should be given every opportunity to present his case. of course, it would be under oath. he made the decision when he came in, and i think the council he inherited perhaps did not wish to assign some of these documents, or perhaps the council he set up decided to come up with another analysis, but i think we should like to hear from him and give him a fair opportunity to explain his case. but, before we bring him and, it would be nice to have this council, the people that signed the oath, and perhaps the council he inherited. on the last hearing we had been chief financial officer of the treasury department where the checks are cut. they create money, and basically transfer it to the department of energy, and the department of energy gives out this money. it is not a loan guarantee.

there is no private, commercial bank involved. essentially, the treasury department is spending the money, giving it to a doe , who gives it out to all these companies. that is basically what happened. host: we are talking to congressman cliff stearns of the sixth district of florida. you want to ask questions about solyndra or any other issues give us a call on the democratic line, -- host: congressman, you said some people have called for secretary steven chu's resignation. do you think he needs to resign over this? guest: before i would commit on this i would like to hear from him personally. i think he should be given a

fair opportunity to present his case. as you know, one of this council has indicated their interpretation of the policy act of 2005 is they could subordinate, so let's hear their side before we make a judgment. host: let's explain the subordination. what do you think actually went wrong? was a law broken? explain the subordination issue that seems to be the crux of the energy and commerce committee's investigation. guest: is one sentence that basically says you cannot subordinate any taxpayer's money. host: we have that sentence from the energy policy act. guest: if you could show that, that would be good. host: this is the section under which this loan was given out

under. section 17 02 states -- the obligation selby subject to the condition that the obligation is not supported to other financing. guest: white. as it turned up -- right. as it turned out, secretary berner said in his 28 years he is never seen subordination to taxpayer money to outside companies like these two hedge funds. so, we have the chief financial officer of the treasury department categorically saying it has never been done. that is 28 years. now we have this back the by the energy policy act to host: what you are saying is it legally cannot be done? guest: you cannot legally subordinate. host: this is from "business week." the council for the energy department wrote a justification for when this happened, and she

broke "-- wrote -- "the secretary brought authority to take engines that would protect and maximize the interests of the united states." it is their argument that he could take this step if he thought it was in the best interest of the taxpayers, regardless of what other parts of a law said? guest: we have a constitution and a set of laws. council cannot decide on her own, or her council representatives, what is in the best interest of the united states. you have to follow the law. in this case, she did not care she needed value judgment based on this company -- did not. she made value judgment based on this company -- deere predicted to go bankrupt two years ago. they were pathetic investing.

she is taken as one sentenced to you just read and interpreted that the united states'best interest is to subordinate taxpayers? that does not make sense. if they have threaded $35 million at risk, why would be in the best -- $335 million at risk, why would it be in the best interest of the united states? host: they are saying this was sort of a bailout at the time, this was in the best interest of time to keep solyndra going for a longer, correct? guest: right, but they had red flags from the office of budget management, from the department of energy, from mary miller when she sent e-mail to the department of energy saying you should go to the department of justice to get a legal roller -- ruling on this. host: mary miller is with? guest: the treasury department.

here you have these red flags. secondly you have people in the administration that said go to the department of justice to get a ruling, yet this lady went ahead and said in her opinion, it is the best interest to subordinates taxpayers. it does not make sense, and when you read this sentence is clear you cannot do it. host: you have seen something like 78,000 pages of documents. have you found a smoking gun here yet? guest: i think we have. the best thing is to bring in the council, and the secretary of energy, and let them present their case for the american people. if, in the estimation of the american people, he broke the law, then i think that would be clear that there was no justification for what he did. host: of austin is on the democratic line from waldorf, maryland.

good morning. are you there, austin? caller: i think this $500 million is a drop in the bucket. how come you're not investigating the crooks on wall street that brought the country down? if this company had not gone bankrupt and succeeded would you still be investigating them? thank you. guest: if the company does not go bankrupt and is successful, they would not be in the headline. in this case they were a poster child for the administration. the president and vice president were touting it as all of the new green energy they were going to do. that is perhaps the one we looked at first because the president said it was the best and the most advanced example. drawing an analogy to wall street, me and many other people think a lot of things that happened on wall street were

wrong, people should have gone to jail, and the commission that looked at it came up with their conclusion which is something i do not think the majority of americans agree with. i did not think they're the same things. you're talking about solar manufacturers of panels to create jobs in america and the financial crisis in 2008. my committee does not have jurisdiction over wall street. host: we had your colleague on the investigation on recently to talk about not just the solyndra -- get your reaction. sorry, we will pull them up. guest: you could tell me what she said. host: one of the issues she brought up is that we should investigate all of the doe

loans, and that is something you have asked for. guest: i have asked for more than one. sun power is one we have seen toyota it turns out most of the jobs will be in mexico -- scene. it turns out most of the jobs will be in mexico. i s for -- i have asked for looking at tesla, which is making these high-end automotive parts that are all electric, cost over one as a thousand dollars. it is a high-end market, and that it cannot go the defeat the distance as a guest car, so we -- they can not go the distance as a gas car, so we have to wonder why we are giving this money to the high density to cars.

host: you're talking about the loan program that was started in 2005. total money given out was $35.9 billion under three different kinds of programs, solyndra been the 17 05 program, which was $16.2 billion given out. have any of these other companies gone bankrupt? guest: no, but evergreen solar went bankrupt. host: have these been given department of energy loans? guest: these have money from state or federal loan guarantees to develop solar manufacturing, and in all honesty the solar manufacturing markets dropped because of the huge amount of china bringing over here solar panels to flood the market.

so, that hurt the american companies. i understand that. host: did think the department of energy loan program was a bad idea to begin with? when it was passed there was money put into it to fund projects that may not have worked up. the point, as i understand it, was that some of these projects would not work out, is that correct? guest: there is a possibility date suggested some would not be successful, but they did not think in terms of this amount of money, and also did not realize that a lot of this money was going to manufacturing instead of research and development, which would provide incentives to have spinoff companies. when you log into the market and decide winners and losers -- when you move out into the market and decide winners en barack -- winners and losers,

that is the government doing venture capitalism. we did not want to get involved in that. host: nicole is in lancaster, california. good morning. caller: good morning. my three comments -- 1, what is intent to do about space junk. how does he fare with quicker, faster, u.s. printing press among the international world? host: a few questions on green energy jobs in general, but is there when you want to take, or do you want to stick with solyndra? guest: the president made a strong case he would turn the country around by using loan guarantees to deal with wind

turbines and the manufacture of solar panels. i do not think that is going to happen. when you look at the solar panels and wind turbines they're not necessarily economically viable, and at the same time china is doing the same thing with cheap labor. there are no environmental or safety conditions in china. they also have ready access to raw materials. if there is so much regulation in this industry in this country, it is more difficult for american companies to compete. that is why some of these companies are subcontracting manufacturing to finland, for better is, or mexico. the long and short of it is that is an area we would be better off using the technology we have from aerospace and nasa to try to come up with a competitive advantage should we have that the chinese do not, and put that into solar panel

manufacturing. if we're going head-to-head, he will be difficult to compete. host: this is a column today from "usa today" from the director of the copenhagen consensus center. he writes instead of building factories for the likes of solyndra, money would be much better spent on relatively inexpensive research and development across a vast number of exciting but still-to- expensive ideas is that something you would agree with? guest: absolutely. you just made my case that we would be better off, instead of going out and giving money to these manufacturers of solar panels to put it in research and development and come up with that advantage of that would

give us a patented ability to compete on. host: does the government have a role in the deployment stage? that seems to be the point from the doe. guest: in america, we believe deployment should be done through the free market because that way the rest becomes not of the government or the taxpayer, but of the company that is taking that risk. they are much better at doing this than the government. secondly, the due diligence as required in the private sector is much more thorough than the united states government can do, particularly the department of energy. they cannot do the due diligence. the point is we should do research and development, come up with a competitive advantage, and use that to go forward. host: a comment from robert on

twitter. guest: that is what i feel. we are dealing with a communist country. they do not have the environmental safety regulations we do, nor the labor conditions. if america is why do have free trade with a country like that i think we have to be very careful. in this case, i did not favor a huge amount of free trade with china because i was concerned about the irregularities in the agreement. he and adam smith indicated that if you're dealing with the country that does not play fair, you have to react. in many cases, china has not played fair. host: david is from saint louis on the independent line. caller: that brings up the point i wanted to make. i do not know you, your politics

with regard to the obama administration, but it looks like you are intending to investigate mostly obama administration professionals, when it seems to me that an investigation of the economic warfare being practiced by the people's republic of china -- knowing solyndra's costs, deliberately subsidized it and under cut it to put it out of business. that needs to be investigated, and tarriffs need to be raised in order to keep it from happening again guest: you make two good points. i have jurisdiction on the executive branch. that is what the constitution says. i cannot go into that area of china, or investigate their trade policies. that is not my jurisdiction terror i wish it was.

i would certainly bring in -- jurisdiction. i wish it was. i would certainly bring in officials to say that china is not playing fair. china is subsidizing their solar manufacturing at $30 billion a year, and giving free land to companies, and flooding the market with cheaply-done solar panels. the consumer looks at a price in this economy with 9.1% of employment and they will buy something that is inexpensive. china is -- unemployment, and it will buy something that is inexpensive. china is doing that. we have seen it happen with televisions from japan, with video recorders, and we lose manufacturing jobs and in the end we lose as a country. i think we need to be realistic that when countries are taking advantage of our free and open society, we have to react. adam smith said the same thing -- we need to protect our

companies that are manufacturing with people that are actually continuing to do on fair trade practices. so, i think that is very disturbing. host: again, talking with congressman cliff stearns from the north florida district. last week a panel asked the federal government to start the iffs.ss of considering tarr is that something you would support? guest: we should have a hearing and established in american minds that china is doing this, and we should react and say if they continue to do this, we're going to do something. lots of countries react if you take action. in this case, i think the united states should take action if we find out there is an enormous

amount of unfair trade practices by china host: back to the phones. norwalk, conn., on the democratic line, nicky. caller: congressman, is great to talk to a republican. i want to mix three points, and it will be about the solar situation, but first of all, a 40-year registered democrat, a tea party member, and getting into fights with people over my points of view with defending republicans. once i get over that, i want to make another point. you have not mentioned, or maybe i did not hear right, nancy pelosi's brother-in-law, getting three-quarters of $1 billion. he is an investment firm that is

investing in solar reserve, which has another name. that is pretty much it. thank you for letting me make my points. it is great talking to you, and i did want to say one more thing, please, guys, get in there, and make sure you have a voter id registration, so that when people go to vote at the polls they have to legally show their legally able to vote. i work in the polls, i see it, and i do not one voter fraud next year. host: on the solar energy? guest: i think he is a bloated -- alluding to what was in the newspaper about nancy pelosi's relative. this is a general statement. i think there is a sense of alarm that we have people who are wealthy donors to the obama administration and to the president for when he ran for

