section about in the enabling if i'm a, but i represent the state of illinois that is now in the throes of a classic death spiral by the governor increased taxes by 66% on individuals, and 46% on corporations. >> from a low level i think is my recollection. >> unfortunately now he is higher than all his midwest competitors. we now see, for example, and pay bills in the state of illinois have gone, grown tenfold in 10 years, now totaling over $8 billion with a steadily deteriorating credit rating. and increasing margin that the state has to pay. i'm worried that systemically the fsoc is not, made it is too politically correct and we have a democratic administration so we can't talk about state debt. we want to grow the size of the government, and so if we talk about state governments that

have overgrown and are in death spiral's, and my word is this, have you contemplated a state default system? because in the state of illinois, is now, all the classic symptoms are there. >> let me say a few things about your question. your right to say that states are under enormous pressure across the country, not just illinois. some of those pressures are easing as recovery continues. it's going to take years for them to get themselves in a better position. people in the fsoc are very sensible people and to look at everything and they know that debt matters and they look at all the basic, as we face going forward. you said one thing i want to correct. the proposals the president has laid out for the role of government and the size of government of economy would reduce the level of government

spending relative to the economy very substantially if congress were to hold to the proposals over a ten-year period of time. that's true across government. the only exception to that is where, because americans are aging, more americans become eligible for health care and social security, and those basic benefits which congress said, not us, those grow with aging with eligibility and with rising cost of health care. if you look outside those basic benefits congress sets under the president's plan even with the investments we want to make in education, infrastructure, other things like that, -- >> but creditors don't look outside. >> no, but -- >> do you need to borrow more money next year? >> and again, if congress am i know we are not holding our breath, and if you were to enact the president's proposal, our deficits would fall very dramatically over the next three to five years under debt burden would fall. we agree with the basic --

>> you switch to federal and i want to focus you on state. i'm very worried because i think the fsoc should say that states pose a systemic risk to the system. i think that fsoc should -- >> i don't think they do, but we will look at them and pay attention to those, as we always do and look at the implications, as we always do, and we are not under waiting, under pushing any of the threats out there. >> because we don't want political correctness to say that we don't want to issue financial guidelines that would cause states to reduce their payroll. but if they're borrowing too much and represent a systemic -- >> if you look at the members of this council and you look at them and you spend time with them, there's no risk of political correctness interfering with the members. but i take your question and, of

course, will be careful and cognizant of those things. >> senator merkley. >> thank you very much, mr. chair, and welcome, mr. secretary. i want to follow up on a question senator kirk was asking about. europe as a little more of a point on derivatives themselves. we had neighbors of the bond rating council, or bond rating companies, that met with us a couple weeks ago. and they said basically they had no idea of who's writing and who's holding and what american exposure is, and that they weren't sure if anyone in the first it. which for a group that specializes in understand the exposure on bonds, took us right back to america's experience with not knowing the america's insurance group what they're writing and was being held where. it's a big problem spent before rating agencies? >> yes spent as you've seen they

don't have perfect foresight in his judgments, but -- >> but there are in the business of studying these issues. >> i would offer the following judgment, and you know, we are all careful and cautious about the things we cannot know and you want to be conservative about these things. but i think the federal reserve and the primary supervisors that oversee the system have a pretty good feel of the overall exposure, not just directly but through derivatives and hedging, and have a pretty good sense about how good those hedges or. now, there is inherent uncertainty in these things, and, of course, it ultimately depends on how effective your ask in this context. but i think we're in a better position than they are, rating agencies, and i think, and i think they are reasonably encouraged by what they see. >> i think it would be helpful

if we could get the fed to give us their vision of that transparent world out there so that we can share the same sense of confidence about not being as linked as we might fear to the european troubles. i want to turn to the housing system, and i appreciate your support for national servicing standards, hugely needed. and as you were entering as i came in here i believe, you support the strategy the president mentioned in his jobs and speech of having a strong effort to reduce the interest rate on loans to put more money and focus -- in folks pockets. but we haven't seen the details of the president's plan, and it strikes me strange a bit that on something so important in terms of the huge tsunami of foreclosures we're facing that we still don't have details. when we see those details soon? can we create a program that