president, and bumblers of money seem to be involved with these doe loan guarantees. they are investors in the company in which taxpayers' money is placed. that seems troubling. when the white house dump their communications on us about a week and a half ago, we went through e-mail and saw continually people that owned hedge funds that were investing in these solar manufacturing, wind turbine, shall we say, limited partnerships, or in this case, corporations. so, i think it was troubling because throughout this process we continually see these people have access to the white house, the west wing, the inner circle of the white house, asking and questions, and at the same time there are investors in these solar manufacturing companies,

and that should be disturbing to the american people. host: do you just not believe the white house's argument that the subordination decision to give solyndra in the first place was made by the doe staff members whose job was to cross the numbers? guest: i did not think their own staff thought it was a decent investment. we have e-mail from them the same they were worried about it making cash flow. host: doe staff? guest: doe and omb. host: this is the office of management and budget, who doe has to run the loan through? guest: right. the rance emails, and doe did

the same thing, to pare the long and short is there is absolutely no reason to some -- same thing. the long and short is there was no reason to subordinate tax payer money. we have e-mail showing there was no way this company was one to make it. we had a senior loan officer, jonathan silver, resign one week after he was under oath. we brought the ceo of solyndra again, and he resigned shortly thereafter after not testifying. host: did you reject that silver's leaving was not belated to this program? guest: it might have been. host: do you believe someone should lose their jobs over this? guest: my experience is people

have resigned under an arrangement that does not bring out the truth in what has happened. so many people have problems, and in the end they just resigned, and a revision of the fired, and some need to be prosecuted. host: does anyone need to go to jail with solyndra? guest: i did not know if we can say that today, but if solyndra is a prototype and that -- example, then i think we have serious problems with this whole idea of giving tax payer money to manufacturers who are developing solar panels and when turbines. host: congressman cliff stearns from the six district of florida. we will go to carol, on the republican line from michigan. caller: going back to nancy pelosi, do you think it is a coincidence that her brother- yes meet brother-in-law was on

the board, and money was going back to california? guest: coincidences' a good word. i have seen it time and time again where people bet of supported the president are involved with these investments and also have the id vantage of talking to the white house and try to get them -- also have the advantage of trying to talk to the white house and get them to process these. we have an example of someone pushing the solyndra loan, and at the same time his wife was the legal counsel of solyndra. they ended up giving two $0.5 million to this law firm, and he was in the department of energy pushing cylinder. he then felt uncomfortable, and had an ethical review of the situation, and actually got a written opinion saying he should not be involved in solyndra, he should recuse himself.

he said he did, the three days later we have an e-mail that he is pushing solyndra. that as an example of people that are intimately tied to the administration, giving the money, actually thinking they have a responsibility to coordinate some of this tax payer money for investments. host: this is an article from " latimes.com ." host: will we see some of these people come in? guest: this is a good example. mr. speyer had an ethics violation in my opinion. the fact that his wife earned from solyndra, i would like to see that bill. i think it is $2.4 million

dollars to be exact. i do not think he should be involved. host: are these people we will see come in before steven chu comes in? are you saving him for the last one of these? guest: i think secretary steven chu is perhaps our prime, top- rated witness because we want to demonstrate our opinion that this is against the law -- what they did, the energy policy act, and we want him to explain why they did this. going back to the question we just got, and what you referred to, is if we see these people that were part of this process and we still see them helping the president, you understand that if the president gets reelected they will be back in the process acting -- asking for more money, and i just do

nothing that is right. host: if you have that question for steven chu, you want to hold off on asking that? guest: i think we will bring him in on short order. my druthers would be to talk to the council. you had mentioned her and others. we talked about her opinion, and try to understand why she made that, and then after we get that, then have secretary steven chu confirm -- does he understand? some of her memos do not go to her. they go to him, so he could claim he was ignorant of for memos, which is really far fetched. when you are doing an investigation and you have this amount of detail, i think you should move systematically and carefully on this and progress in a way you understand all the people, how they made the

decisions, and then bring the top guy in last. host: a question on twitter from jim. is there an energy source that governmentguest: subsidizing isr word than loan guarantee. that means the free-market goes out and takes a risk and it's the tax benefit. they can be subsidized for the research and development. we do that across this country with universities, and we do it with energy companies, too. we do it in the petroleum industry, but we do not go out and necessarily have venture- capital us like we do to the loan guarantee. an independent from florida. caller: you gave the republican the question, and he did not even ask for them. let me make a it is so hypocrite tall of

you to criticize mr. chu when you not only voted for but gave contributions to our government that pleaded guilty to stealing $1.7 billion you and me the taxpayers of the state of florida. his lieutenant governor is right on the verge of being indicted for charging me and you, the florida taxpayers for $375,000 rent on a building that don't exist. how --. >> host: congressman stearns, give you a chance to respond?xi >> guest: in politics, one day you're a peacock and next day you're a feather duster. in this case he is making the charge that governor scott had these problems with medicare and he had ultimately, he did leave theme company and ultimately he did have to restore some money but the caller is making that comparison. m i have no jurisdiction over

that area that the governor was involved with. i don't know anything about the governor's position other than he won th' governorship of the state. i think he is doing a goodhe job. g i think the caller is makin' the comparison, if i'm looking at solyndra, why am i not looking at the governor. of course i don't have that jurisdiction. that election occurred and people of florida decided they wanted that governor, wanted governor scott to be our governor. so i respect the people whosc voted for him.o >> host: tim is a democratth from rockville, indiana. good morning. >> caller: good morning. >> host: go for it. >> caller: okay. i have a couple questions. number one, the united states has the best investigative division in the whole world in the fbite and i'm kind of wondering w why the investigation is being done by politicians aren't the fbi? they can forward the

information to the fbi but they're the one who is doth the investigating especially on the federal level? >> guest: well, i think your t question is applicable.ig we are responsible as a members of congress to do oversight investigation which we do.si it's across the board. we have that responsibility under the constitution.n, but the fbi obviously is going to look at solyndra too. r as you know after they wentfb bankrupt, two days, two days later the fbi raided sole solyndra and they're continuing the investigation. i think we have the constitutional right to continue our investigation. they're looking for criminality. we're trying to understand how these loan guaranties were processed and try tost understand if the department of energy was malfeasance and what should be done and ultimately to try to make sure this doesn't happen again. >> host: let's layer out for m viewers exactly how many different investigations are going on right now.enas there's yours and in the energy and commerce committee. >> guest: right. >> host: the fbi raided solyndra on behalf of the

department of energy's inspector general, is that correct? >> guest: that's correct. >> host: and thee treasury department is also launching investigation? droo. >> guest: yeah. >> host: and nowsu as i understand it, the oversight and government reform committee might be looking into the doe loan programs too, is that correct? >> guest: i understand they're looking at a broad section. i don't understand thatth they're looking at solyndra. we're perhaps the prime one in congress looking at solyndra. >> host: that is chairman darrell issa? >> guest: right. >> host: what are your conversations with him? h are the lanes blending here or are you clarifying you will take solyndra and he will take the broader program? >> guest: i think the understand is we have solyndra and obviously he has oversight over the government. in this case he can go across the board dealing with other, shall we say loan guaranties as well as look at the department of energy, their due diligence in a general way what they're doing with these loan guarantee programs. but obviously there's a lot of people looking at this many casesw, in

think they should continue these investigations. >> host: is there a timing on when you know some of these are going to be concluded? when do you expect to a have yourre investigation complete? >> guest: well in this case once we get secretary chu, then i think the next step is to try and look at some of these other companies and try to he will have wait they will and try to come up with a broad, shall we say consensus of what went wrong and try to provide instruction whether legislatively or whetherhe it's just throughly instruction on how these loan guaranties should be done and at what pointow should we not be involved with this type of, what iwe say is government venture-capitalism. >> host: a question over e-mail. this is from daniel. wasn't the solyndra a government assistance plan hatched under the previous bush regime? this is something come out in some of the hearings? >> guest: no. we show and demonstrated under the bush administration they specifically said they should not go ahead withon

solyndra. there was not enough of the financial information. so i think the bush administration is cleared of that. >> host: are you saying that this specific but the loan program --. >> guest: the loan program that's true. >> host: was part of the 2005 energy policy? >> guest: that's correct. but solyndra itself was not approved by the bush administration. it was specifically declined and we have those documents that show that and the long and short of it is, it was pushed by the obama administration once it became into office. >> i host: ralph is a republican from clayton,nc new jersey.fi good morning, ralph. >> caller: good morning. how are you guys doing? a >> guest: good. >>on caller: okay.ll mr. sterns, i have two questions. >> guest: sure. >> caller: one, the first question is this solyndra thing. in 2008 solyndra contributed to the democratic party. they also contributed twice as much to the republican party. is on advertising net and i'm a republican.ep

the second comment, if you want to prove something don't work, approve it and then the people will see, and the president won't get elected.li as long as you're taking the steps you're taking i know a lot of republicans besides myself that will vote democrat. >> host: ralph, are you saying you would like to see the loan program continueep and see how some of these other programs turn out? >> caller: i'm saying i would like to see the whole jobs act passed so that we can prove one way or the other whether it will work because as far as i'm j concerned, if you don't let it go, that it don't work, i'm voting democrat. >> host: respond? >> guest' well the first question he asked it's true solyndra actually lobbied congress and also contributed money. which is another outrage tond think the taxpayers guaranteed half a billionto dollars to this company and they take some of the moneyrs and use it to lobby congress and also provideo contributions to people in

congress i think is wrong. his major point though, thehi second is the proof is in the pudding. if it go forward and if it succeeds that's one thing fhi it fails that the american people willan see it is the wrong direction. he is alluding to the jobs act the president ist pushing. he is basically saying let the president's jobs act go forward. if it is successful, fine. if it is not, american people won't vote for them.nd i understand that but you could do a lot of damage inot between. in fact the jobs act that the president pushed came before the senate never got up to a vote because thet some of the democrats didom not vote for it. it couldn't pass the senate.fo this is pretty much theth whole plan the president w proposed exempt senator reid added a millionaires tax. in the end the president's jobs bill is dead and iob think many, both congress and on the senate side andnk the house don't think the president's plan would work. >> host: an independent from louisville, kentucky.