will affect enough americans to make a difference, not only in terms of those families, but in terms of our national economy? >> i think we can make a big difference and you will see from the fhfa director i think in the next couple of weeks very detailed proposals. this is their authority. i don't have details yet. it's not in my power. they will lay out some specific proposals next week, and i think they will make a difference. we've been very careful not to estimate number of americans that can be reached by this, because as you've seen we dramatically overestimated at the beginning of this, the number of people we could reasonably reached. so we will be cautious but my sense is based on what i've seen in what he's told us, it's going to make, it's meaningful enough to make a difference. >> is there any sense to using soft second for the balance that

is under water as a way to create loans that could reenter the market place? >> that is one of the issues that they're looking at trying to fix because that's one of the things that stands in the way of allowing more people to take advantage of lower rates. but i can't say today, i don't know yet to what extent they feel they have a fix. >> that's one way of rather than can one possibly certainly taking, refinanced the whole thing regardless if you're underwater. >> that's true but they're looking at a range of things and you'll see more details and a couple of weeks. >> i look forward to that. and, finally, in terms of rules related to implement in the volcker rule, certainly the goal is to say that commercial banks are in the business of making loans. if you want to be hedge fund, become a hedge fund. but not mix the two. to the detriment or the increased systemic risk. there is some concern out there,

is this something that you're engaged in an could i sleep well knowing we will have a clear distinction? >> i think you can. and i should say, i think you are aware there's already been a very substantial change across the industry, moving away from dedicated internal hedge funds, in anticipation of the rule. but you see the agencies i think this week and next lay out detailed proposals. those are out for comment. everybody will attempt to look at where the balance is. they will have some questions but we haven't the results you. will have a chance at that point to make sure we get the balance right but i'm very confident this is going to meet the objectives of the legislation. >> i think that the plans on compensation for market-making trades is very, very helpful because it creates a huge

distinction between one business and the other. thank you very much. >> thank you. >> there are a couple other members who tell us they are coming back. and in the meantime, the comment has been made to senate for the fsoc to set aside a panel of the ccp rule is cool, pretty high threshold. would you please explain the appropriateness of this? >> well, that's one of the checks and balances that exist in law and i said i think that combined with the others make it a pretty strong checks and balances. i know some members up here would like to alter them, but that specific provision allows the council to in effect block a judgment by the bureau if it's inconsistent with the safety and soundness, i think that's a basic standard. that's quite unique safeguard

check and balance, very strong, not the only one. as i discussed earlier with senator corker i think the balance is pretty strong. >> last year that sec adopted new rules with the money market funds. and last october the president's working group recommended several possible reforms to reduce the potential systemic risk of money market funds do you and the fsoc members agree that are the reforms are needed to make money market funds more resilient and less susceptible to runs? what risk are we currently facing? >> the chairman of the sec agrees with that, that more reforms are necessary. i think the broad sense of the council and i share this is that she's right. she is examining the range of

ideas, some of those have elicited a lot of opposition and concern. others more support. they're working through those, but my sense is that although we have more work to do we made quite a lot of progress, and want to build on that progress to do so carefully. and i think the chairwoman of the sec is supportive of a careful balanced look at further reforms to make him he said, make it more resilient. >> in the fsoc annual report, you noted that the u.s. is within a global effort to develop minimum standards for margin on swaps. could you provide us an update on the progress of international coordination in a way that both reduces systemic risk and promotes u.s. competitiveness?

>> absolutely. with three decades of experience with global capital standards, trying to make those better. no precedent, no previous attempt to make sure we have in place, grows on marching around rule for derivatives. so what we've proposed is a major international effort to establish those. we have reformed a special international task force that is led by the federal reserve i believe, that joined by the federal reserve that brings together central banks, bank supervisors, market regulators together to try to design a common framework that will match what we're doing and and the united states. we are in the early stage of the process but my sense from talking to the european officials and those in asia, u.k. officials, there's very broad support in that and they share our interest to make sure it is a global level playing field. >> senator shelby, do you -- >> i do. thank you, mr. chairman, i do have a few. first of all, mr. secretary, i

want to get, try to answer what you may be paid for, the nominee for attorney general to be confirmed. 44 of us have sent a letter, your birth mother with, to the president spent and i think to me, to spend if i could finish. we haven't heard one word about that, asking for some modifications to this. it's not the nominee. i think the nominee as far as i know it's probably well-qualified, you know, very honorable, very smart man. but we are waiting for that dialogue, and i hope we hear from you. but short of that i think the nominee is not going anywhere. but i want an answer to that. >> well, i understand your position and we have received that message. you've been very clear about it, and you have a pretty powerful show of strength. but i would just encourage you to reconsider because i think