>> caller: you're talking politics. i want to talk to you for a second about the fallacy of green energy. i know something about green energy and i work for nasa a couple years and i worked on the apollo program and i'm a physicist. the president came into office and he said we canem make the transition from fossil fuels to green energy in 10 years because we put a man on the moon in 10 years. i we used existing missile technology to put a man onte the moon. we didn't take 10 years to get them there. we took 10 years to get them back. we took a huge missile. took warheads off the nose can. put a capsule with human being on it and sent it into space. the problem was getting that human being back to earth. this nonsense about green energy is just that. it is nonsense. >> host: do you have an estimation how long you think -- >> it will take 40 years. 40 years to get viable energy. sources other than fossil fuels.

windmills are, are wind energy. they have been around for generations in holland. solar panels, there isha nothing new about them. they have been around foran years. but you can't run new york, chicago and los angeles with wind mills and solar panels. it can't be done. >> host: congressman? guest: well, you justot heard from a physicist. you heard from somebody involved with the apollo program from nasa. i think he spelled out clearly it will take 40 years to transition fromke fossil fuels to sun or greenio energy. what he isfr saying is, in the in between time we should do is develop the energy we have, these resources whether it's gas or shale. whether it's nuclear or whether it's coal. if we can go to the moon we should be able to use thos cleanly and protect our environment. i think what he is saying in the larger sense we're kidding ourselves and the president is kidding himself if he thinks we can transition from fossil fuelsf to these wind mills and

these solar panels, not to mention how many solar panels you would need and how many windmills you would mead it toe develop enough energy to run a large city. >> host:o congressman, in therg time at that we have left here, your energy and commerce committee is actually holding a hearing today on the status of online gambling. can you tell us what the options are on the table right now? as i understand it there's a bill to actually legalize it in the united states?ow >> guest: well there's a i bill by gentleman from texas, mr. barton, to legalize it for poker only. but we passed recently a bill in congress overwhelmingly to say, no internet gambling on the internet and we did this by outlawing the use of credit cards and money orders and money transfer. that pretty much stopped it. now it has all gone overseas. it is now done illegally. so the people who are advocating internet gambling are saying because it is overseas we're losing revenues, tax revenue. losing jobs and also there's

a lot of fraud. but that fraud is going to, occur anyway.ud and secondly i think the, other side of the coin is,nd do we want to have internetof gambling which would be poker possibly would be roulette and all kinds ofin gambling on internet. people addicted to thepl gambling they have the computer inre their bedroom,av dining loom, their living roomhe, their study the i addiction would increase. tradeoff --. >> you're saying too easy. >> guest: too easy, children could get into it too. we have the same problem with pornography getting access by just lying their age. i think the majority of confess when we passed thisn bill legalizing gam link on internet is not the way to n go. barton bill is poker only. once you open it up to say poker perhaps you will have roulette and gambling across the board and sports everywhere. >> host: sounds like you will be opposing your fellow

republican? >>t i guest: i support the status quo.ri the hearing is important, i compliment the chair lady, mary bono mack. the long and short we should hear both sides and have ah new understanding what the other people feel. >> host: is there a timewh frame when we might see a bill come out of this or movement on this? >> guest: i don't think there's a time frame. i think at this point it is very exploratory. i don't know how many cosponsors mr. barton has on his bill but i have concern that if his bill was brought up they would also put in gambling across the board and not just for poker. >>ou host: last question for you on solyndra. i what's the, what's the nextst step that we're going to see here? >> guest: the next step is a week, next week we'll bring in the counsel for the department of energy and askhe them to explain particularly the lady who wrote the memo mow explaining why they could support --. >> host: you're trying to get documents from the white house as well, correct? >> guest: we are. c we asked for documents. we're having a little bit of trouble, in fact a lot of

trouble getting the documents from the white house. we're hoping they will, theas president indicated he wouldro be transparent when he came in. at this point we're a little puzzled why he is not h providing the documents. we specifically asked for ones. he is not providing them. f i'm not sure if he will claim executive privilege or we will have to subpoena these documents. i think it is better for all, of us to understand how this happened and bring in the counsel and have them to explain why they subordinated taxpayer money. >> host: congressman cliff stearns, 6th district of florida. a lot going on with the investigation. thanks for coming in. >> a reminder that in about 15 minutes on c-span2 we'll bring you a house armed services committee hearing looking whether to change the military retirement program into a 401(k)-like system that is 1:00 p.m. eastern. until then some of the headlines and phone calls from this morning's "washington journal.". >> host: front page of the "atlanta journal-constitution" courtesy of newseum here in washington who tells us who

is eligible for this program. homeowners can refinance mortgages under the home affordable refinance program, or harp if they meet the following criteria. the mortgage must have been sold to fannie mae or freddie mac on or before may 31st, 2009. homeowners must be current on their mortgage with no late payments in the past six months and no more than one late payment in the past year. the current loan-to-value ratio must be greater than 80%. the mortgage can not have been previously refinanced under harp unless it is a fannie mae loan that was refinanced under the program from march to may 2009. what is the program? the home affordable refinance program or harp, was started in 2009. it lets homeowners refinance their mortgages at lower rates. borrowers can bypass the usual requirement of having at least 20% equity in their home but few people have signed up because many couldn't qualify under the program. as of august 31st, fewer than 900,000 homeowners and just 72,000 underwater

homeowners have refinanced through the administration's program. the administration has estimated that the program would help 4 to 5 million homeowners. on that figure "usa today" though quotes in their article this morning, front page of the newspaper, they quote a name that many of you hear often, mark zandi that economist from moody's. at end the article saying it may lead to 1.6 million more refinanced loans. several factors will affect the results. if interest rates rise, refinancing becomes less attractive zandi says, even with changes, lenders won't rush to refinance deeply underwater borrowers says alan white, a law professor at valparaiso university. that is from the "usa today." their headline, is, one million get shocked to save on loan. changes open door to the refinancing. many made the papers, the articles, the announcement

by president obama made many of the papers this morning. we want to get your take on this. what is the role of the government in financing mortgages. eric a democrat in baltimore. we'll go to you first, eric. what do you think? >> caller: good morning. >> host: morning. >> caller: i think the principle has to be cut. as long as they're staying away from the principle being cut on all these properties, the problem is going to persist. one late payment in a year, that is going to cut more people out. they have to get these republicans out of the way so we can start building america for the middle class and working people. the republicans are acting like fascists. thank you. >> host: eric, have you tried to refinance personally? >> caller: yes, i tried the first time. it was such a nightmare. they said i made too much. they said this. they said that. and it never worked. i walked away from my property. >> host: you did? >> caller: i make over 100,000 a year. so if i can walk away from a

property with that type of income, this country is in big trouble. >> host: eric --. >> caller: and i'm a vote name veteran. >> eric, what was your house, what did you buy it for if you don't mind telling us and what was it worth when you walked away? >> caller: the house was paid for. it was refinanced. it was valued at $190,000 in scranton, pennsylvania. and, after the refinance they promised me based on a strong income and everything else, and then when i went to closing they said, sorry, your house is now worth 90. it was worth less than half. >> host: it was worth than, worth about 50,000. say that again? >> caller: it was worth, it was valued at 190,000 and it, the value, it got devalued to 90,000. >> host: 90,000? >> caller: yes. they wanted to pop up an adjustable in my face which

would have, it was a ridiculous business decision. tell the people of america not to look at their home as a personal loss, as a personal defect of personality, as a nonpayer. look at it as a very bad business decision that was hoodwinked by wall street and the bankers. as we all know. >> host: all right. let's move on. get some other vices in here. samuel a independent in bronx, new york, what do you think? >> caller: i personally think it will not help the vast majority of homeowners. what i understand it is 11 million people that need that type of help. they said this program will only help one million. and again i think at the end of the day the people who make these programs and decisions, they're rich and they're so far removed from the average working person, they can't come up with any program that is really going to help the people. even if you help them and you give them the loans and help them keep their house,

the jobs out there, the wages are so low. so i think this is new america where most people are going, majority of the people will have very little and the minority will have everything. >> host: sam, do you think there's a role for the government in financing mortgages? or should it be a free market enterprise? >> caller: oh, that's a good question. you know what? i will be bold and state it. i think they should help out regular american person the same way they helped out the bankers and the rich. they were able to wipe out these people's loans. why not just wipe out a lot of what america owes and let them start over again? because if they can start over again and they're making money, they will start buying things, they will do thing. why not do the same for the average person as they did for the bankers and the rich? >> host: all right. on that note about the estimates of how many people this is going to help, "wall street journal" said, 11 million are underwater, and can't refinance. this is what "usa today" says. new home appraisals may also

no longer be needed under this new program which would lower refinancing costs. harp will also be open to more deeply underwater borrowers. the changes in harp won't help every borrower who would like to refinance. data an anna lit ticks company, corelogic estimates 7 million u.s. home loan borrowers are current on loans are underwater and have traits about a full percentage point higher than prevailing rates. with 30-year mortgages on average at 4%. homeowners could save $2500 a year in house payments that is what the administration is estimating. they're saying the administration, that is, this would help an estimate the four to five million billion rowers. matt, republican in south carolina, what do you think? >> caller: i used to audit banks in late '80s before all these things changes were made. simpler something is better

it is. i saw the mortgage files in the guise of a vault. protected himself. everything was documented to the t they were a perfect file. the problem is everything become so computerized now. everything is so complicated of everything is so complex. that is it really hurt us in actuality. i point i listen to all the liberal callers and blame everybody else but, hate to face it, some of this is american's people fault. we haven't been budgeting. we bought houses we couldn't afford. forget this hoodwinked stuff. you have some responsibility just because you have to take some responsibility to say, i signed on the dotted line. i bought the house and i'm going to pay for it. that is the way we thought about loans in '70s and '60s. when you made a commitment you kept it. if you lost a job that's different. so many people are taking advantage of the system and getting out of houses they never should have been in. it was really our president who activist back then who was pushing for those

no-money down-home loans for low income people in community reinvestment act. as activist he did that you have wealthy people and poor people living in homes they can't afford with middle income. they have to bail out and when they leave a hole in the bank, the bank has to be refunded. it is not bank's money. it is depositers money in the bank. the point is low income people and middle income people have been bailed out through the whole process not just the banks. they were the ones who signed on, bought the overpriced real estate thinking it was investment rather than just a stupid house to live in. they're the ones who didn't budget their money. now they're blaming everything on banks which bail out of the responsibility but come on. let's be real. we have to get back to common sense. we have to get back to proper budgeting. we have it get back to proper rules and, and just go back and reenact the glass-steagall act that franklin roosevelt put in and do solid lending where you require 20% down but in the '80s and '90s the

american people didn't want that. they didn't want to wait for 20% down. they wanted now. baby boom generation said we want the house now. they told their congressman to do it and it was done. they turn around and complain what happened. how can you not accept responsibility. american people for some of this. >> host: let me get your reaction. "the financial times" talks about if you allow borrowers who are underwater to refinance when their homes are worth more than, worth less than their paying for, this is financial times says the mortgage bonds hit six-month lows. in reaction to this news, prices for billions of dollars in mortgage bonds fell to their lowest level in six months on monday as traders bet that new measures to help distressed homeowners would leave to a wave of early repayments. the price fall highlights the mixed effects of the action. for every homeowner who refinances and enjoy as lower rate there is investor who loses out on higher income as mortgages and bonds they back are repaid

early. >> caller: that's right. why should anybody buy bonds anymore? why should anybody loan money to banks? why would anybody? that is the whole problem. you mess with the whole system in that regard. they have proven many times when they give people a break, on their loan, on their mortgage, and reduce it, that six months later they're back in a bind again. six months later they can't afford that the new payment. other people might say the heck with it. i've been playing by the rules all my life. i didn't go over my head. my house dropped a little bit maybe i stop making payments too if everybody else is getting away with it. this is shoddy and people can't take responsibility for their budget. it is their budget. the government can't tell you how to spend your money nor should they what you spend on appliances or food or housing and we, if the government has to take that much care of us there is something really sad and wrong with that. >> host: all right. matt, sorry, we lost him. let me show you a what president obama had to say in his own words yesterday.

he was in las vegas talking about the expansion of this new program. >> there are still millions of americans who have worked hard and acted responsibly, paying their mortgage payments on time, but, now that their homes are worth less, than they owe on their mortgage, they're having trouble getting refinancing even though mortgage rates are at record lows. so that is going to soon change. last month i directed my economic team to work with the federal housing finance agency or fhfa and their partners in the housing industry to identify barriers to refinancing, knock those barriers down and explore every option available to help many american homeowners to refinance. >> host: "the hill" newspaper puts it this way about president obama's announcement yesterday and his location. obama takes fight to mortgage battleground. if you look at "the los angeles times" this morning, front page, they have a chart about showing the

percentage of homes with negative equity in the second quarter of 2011. the red states, florida, arizona, nevada, have somewhere, are 46 to 60% of the homes in those states are with negative equity in the second quarter of 2011. the, the next darker shade of pink, 31 toe 45%. so he was yesterday in nevada. you can see, 60.4% of homes with negative equity in that state. detroit, michigan, democratic caller you're next on this. what do you think, government's role in financing mortgages? >> caller: right now it is necessary but it shouldn't have to be that way. if wall street and bankers are were doing their job, properly, you know, years ago, then, you know, the u.s. government shouldn't become involved but they weren't. they were selling, i mean this has been going on for decade. they were selling huge packages of thousands of mortgages, trading in them.

trading them on the open market and, you know, the only reason i know this stuff is because i have a family member who worked in the mortgage business. he worked for the biggest mortgage company in america at that time, manufactures hanlover. that has been sold, traded, sold, whatever you want to call it. there should be no role for government but right now it is a necessity because wall street failed us, you know. it wasn't just wall street. wall street was trading securities on the open market, open world market. that is why the whole world is faltering right now. so that is my opinion of it anyway. i'm not a trained economist however i do, have been reading "the new york times", midwest edition of "the new york times" for the last 25 years. so, in the business pages, yeah. so i do feel i know a little bit about economics when i was in college that's not what i studied. anyway, thank you for c-span i hope to educate some

people a little bit today. >> host: we'll hear from lynnette, an independent in wilmington, delaware. >> caller: hello, good morning? >> host: you're on the air. >> caller:, yes thank you, good morning. thank you for c-span. what i wanted to say the government role in financing the mortgages, i think there is big bailout in everything. that is what caused everything to happen. and i think also, they should go back to capitalism and drop the facism. . .

>> sharp political split. president barack obama went when his republican rivals have so far refused to go. he asserted americans should refinance their mortgages at lower rates. in 2008, republican presidential candidate john mccain proposed the government buy up home mortgages that exceeded the value of houses. then reissue them at market

value. we got killed is the quote from douglas holtz-eakin who made the proposal. the tea party movement took over after cnbc after a tirade in february, 2009 >> speaking on politics on this that is what the financial times writes about this morning. obama lays down election marker. president barack obama series of announcements on new ways to stimulate the economy are as much about laying down a marker

for next year's presidential election as they are about serious policy initiatives. the larger aim of mr. obama >> here's president obama yesterday in nevada on this. >> people out here don't have a lot of time or patience for some of the nonsense going on in washington. any member of congress thinks there is no unemployed workers or no down on their luck neighbors in their district that

would benefit from the proposals in the jobs bill, then they better think again. they should come and talk to the families out here in nevada. these members of congress who aren't doing the right thing right now, they still have a chance to take meaningful action to put people back to work and to help middle class families and homeowners. but we can't wait for that action. >> we can't wait slogan has become a new hash tag, too, in republicans' response taking advantage of what president obama -- this new slogan we can't wait and house speaker john boehner put out this tweet. we can't wait for washington democrats to embrace a balanced budget amendment to the constitution. the speaker had a second tweet that he put out yesterday as well, reacting to the president saying we can't wait for president obama to work with house republicans to remove government barriers to private

sector job creation and another tweet in reaction of president obama's announcement of this new housing plan and the new slogan we can't wait for senate dems to stop blocking ballpark bills that would help create private sector jobs. we have a call. >> caller: i've been in house and i got it for 80,000 and i think most people wouldn't be behind their mortgages if they either had jobs or their clientele was bigger. i lost my clientet about 80% when the economy started going down. i didn't make a bad decision when i bought my home and it's not just a place to live. it's my home, you know? and just dealing with bank of america has been horrible. for six months i've been dealing with forms and meeting people and they haven't done anything. i just take what i owe you and put it at the end of the loan it's a 30-year loan and i'll get

back on track or reevaluate the home because it's not worth the 80,000 but i never bought it as an investment. i bought it as a home so maybe if there were more jobs, you know, and maybe my clientele would be bigger i could do better. everybody's case is individually different so, you know, and i'm sick of the right bashing government, blah, blah, blah. the government are we the people and they have no problem taking a paycheck from the government for the job they do. >> host: that's santo from eastpointe michigan. women's work usa has this tweet. bankers may have paid back t.a.r.p. but they caused a 20-year economic crisis in job loss they've yet to pay back. laguna beach, california. good morning. >> caller: good morning. i have been a lifetime democrat but i just switched my registration of independent because of the obama administration. i would just like to make the

comment that, you know, my husband and i -- we did everything, quote-unquote, right. we worked really hard. we saved up a down payment. we didn't buy a house we couldn't afford. and i don't really want to pay for everybody else's mistakes and i think we're rewriting history conveniently for the elections by leaving barney frank and, you know, some of the congress out of this mix because they forced banks to give loans to people they knew couldn't afford it. they did that. the banks didn't do that on their own. they did that. so the fact that people, you know, can say that they were fooled or they weren't smart enough, that ignorance doesn't hold up in court so it shouldn't hold up in congress but i do -- and i do resent the fact that, you know, the president had the first two years of free rein to concentrate on jobs, housing. he chose not to do it. he chose to travel around the world he hadn't seen. he chose to work on health care

reform that nobody wanted in the manner he did it. and he chose a lot of other silly things that he didn't follow through on. but he didn't focus on this and now because it's an election, it's easy to approach the people who aren't going to pay for anything and get their vote and then put the burden on people like me. >> all right. as many of you know, every week on wednesday on the "washington journal" we take a look at the magazine article, we're going to be talking about a new article written by megan mccardell, capital gains are members of congress guilty of insider trading? and does it matter? if you want to read the article and call in with your questions or your questions you can post on facebook as well, go to our website, c-span.org and find a link to the article there. if you go to c-span website you

can find a link to the article or go to the atlantic.com. read the article and call in with your questions or your comments. fred, a republican, richfield, connecticut, you're next on this topic. government role in financing mortgages. >>. >> host: morning, fred. >> caller: i think everybody should have to take responsibility for what they've done. but the homeowner needs to take responsibility. they are the ones who signed the mortgage and they committed to make those payments and if you can't -- >> we'll leave this "washington journal" segment at this point. if you missed any of it or you'd like to see it again, go to the c-span video library at c-span.org. we are going to capitol hill now for the house arms services committee hearing. they're holding a hearing on military retirement. service members right now receive retirement benefits after 20 years of service. and this hearing is going to look at whether that should changed into a system more like 401ks that are used by private

employers. this is live coverage on c-span2 and it's just starting. >> insight and called to action. the defense business board -- one element of the department of defense was quick to present a major retirement reform proposal that set the tone of the retirement reform debate. the proposal would remove the retirement system aggressively to a private sector to define contribution system based on the personal investments of service members. the proposal received immediate criticism from service members and military associations. the proposal is certainly a radical solution that would result in a significant reduction of retired benefits for all service members. as could be anticipated, the unveiling of the defense business board proposal injected considerable uncertainty into the force to include groups fighting in the wars in iraq and

afghanistan. the proposal created an immediate morale firestorm as service members feared that senior members within the department of defense and the military departments were seriously considering its implementations. we invited the defense business board to testify today to face the arguments of their critics and explain the merits of their proposal but they declined the invitation. i'm concerned that the defense business board knowingly elected to pursue a very controversial proposal with the immediate negative consequences for morale and combat readiness and yet they were unwilling to come before this subcommittee and defend their actions. in my view, their failure to appear speaks volumes about their own lack of conviction that their proposal is deserving of serious consideration. secretary of defense leon panetta has been clear that

retirement reform must be on the table for consideration as the department of defense contemplates the wide array of programs that will be considered for cuts to meet the budget reduction goals. i am pleased of the moral problem and announced his clear support for grandfathering the benefits to be provided to currently serving service members who have bourne the burden of war over the last 10 years. we simply cannot dismiss the trust of the soldiers of afghanistan and iraq. i'm saddened that the leon panetta did not disavow the proposal. that statement would have removed a major issue to the force. i was very pleased at general dempsey's statement before the

house arms services committee that recognized the unique requirements of military service and that strongly asserted that the military requires a retirement system totally different from any civilian retirement program. today we hope to learn more about the current positions the department of defense and the military advocacy groups concerning the need to reform military retirement. i would like to welcome our witnesses, dr. joanne rooney the principal deputy undersecretary of defense for personnel and readiness. dr. rooney, this is your first opportunity to appear before the subcommittee. welcome. i am certain we will be seeing more of you in the future. next we have two highly respected professionals that are long-standing friends of the subcommittee. ms. virginia s. penrod, the deputy assistant secretary of

defense for military personnel policy and colonel steven p. strobridge, usaf, retired, the director of government relations of the military offices association of america, moaa. finally, let me introduce mr. john davis. he is a marine, not a marine veteran or former marine. a marine and so we appreciate so much of you being here today. the director legislative programs fleet reserve association. mr. davis, this is also your first time as a witness before the subcommittee. welcome. congresswoman davis, you are welcome for your opening remarks. >> this is your first time you testifying before the subcommittee and i welcome and i welcome mr. davis, mr. strobridge and rooney.

while we all know the concerns about the current state of our nation's economy, the discussions on the condition and the future of military retirement are once again being raised. no surprise, i would suggest. such discussions are not new. during previous economic downturns, focus has turned to the stability and the affordibility of our military retirement programs. however, for the most part, the current military retirement program was established over 60 years ago. so it is valid, i think, no matter how difficult. certainly difficult knowing the nature of the service and the sacrifice of the men and women who serve, it's still appropriate, i think, for us to ask ourselves whether the current program still meets the requirements it was set up to achieve, which, of course, we know is the focus of today's

hearings. only 17% of the force actually completes a full 20 years of service in order to qualify for a nondisability retirement. and many have impressed concern that the current program does not recognize the sacrifices of those who served during 10 years of conflict and may not stay the full 20 years to earn a retirement. is it fair that person who may have been deployed once and stays to retirement is eligible for a lifetime benefit while an individual who may have multiple deployments in a combat theater does not stay 20 years, that person walks away with nothing more than the admiration of a grateful nation. when the 20 minute retirement system was established the life expectancy in 1949 for a white male was 66.2 years. for a black male it was 58.9

years. compared to the latest data available, the life expectancy in 2009 for a white male is 76.2 years and for a black male, 70.9 years. so there's no doubt that americans are living longer and more fuller lives which means that an average individual who receives military retirement for 20 years of service will receive retirement for nearly twice as long in his adult life. him or her adult life. in addition, many of those who retire at 20 years of service have gone on -- gone on with an ability to seek another full career in a different field. the personnel programs including the retirement system often strikes fear in the force. so it is important, critically important that we do not necessarily undermine the faith of those who are currently serving. but we do have a responsibility

to ensure that the compensation package that is provided to service members are meeting the needs of our nation's national security and that, of course, includes looking at the military retirement package. thank you, mr. chairman. this is an important hearing and i look forward to our witnesses testifying today. thank you. >> thank you, ranking member, davis. i ask unanimous consent that the defense business board report on their proposal to reform the military requirement and a statement from the reserve association be entered into the hearing record. hearing no objection, so ordered. we'll appear in order with our witnesses beginning with dr. rooney. >> good afternoon. chairman wilson, ranking member davis and distinguished members of the subcommittee, thank you for the opportunity to come before you on behalf of the women and men who so ably serve

in our nation's armed forces. i am here today to speak to you about the military retirement system of our uniformed services. since the military transitioned to an all-volunteer force, military compensation has been undercontinuous scrutiny. the primary goals of the military compensation system are to attract, retain and eventually separate members so the united states force can support the numerous missions both here and abroad when called upon to succeed on the battlefield. even though consider military benefits far-reaching we must remain cognizant they support the brave men and women who volunteered to defend this great nation. over time while the military retirement system has remained relatively constant, pensions in the private sector have changed and more closely ally to support the more mobile workforce in that sector. unlike the private sector, the

military services must row most of their military workforce internally. it generally takes 15 to 20 years to develop the next generation of infantry battalion commanders and subcaptains. as a result, the department must ensure military compensation, promotions, and personnel policies all foster greater retention and longer careers necessary to create these experienced leaders. this need for greater longevity and continuity suggests there are valid reasons why mirroring a private sector compensation package may not necessarily be the proper approach for the military. however, the department does believe that reviewing the retirement system is both a fair and reasonable endeavor and over the past year has begun reviewing such retirement in the context of a total military compensation system. the officer enlisted in civilian leadership of all services from the active duty, reserve, and

national guard components as well as the u.s. coast guard are participating in this review. the review is designed to be deliberate, careful, and pragmatic. the defense business board proposal is just one of several concepts that are being reviewed and modeled to determine the impact on recruitment and retention. the department is working to strike the correct balance. this includes weighing the impact of a new system on recruiting and retention, considering the welfare of the individual service members and families which includes grandfathering our existing force who took their oath under the current system. and acknowledging our responsibilities to the american taxpayer. the department needs to ensure any proposed changes do not break faith with the current members or negatively impact the current force. before proposing changes to the military retirement system or any part of the military pay and

benefit structure, however, the department is committed to conducting significant evaluation and in-depth analysis of any proposal. the department must ensure its ability to continue recruiting and retaining the highest quality members and must understand to the fullest extent possible the impact of any changes on the future of the all-volunteer force. finally, while the department acknowledges the military retirement system appears expensive, it is neither unaffordable nor spiraling out of control as some would contend. the department annually contributes amounts to the military retirement fund in accordance with the requirements set forth by the dod of the actuary. the contributions as a percentage of military basic pay are projected to remain relatively constant over time. at this time, the department does not have any specific proposals or recommendations ready to offer. within the last month, the press

recommended forming a commission to review the military retirement system. if this commission is formed the department expects to provide significant input to the commission. the department also expects that any proposals offered will be similarly presented to the congress and to this subcommittee for discussion and assessment. i look forward to continuing to work with each of you as the department moves ahead on this issue and thanks you again for the opportunity to testify and for your continued support of our military members and their families. i look forward to your questions. >> thank you, dr. rooney. we now proceed to ms. penrod. >> good afternoon. chairman wilson, ranking member davis and distinguished members of the subcommittee, thank you for the opportunity to come before you to discuss the military retirement system for our uniformed services. dr. rooney told you that the department has begun a review of military retirement and it's my office that's been tasked with this tremendously important

undertaking. the purpose is to determine the impact and feasibility of restructuring the statutory and policy framework for military retirement. we are aware numerous commissions and studies have criticized the retirement system. however, i would like to point out that the current system has supported the most successful l all-volunteer military. and should it be more in line with the private sector. to ensure during our review we get it right we're considering the major aspects of military pay and benefits along with the associated personnel and force management policies that have an impact on recruiting or retaining the all-volunteer force. we're not looking at retirement in isolation. our work has not yet complete from unable to report to the on the results of the review but i can assure you that sustaining the all-volunteer force and the men and women that so ably serve

our nation will be at the heart of whatever we do. look forward to your questions. thank you. >> thank you, ms. penrod and colonel strobridge. >> thank you for the opportunity to present our views on the retirement concerns. we thank you for standing up as champions both now and in the past to ensure military retirement incentives remain commensurate with the extraordinary demands of career service. the primary purpose of the military retirement package is to induce top-quality people to serve multiple decades under conditions few americans are willing to endure for even one term. after a decade of war in which career service members deployed time after time after time, with ever increasing odds of coming home a changed person, we find it shockingly insensitive that some now seek to curtail their retirement package to, quote, make it more like civilian workers. these are the primary incentives

that have sustained the career force in peace and in war. we're very concerned the recent proposals are aimed mainly for budget savings for scant regard for longer-term damage for retention and readiness. the fact is we already have considerable history with military retirement cutbacks. enactment of the high three-year average basic pay system in 1980 cut retired pay by about 8% for subsequent entrants. through the 1980s and 1990s, military pay raises were capped below private sector pay growth nearly every year. dramatically reducing lifetime retired pay for all the thousands of people who retired under those depressed pay tables. and in 1986, congress passed the so-called redux retirement system that cut lifetime retired pay value by more than 25% for a 20-year military retiree. at that time, secretary weinberger, secretary of defense at the time, warned congress that redux would undermine

retention and readiness which proved true a decade later and congress repealed it in 1999. recently proposals by the defense business board and the tenth quadrennial review of military compensation envisioned far more dramatic cutbacks than redux did. delaying most retirement compensation until age 57 or 60 even though the services don't want to keep most people anywhere that long. they proposed a investing option for people who choose to leave early. we believe this is a formula for retention and readiness disaster. that would have destroyed the career force had it been in affect over the past 10 years. some support resting on a principle fairness with private sector workers but it's an odd concept of fairness indeed that would dramatically cut compensation for those who serve and sacrificed the longest that paid more for those who leave early. defense leaders have sought to quell concern in the field by

saying they plan to grandfather the current force. but the redux experience proved that grandfathering doesn't avoid adverse retention effects. it only shifts them to future leaders. current defense leaders have repeatedly expressed support for significant retirement cutbacks for future entrants without a word about long-term retention risk. in our view that's an abdication of their responsibility to protect future as well as current readiness. we're extremely grateful that this subcommittee and the full subcommittee have stood up to highlight those retention and readiness concerns to the super committee when few others seemed so inclined. that concludes my portion of the coalition statement. >> thank you very much, colonel. and now we proceed to lieutenant davis. >> thank you for the opportunity to testify on this important

issue. the all-volunteer force has successful fought a protracted war due to the dedication and patriotism of our men and women in uniform. but we should not underestimate the pay and benefits keeping the force sustained during this time of challenge. many wrongly believe that the uniformed services received 50% of pay for 20 years of service. that's not the reality. the retired pay calculations is based solely on the basic pay excluding housing and subsistence allowance, personnel with 20 years of service earned retired pay that replaces 34 to 37% of their gross, gas pay and allowances. any fair share accounting should acknowledge retirees that have already given under the past budget cuts. hundreds of thousands retired under depressed pay tables between the mid-1980s and in the mid-2000s. they have forfeited 3,000, to $5,000 a year for the rest of

their lives. regarding to the change, some economists believe the consumer price index overstates inflation by failing to recognize that consumers change their behavior when prices rise sharply. when that happens they say people simply buy cheaper substitute products like chicken instead of beef. with other substitutes the compact car, a substitute for a full-size car? over time this leads to a major change in living patterns. the change in cpa would change an ef by $100,000. we don't agree with the cola cuts because it defeats the purposes of the colas. another proposal is to use the high five in lieu of the current high three. this would cut retired pay by 6% over four years. we oppose this because it is

just another way to devalue military service. the qrmc report suggests a 401k-type retirement payment starting at age 57 to 60. this would reduce retired pay for an e7 with 20 years of service from $24,000 a year, already a modest amount to a ridiculous $3,600 a year. this dramatic change would do grave harm for retention and recruiting. a recent fra survey indicates that 93% of the respondents if benefits were delayed, fewer people would join and they would serve shorter periods of time. the survey also indicates that more than 80% would leave the military sooner if military retirement was switched to a 401k plan. and 84% believe fewer people would join. career senior ncos are the backbone of our military and

their leadership guidance are invaluable. benefits likely result in many of them leaving the military early. and these positions are very difficult to replace. but the bottom line is the current retirement system is that it has worked as intended. sustaining a quality career force through good and bad budget times through war and peace, only stopped working when congress stopped it in 1986 and that's a lesson we shouldn't have to relearn. thank you. >> thank you very much. we'll proceed and each member will have a 5-minute period of asking questions and, again, we have a person above approach mike higgins who's going to be our timekeeper so you can almost look at his face and tell when the five minutes is up. i'd like to begin with dr. rooney and ms. penrod.

it's been widely reported that with the defense business board reform proposal last summer, that there was a great deal of distress among career service members. dod's reluctance to disavow the proposal as given rise to concern that there's strong support that dod for such reform. with this report, does dod intend to support the defense business board proposal? and then it's already been identified by both of you that there are studies underway as to how this proposal will affect retention. when should we expect a report on the effect on retention? >> yes, sir. in regards to our posture on the defense business board, you indicated that early on we did not come out adamantly against

it but i believe that recent statements by the secretary, the chairman and even in our opening statements clearly indicated that we are seeing the defense business board proposal as just one data point for consideration in review as we're looking at the overall retirement and compensation system. again, the key factor for us is that any change or any system, frankly, must ensure that we are able to recruit and retain the all-volunteer force and not at all damage the current faith that the troops have in us. that report has some very strong limitations. it is a data point for us and we see it just as that, as a data point. you also asked -- where are we in terms of a proposal coming forward? and as ms. penrod indicated, we have a group that's currently looking at a number of alternatives. and we're working closely with

the rand corporation to also help us in the analysis of that, again, with the idea that recruiting and retention are key factors to consider in any kind of proposal. so at this point we don't have a specific date. however, with the president's proposed commission, if that would stand up in the springtime, if that would go forward, we would be prepared at that point in time be very much informing the conversation with them. >> and ms. penrod? >> as dr. rooney was stated we're working with rand to any changes in the current retirement program. we preliminarily have the report of the bbb and it does have a negative impact on retention. that's what it's showing us at this point. we're not complete with that review. again as dr. rooney stated, it is a data point.

we will take that information and help us as we go along. >> i was very impressed, colonel and mr. davis, the facts that you pointed out -- people should know how this affects individuals. and with that in mind, what is your reaction that the retirement reform is unavoidable. what would be your response, each of you? >> the testimony we've heard here today from the dod witness kind of refutes it. where they say it's neither spiraling out of control nor unsustainable. their projection is that it's going to be the same percentage of basic pay into the future. i think the committee has statistics that's shown retirement cost as a part of dod budget have been relatively stable. the first time i worked on

military retirement was in 1977 and we showed projections at that time that critics are pointing out that the system would go broke by the year 2000 and we're here and we just fought a war since the year 2000 so i kind of poo-poo those kinds of ideas. >> thank you. mr. davis. >> i would agree with everything colonel strobridge just said and i would add, you know, the price of military retirement, price of military benefits is really part of the cost of fighting a war that we're currently involved with and the price of defending our nation and should be put in that category as well. >> and i want to thank all of you as i conclude because i can see your appreciation of the career, ngo's, the junior officers. we can, quote, get new recruits but the expertise must be maintained for the security of our country, of our ngo's and

junior officers. i'd proceed to congresswoman davis. >> thank you, mr. chairman. and, again, thank you all for being here. i would mention in my opening statement that we have 100 thousands of our military personnel who serve out the 20 years, though they may only deploy once if at all in a conflict theater versus those who deploy on many occasions. apparently we know in the last 10 years that's quite common and yet do not serve the full 20 years. how do you think we should go about looking at that issue and do you think it's one of fairness or is it, you know, just the way it is? >> to me the key purpose on the retirement system is sustaining

the career force. national defense comes first. i'm all in favor of service. i built my career on issues of fairness. but you have to sustain the system through peace and war through good budget times and through bad budget times and we have all seen periods in the past where we've pulled out all the stops to retain people when we've had service conditions so terrible for an economy that was so strong that we had to raise retention bonuses. we had to pay, you know, extra things. those are going to happen in the future as well. and when we acknowledge that the military service conditions are unique and vastly different from civilian conditions, the fact that we can only getting 17% of enlisted people to stay with the

current system to me speaks for itself about the arrested oo -- ardueness of the career. anytime you have a vesting system it by definition it detracts from a career incentive. it can't do anything else. and in bad budget times it leaves the government bidding against itself for their services, which only drives up costs. so to me, if you want to talk fairness, the first thing we have to do is be fair to the people who suffer and sacrifice the longest and that's the career person. and the last thing we should be doing is cutting their package to fund a better package for people who leave. >> dr. rooney? >> certainly. when we're looking at fairness and you brought up a good point because you were even talking about the range of people in deployments and all and that's why in my opening statement and you've heard other comments from

the department of defense that we look at compensation as a total package of which retirement is only one segment of it. so across that whether it's basic pay, hazardous duty pay, all the different aspects that go into compensation that's how we get that balance of fairness. the other thing in terms of the overall system for fairness is when people come into the military, they understand the system. they come in knowing what the various pieces are and as a result they're feeling because we're viewing it from not only basic pay but all the tenets of compensation up to retirement that we do get a balance of fairness. the point you did bring up, though, in terms of should we be adding a component to retirement to compensate for those people less than 20 years, that's one of the reasons that we're saying it's very prudent to be looking at military retirement as part of the overall compensation to

determine if there's something we should be looking alt something more closely. >> mr. davis, did you want to comment? >> yes, i just wanted to point out that we did a survey and that was one of the questions that we asked, 350 active duty personnel do you think it's fair for people, you know, to get a pension, you have to serve 20 years and 81% of them thought it was fair. so you know in the ranks of the military apparently there's no feeling, gee, i serve 10 years and get out, it's unfair because someone else serves 20 years and they get a pension and i get nothing. and i also would like to just to point out too, it's not under the jurisdiction of this subcommittee but if someone serves 10 or 12 years, of course, they're not -- they're then under the jurisdiction of the veterans committee. and they do have benefits, of course, such as the g.i. bill and a whole latitude of things they can use to basically get benefits from their service. >> right. thank you. yes. ms. penrod, did you want to

comment? >> i think i agree with you, congresswoman davis, that it is a 20-year retirement has sustained a -- an all-volunteer force. how do we know what the future will look like. it may make the military more enticing to come in if an individual thinks that they may have something they could take with them. also, even though you have the g.i. bill, i think that's an outstanding benefit, you still have an individual that will be separated possibly during drawdown with 12 years of service and so i think we need to look at and that's look at all programs. >> thank you. >> and we proceed to mr. kauffman of colorado. >> thank you, mr. chairman. i guess my first question -- i think some of the testimony today had referenced what the -- that it's a relatively low

percentage of payroll that supports the retirement system but nobody says what that is and i'm wondering if somebody could give me a percentage number. >> at this point i have some numbers that i would like to take down for the record. >> first of all, i agree with the secretary of defense when he testified before the house arms services committee recently and he said that if we -- whatever reforms we do it should not affect those that are currently on active duty and went in with the understanding this is what the system is when they, in fact, enlisted or were commissioned in the armed forces in the united states. and myself being a retiree from kind of an active duty and

reserve combination that i remember as i was approaching the 20th year mark and when you're a reservist and if you're injured -- not when you're on active duty, it's not considered line of duty, not misconduct would be the category and you don't fall into that. you report back for duty. i was in the marine corps reserve that weekend and if you're determined you can't do what they ask you to do because you sustained an injury skiing, then you're automatically out. and there's nothing there for you. i gave up skiing in colorado as i got closer to that 20-year mark just to make sure that nothing happened there as i got closer there. i just think that we need take a look -- not so much the reservists but i think the active duty component. and i disagree with the notion that we ought to go in the direction of all defined contribution. i just think that we're asking

our service members to give a lot. and i think there needs to be a component of certainty in that. so perhaps a more bifurcated approach that would be defined benefit with an element of defined contribution for those who would enter the armed forces after the effective date of the new system when it was put in place. so i just think that we -- this system needs to be reformed. it needs to be revised. it's something my father was under the system as a retired army master sergeant was a world war ii and korean veteran and i think that as congresswoman davis has said, things certainly have changed since then in terms of life expectancies and a number of other issues. so i just think everything we ought to look at. but i understand -- the defense advisory board only looked at one issue if i understand that.

only came across with one suggestion and that was completely defined contribution. is that my understanding? >> yes. that's the only proposal we've seen is one that is a defined contribution. >> i'm surprised by that. i'm disappointed by that. i just think -- i mean, if you look at the system for civil service or for members of congress, i think for members of congress and their staff, it's 1.7% a year for the first 20 years. it's 1% thereafter for the next 10 years. and there's a thrift savings plan which is a defined contribution part which is there for all federal employees. it's a lower, i think, factor -- i can't remember what it is for federal employees. but the difference between federal employees in the military or members of congress as you know -- and i'm not a fan of our retirement system. i think it ought to go. but for the military it's the fact that they don't have -- and we don't really want them to

have the sort of career protections that federal civil service have. so when you compare the two retirement systems i think you need to recognize that in a military system. and it has to complement the fact that they're all at-will employees when making determinations about retirement. so i look forward to working with you or all of you in terms of coming up with a new system. i'm certainly not going to say that the old system ought to be replicated going forward. i don't believe that. but coming up with a new system and i do believe we need to look at in particular those folks that serve less than 20 years that i think that they ought to recruit something for that. and i think -- we ought -- in the new system again for those who are not members of the armed forces yet, i think we ought to look at the notion that should you begin drawing the defined

benefit portion of your retirement, right at the end of -- the 20-year mark or whatever the mark is. so i think there are a number of issues that ought to be on the table. with that, mr. chairman, i yield back. >> thank you very much. we now proceed to congressman dr. joe heck. >> thank you, mr. chairman. i especially want to thank you for pulling this hearing together so quickly after my request. i want to thank all the panelists for being here today and providing your testimony. i agree that it's certainly reasonable to review the paying benefits and the retirement system of our armed services but where i disagree is when the defense business board's proposal is released publicly without much information given to our men and women who are currently serving in harm's way and i receive the emails and phone calls from folks wondering what's going on with their potential retirement and hearing firsthand what the impact was on morale in theater. not that they're not already worried enough about whether or

not they're going to get their next paycheck back home so their wife can pay the mortgage but they are worried what will happen when they hit their 20 year mark and what's going to go on with their potential retirement. the question if the current benefits package or the current retirement relevant i think poses a concern in that how do you define relevant? i hope that's not a euphemism for the cost associated with the retirement program especially when only 17% of the folks who spend their lifetime -- you know, enter the service wind up qualifying for a full retirement. i know it's hard enough in these fiscal times when we're trying to department how will meet the $750 billion reductions that this administration has already called for but is this review of benefits and pay taking place in a vacuum? or is it being looked at in conjunction with the amount that we spend on basing and facilities and the amount that

we're spending on hardware and weapon systems or is each one of these things being reviewed in a silo? 'cause my concern is we can have the best piece of equipment, the best weapon system but if we don't have the person to gain the site picture or pull the trigger like the great pilots i have at creek air force basemaning the rpa's now in theater, that weapon system really doesn't do anything. is this being done in a vacuum or is it being looked at across-the-board in the entire dod budget? >> i'll be happy to comment on that. no, it is not being looked at in a vacuum. we are looking, as you said, the challenge that we have for budget cuts. but as not just across-the-board cuts or arbitrary cuts but very strategically looking to what does our future force need to look like? and how then once we determine that future force -- how do we attract and retain the best people using compensation as the

tool to be able to again support that all-volunteer force, keep our current troops the faith of them but going to attract and retain. so it's part of an overall strategic effect how we will face not only the budget challenges but the challenges of the department of defense going forward. >> and i appreciate what colonel strobridge stated having lived through the years of having to give recruitment bonuses or incentive bonuses and then using stop loss to keep people in and now we're getting to the point where we're cutting the active duty force in both the army and the marine corps so how does that play into this decision? i mean, we're already trying to downsize the force on purpose and now we're talking about potentially changing the retirement program which may cause an additional exodus? >> actually, sir, when i was indicating strategic, i do mean we are taking to consideration that we are doing a force drawdown but we're also looking forward and acknowledging in

order in keeping faith with our current forces. you mentioned some specific capabilities so the future relies on new technologies and we may have new requirements for recruiting those folks. so when we're looking at what does this force look like and what are the attributes? we want to make sure our overall compensation package of which the retirement is one is the right combination of package. and that's why we're saying that there is no decision that has been made on any component of that but as the secretary has said several times we must put everything on the table because that is the prudent way to approach this challenge. >> and in my limited time just a quick final question, has there been set a dollar figure that is supposed to be attained either in retirement or overall paying benefits in order to pay the overall dod budget? >> not a specific one. >> thank you, mr. chair and i thank you for holding this

hearing. >> we proceed to congressman allen west of california. >> thank you, mr. chairman and madam ranking member as well and thanks for the panel for being here. and i guess i'm one of those guys that the ranking member talked about that did do a career in the military and was young enough to continue on to have -- i guess a second career which is kind of a laughable hypocrisy i got a 55% retirement and i believe in five years on this side i could get vested into an even greater retirement. so we can talk about that later. but as i sit here today, i am very concerned and it takes me back to the quote by george washington. where george washington talked about how future generations will regard their service to this nation based upon how well we treat our veterans. and i recall my father who was a world war veteran sitting down and talking to me about how great it would be to serve a career in the military so when i look at a career in the military, when i look at people who are serving in our military, that is a defined contribution.

and on the backside i think that we should be giving them a defined benefit for that contribution because of what they do. now, my first question is, do we still have the thrift savings plan for those men and women out there who, you know, may just serve five years and while they're in a combat theater they are allowed to go in that thrift savings plan so they can start putting away some money? >> yes, congressman west. we continue to still have the thrift savings plan. >> okay. now when we talk about comparing military service to the civilian sector did the private sector civilian sector have something that's equal to the uniformed code to military justice? >> no, sir, they do not. >> okay. in the private sector other than being a professional athlete, your position and your ability to progress through the ranks depend on your physical abilities and do we mandate that people have to get up at 6:00 in

the morning regardless of the conditions thereof to participate in physical training and activity? >> congressman, i cannot comment on private sector that sacrifices are not the same for the military personnel as they are for our private sector civilians. >> and i think that's my biggest concern is that what we ask the men and women to do ever since those men answered for the call in lexington and concord is different for someone just going to a bank or different for coming here and working on capitol hill. it's a very dangerous road when we start to go down the comparative analysis of the private sector or business sector to the united states military so i ask that we be very careful about that because i think we're already starting to make some decisions thereof. how many people do you remember what happened after desert shield desert storm when all of

a sudden we offered people to exit the united states military? i do. have y'all down any research as far as the degradation of leadership which is something that general martin dempsey talked about when he came and testified before us is couple of weeks ago? have we looked at that and what could happen as far as the regression of leadership? >> yes. i believe general dempsey used the term "hollowing" of the force and the secretary has talked about that is something we have learned many lessons from the past and we will not do anything to our compensation system so that we end up with that hollowed force. >> okay. any comments, colonel? >> i'd just like to say i know what you're saying about that. and, you know, from the enlisted side, you have, you know, senior enlisted people, sergeant, major -- >> you need first sergeant and sergeant majors. >> to nothing else with those people combined with the junior

officers a hard charging junior officer and you have a senior enlisted person who can, you know, have a wealth of experience with the military 20 or 30 years that they can, you know, explain things to the junior officer can call on them for their experience and that makes a very powerful combination. >> and i will testify to that as a young stupid second lieutenant when i first came in. colonel, you have anything you want to add? >> yes, sir. i think so many of these things and these analyses treat people in the context of human resources as if they are widgets in a box instead of thinking, planning human beings. and when we model -- i've got a lot of -- doing a lot of studies working with rand. i spent a lot of time working with rand. the problem with all these is

the models don't include things you can't quantify, such as sacrifice, such as time away from home. they include all the money people spend, you know, they can measure behavior. but they don't talk about -- there's nothing in the model that accommodates the chance that we might go to war tomorrow. you might be going to iraq every other year for the next 10 years. there's nothing in there that accommodates for the fact that we might do the opposite. we might stop a war or we might have a budget-driven drawdown and you built your plans on staying for a career and all of a sudden we're going to force you out. and those are the kinds of things that, you know, service leaders are always speaking additional flexibility, to be able to micromanage the force. and the only thing we know about those kinds of plans is whatever you plan for five or ten years

is going to be wrong because the world is going to change your plan for you. and to us, that is one thing -- when you have a very powerful career incentive like the 20-year retirement plan it's very resistant to day to day manipulation. and that's a good thing. >> thank you. >> and i just hope that our fiscal irresponsibility on this side does not become borne on the backs of our men and women and their families. with that being said, i yield back, mr. chairman. >> thank you very much, congressman scott of georgia. >> thank you, mr. chairman. i'm going to focus more on the gentleman and the ladies, i would like to focus on the 80% and you get nothing. and colonel, you were just

talking about the potential of somebody to go overseas every other year for the next 10 years, five tours and then you have a drawdown or a force reduction and the bottom line is, that person doesn't -- would not qualify even though they may have wanted to stay for 20 years, they would get nothing, is that correct? ..

>> can this fiscal environment, i think it's going to be a lot tougher for congress to authorize those kinds of programs. so we are going to be seeing less incentives. there will be some incentives, but probably less. >> of the 17% who received the benefits from 20 years, what percentage of them are enlisted? >> of the people who stay for cover? what percentage? probably about 70% i would think. >> so 70% are enlisted. i guess my question is, you know, i hear your objection to having, you object to having any other plan, is that correct? >> no, i don't object have any other plan. i object on the face of it to

saying that because civilians do these things, that the military should, too. the military is a very different system. it's built to serve a very different purpose. and so, to me and has to start with that uniqueness and not assume that what happens in the private sector is, any piece is a good thing. it needs to be evaluated on its own merits spent i certainly agree with you that they are different, but it do think it's necessary for this committee, and for us as a congress to do something that helps that 83% who don't qualify under the 20 years. there are many of them who have served many tours overseas, and i understand that we have to have our experience in our officers and maintain those things, but i also, i'll tell

you, i do think, i do think that we need to remember those 83% of the people who have spent their time and their families time and contributed a great deal to the freedoms we enjoy in this country. i see nothing wrong with him being free to choose a different retirement plan, on their own will. so we will work on that as time goes on. i would ask, mr. davis, would you give me that math again that you used where you said 3000 was the last number, maybe 24,000 was the first, and your presentation? >> that was 24,600 for 20 years, as compared to taking the plan proposed by the qrms he which was to put them in a 401(k)

they would never get the intel 857, i we cannot $23,600 a year, 401(k) benefit. spent how many years have they -- could you share that with the committee? >> if i could clarify, referring to chart we made, the 3600 would be the initial value of the defined-benefit retired pay. in other words, the 24,000 would be reduced by 5% for each year the person left before age 57. assuming and enlisted person leaves at age 40, that means it would be reduced 85%. so the defined-benefit contribution, or the defined benefit portion would be $3600 a year. there would be some additional amount that person would receive from their thrift savings plan that would be in the range of

10-$13,000 that they could start drawing at age 60. >> but that would be contingent upon how much money they put into their savings plan? >> correct. >> if i could see that math on that. i'd like to see the math on that. >> we have a chart on that in our formal statement. i can get it to. >> great, thank you. >> we now proceed to congresswoman hartzler of missouri. >> thank you, mr. chairman. ranking member davis. appreciate all of you being here. i wanted to start, colonel, and ask you to expand a little more on your comment earlier that you don't think grandfather and, if there was a new plan, you don't support having a new plan and his grandfather and in current members of the military. could you expand on your concerns? >> sure.

i think my point was, people think grandfather is a panacea, that everything will be okay as long as the grandfather the current force. i have a letter, the letter that i refer to that caspar weinberger wrote back in 1985 that went to tip o'neill expressing concern about the redux plain congress was about to enact. and he spoke, that letter spoke very eloquently on grandfathering. if you don't mind i would like to read it. while the changes we have been required to submit, tactically affect only future entrance, we expect an insidious and immediate effect on the morale of the current force. no matter how the reduction is packaged it communicates the same message. that is, the perception that there is an erosion in support from the american people for the servicemen and women for whom we call upon to ensure our safety. it says in absolute terms that

the unique and dangerous and vital sacrifices they routinely make are not worth the taxpayers dollars they receive, which is not overly generous. now, the issue, there was a line in there where he said basically you have to you have to categories of people serving side-by-side. and each know that they have different benefits. and that was a very accurate predictor of what happened in the '90s, where you have the people who are trying to reenlist people, say, even if they mislead them and tell them what the benefit they have, which when people find out that that wasn't true, they get particularly upset, or you have these people saying i'm sorry, but the benefit you have is not what your predecessors have. there's just no way those people go through 20 years serving together that that doesn't become a burr under their saddle. >> so you're not for any changes at all? you want to keep the system the way it is is now for ever? >> i know that's probably not

realistic to say they will never be any changes at all. the thing that i think we would have to, and very frankly there would probably be budget changes of some type. i think we have to start from the standpoint that we have tried some of these things before. the one that we know was a tragic failure was the redux system which compared to things that are on the table today was pretty modest. >> all right. are here from the department of defense representatives on why you nation this whole process? why do you think there needs to be some changes, the rationale? >> it's actually multiple purpose. one is that we are looking to our future force. and again, we talked about such concepts as we don't want to hollow out the force as we are changing. we know we are forcing drawdowns. we know our future force very

much can look different in terms of the type of force we must recruit, the qualifications, the technical aspects. to write their as we are doing that review, that prompted us to say, are we sure we have the correct pay benefits compensation package going forward. the timing of that review, and not only the speed but the deliberateness of it, clearly ties into our budget concerns going forward. and the budget that we must me and the reductions we must me. so all that is coming together at the same time. and again because we're trying to do all of the budget reduction strategically, and though they are interconnected, this does become part of that discussion but is not solely driven because it's a budget exercise. >> i wanted to jump to a concern that i have heard at home, and see if any discussion is taking place with this, about 30 seconds left, but is there any incentives currently in the

system, which i don't believe there is, to encourage people to stay 30 years? some of the concerns i've heard from some of my retired military at home was that right now we have many people retire at 20 years and we are losing that knowledge and all that experience. so is there anything being looked into encourage people to stay longer? >> actually as we look at our review, we look at the full force profile and agreed a 20 year retirement, the force today of the services they built a profile around that behavior. we do have, continue to have percentage points for every do you stay you stay in mr. of 20% over 100%. we do have changes that happened several years ago as far as retirement. but that will be part of your overall review. we have a model, estes said, rand passionate as steve said,

rand has a for a strong model to look at impact on retention but that just informs the process. we also have our senior -- part of the working group, all services are represented. coast guard is represented. guard and reserve are represented. that's where you have that piece of this review, and the experience. >> thank you. and i would encourage all of you, as you go to this process, you continue to get input as many people as possible affected by this as was most of congress. this is a very, very important topic to certainly people in my district, but no changes should be made lightly obviously. so thank you for what you're doing. thank you for the input, and thank you for your service. thank you, mr. chairman. >> thank you, ms. hartzler. ms. davis, do you have another question?

>> thank you, mr. chairman. i wasn't sure if we're going to have another round. but there are a few questions. and one is really to mr. strawbridge and mr. davis but i'm not difficult this is in getting input from all the people who you speak to, but i'm wondering within this discussion whether there are really some priorities perhaps that had been identified, whether there were some areas in which you feel that you could find savings, can you prioritize any of the benefits for us? what should be protected? what could be modified, reduced or eliminated? technology and, of course, that you would rather not see any reductions at all, even the targeting here is problematic. but are there some areas in which you could define for the committee that might be helpful? >> i think one thing have to recognize is we are here representing 34 organizations,

and that does require a wide diversity. we did have some differences of opinion on health care, on the tricare peace. in the end, you know, the kind of differences we were talking about were $5 a month, you know. and those were very significant within the coalition. we have a lot of debates over those. whether we should just say no changes. i think there are a reasonable number of groups that would say no changes, the system works, you know, this is what people were promised. we've got to stick with the. i think there are people who would be willing to discuss those things, but i think it's much tougher on retirement, very frankly, that health care. and even health care, when we were talking about that we were talking about relatively small differentials, the kind of things and health care that are on the table now, which were very disappointing to us who did

buy into a $2 increase on pharmacy fees, to then have the administration turn around before the even gets enacted and so, you know, what, no, we are going to raise that to $40. that's a big problem. and that raises some serious credibility issues that, you know, give, you know, support to the idea that give an inch, you take a mile. so that's a very significant concern. retirement, every retirement plan that has been put forth for the past four or five years, when you go back to look at the defense advisory committee for military compensation proposal, the defense business proposal, all of those entailed radical changes, way worse than the redux that failed. and so when you see that, i think will get our arms, you

know, hair on fire and say, i'm sorry, you are just starting from the wrong place. we are starting from how much money can we take out of it when what we should be starting for is, what should people are in for a career of service and sacrifice and to conditions that can range anywhere up to and including the point every other year for 10 years, or giving up her life, or coming back with ptsd and tbi, and not on your life but your families life is going to be changed forever. those are the kinds of things as congressman west said, that we believe have to be counted as a contribution. that's what people really pay in a career of service and sacrifice. >> thank you. i certainly appreciate what you're saying. i think we all do. appreciate that. if there are things that you can offer to us, that's always hopeful. mr. davis, i don't know if you want to comment further. i had one other question. >> i just wanted, you know, the

second is information but also to remember when looking at the retirement system, i think it's important to remember that our armed services are there to fight wars. and war is a young man or woman profession. and i look back at some of the stuff i did when i was in the marines, caring artillery shells and all that, the kind of activity that you do. i probably couldn't be able to do it today. so, you know, when you think about it, it's a young man's or woman's profession, and the retirement system should reflect that. >> thank you. if i may just for our department of defense witnesses, and you can do this certainty for the record because my time is almost up, could you also help us understand where you are looking to address other increased costs and expenditures that we have in our contract of services? i'd like to know what we're doing about that.

because the concern of course is that we are looking here at retirement benefits and other benefits to the military, and yet we see that despite the fact that perhaps you are trying to look at some of those costs, at the same time we are maybe doing away with some services from our civilian personnel that we would have to go back and then contract with the outside. and i'd like to know what else you're doing, how are you going about addressing those issues so we are talking about cuts across the border i know irresponsible and the other question she did say this is not the only thing we're looking at, of course. but i'd like to know how you're going about doing that and how far along we are in looking at in a lot of the contracted services that also cost us a lot of money. thank you very much. >> we will take that for the record, given our time. thank you, congresswoman. >> thank you very much. and during our whole debate i

was impressed several times, it was reference about military families. and as we are looking into the issues of retirement, the military families truly are of service and sacrifice. and i just hope that every effort is made to work with military families and get their input, because they really truly sacrificed so much, but they are counting on a very positive career, very fulfilling career for their spouses and for themselves. a question that i would have is for colonel strobridge and mr. davis. has the department of defense consulted with your organizations, fleet reserve, moaa, or had to consult with other military organizations and

associations for their input on this issue of retirement reform? >> not to date, no, sir. i think they're probably people who would prefer that they didn't. >> well, i hope, and mr. davis, you're a few? >> yeah, we have not been contacted for our input. >> well, i certainly know one resource you can be. and so i hope that you would be contacted. and i know how broad-based both of your organizations are, and i pay dues to roa and some others, too. so american legion comes to mind, vfw, retiree organizations active, and i just know that they would give heartfelt real world examples, firsthand, of the consequence of any reform

effort. i'd like to proceed to mr. coffman. >> thank you, mr. chairman. i was in the military come in the army on active duty during the first, well, reduction in force that i can remember which was in the early 1970s, post-vietnam. fortunately, there was no separation pay as was in the early 1990s post-gulf war and that reduction in force where i think they give a lump sum payment for separating, i think senior noncommissioned officers and officers who were forced out in the process. and i think that what is stressful for the population in a reduction in force is about there is no understanding of what the system is going to be

until they pretty much until they receive notice that they're going to be out. then there may be a decision that will help them, there may not, and that's unfortunate. and i think that's one reason why, i think it's important to have a reform that reflects some crude retirement benefit for people less than 20 years. and i think that's something that is important to look at, to watch out for. and then also, certainly i want to reiterate again that i think that whatever system we put in place should not impact the people currently on active duty. with that, mr. chairman, and less, are there any response from the pale to what i just had? >> i which is common to the separation pay that you're talking about, at least as far as the law is concerned those

are deemed, we don't think that's right, that when you look at the law it's hard to come to the conclusion that it is deemed a kind of retired pay payment. if you take that and then come back in the service and qualify for retirement, they're going to deduct that separation pay from your retired pay. so we don't like that but that's the way it is. in other words, under current law that is the retired pay outlet, the separation pay. >> just one final point, and that is on active duty in the army and marine corps, i served in combat arms. except my last tour in iraq was still a force fashion civil affairs. i've got to say, that pretty much wore me out. i think as a casual observer they will verify that. that it is, there's such a wide disparity in occupations in the

military. and i've got to tell there are a lot of people that people show up to work in the morning and leaving afternoon, and it's not a lot different, quite frankly than a civilian job. there are those jobs that are just tough. and i believe that if we can't recognize that in retirement we ought to recognize it and blessing up hazardous duty pay, plus an avid cd day, and all those other things, recognize people that don't punch out on saturday, on friday afternoon and go home, and just, you know, go day after day after day. and i've done that in the theater. anymore, twice. and it's tough stuff. so i think we need to recognize that certainly i appreciate everybody serves enhance its military, but i also appreciate that there are differences. and with that, mr. chairman, i

yield back spent thank you very much. congressman heck? no further questions. my goodness, colonel. congressman scott of georgia and? ms. davis, anything further? there being no further, thank all of you for being here. you can tell the high interest and appreciation for your service. and again, military families, what we are talking about our consequences far beyond today and we are looking for very strong and positive future. the meeting is adjourned. [inaudible conversations] [inaudible conversations]

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[inaudible conversations] [inaudible conversations] >> tomorrow more on federal budget cutting efforts as douglas elmendorf appears before the joint deficit reduction committee. he'll address security and nonsecurity discretionary outlays. live coverage begins at 10 a.m. eastern here on c-span2. and on washington journal tomorrow, megyn mccarter. she'll discuss her book, "capitol gains." you can read that article on atlantic.com, and then join washington journal tomorrow at 9:15 eastern to talk with the author as she takes your questions.

that's live tomorrow on "washington journal" at 9:15 eastern on c-span. >> although this headline proved false, dewey's defeat by harry truman was with iconic, and he continued to impact political history. this week on "the contenders," follow the career of thomas e. dewey, a dominant force in politics as three-time governor and influencing national politics in the elections of dwight eisenhower and richard nixon. "the contenders" live from the roosevelt hotel in new york city friday at 8 p.m. eastern on c-span. [background sounds] [background sounds] >> spend this weekend in knoxville, tennessee, with booktv and american history tv

and look behind the scenes at the history and be literary life of the marble city. on booktv on c-span2, the university of tennessee's body farm is four acres of decomposing human remains. dr. william bass on a real-life csi. also, a look at "roots" author, alex haley, and his life in knoxville. how haley fell in love with the city during a 1982 visit. and on american history tv on c-span3, a visit to the sequoia birthplace museum. an indian silversmith successfully created a system of writing for the cherokee language. also a visit to secret city. oak ridge national laboratory historian steve stowe on the lab's part in the development of the atomic bomb. and is knoxville a true southern city? saturday at 11 a.m. and sunday at 6 p.m. eastern. watch throughout the weekend on booktv and american history tv

in knoxville, tennessee. >> fema director craig fugate said his agency would have faced great difficulty responding to an unforeseen disaster at the end of the last fiscal year because of a lack of funds. his remarks came during testimony before a house homeland security subcommittee looking at 2006 post-katrina disaster response legislation. the director said the federal law has improved the federal response capabilities. from earlier today, this is about an hour, 20 minutes. >> good morning. the subcommittee on emergency preparedness response and communications will come to order. the subcommittee is meeting today to receive testimony from administrator fugate on the progress fema has made since the enactment of the post-katrina emergency management reform act five years ago. i now recognize myself for an opening statement.

i want to welcome administrator fugate to the subcommittee. welcome, sir. we appreciate you appearing before us, and i thank you for your flexibility in scheduling this hearing. fema certainly has had a busy year. with a record number of major disasters declarations, you have responded to tornadoes, hurricanes, flooding, wildfires and severe winter storms. a number of members of congress in this committee, on this committee represent areas that were impacted by natural disasters this year, and we thank you for all of fema's efforts. this hearing is a follow up on a field hearing the subcommittee held in clearwater, florida, my district, which, of course, is in my district, i said. in june which we received testimony from state and local emergency management officials and the red cross. the witnesses gave their

perspective on the post-katrina emergency management reform act and working with fema and let us know what is, they let us know what's working well and gave us their suggestions for improvements that could be made. today we continue that discussion, of course, with administrator fugate. i'm leaded to note add, administrator fugate, that your response to these recent disasters has received positive feedback from the members and emergency management officials with whom i've spoken. that is good nudes, and it is in some -- news, and it is in some cases due to authority of the post-katrina emergency management reform act which was signed into law just over five years ago, on october 4, 2006. i think we can all agree that fema has come a long way since hurricane katrina. but we have, of course, we know that there is always room for improvement. administrator fugate, i'm particularly interested in your

assessment of what is working well with fema, what requirements, again, the post-katrina emergency management reform act could be working better and what new authorities would enhance your ability to prepare for, respond to and assist in the recovery from disasters. a topic also worth discussing is efforts to mitigate damages to homes and businesses before disaster strikes, and i'm pleased that you mention this in your testimony, your written statement. as ben franklin, benjamin franklin said, and i quote: an ounce of prevention is worth a pound of cure. that's why i have introduced the hurricane/tornado mitigation investment act of 2011 which would provide incentives to individuals and business own ors -- owners to make improvements to their property that will help mitigate hazards. these efforts can help to reduce loss of life and property damage, speed recovery and also

save money in the long run. administrator fugate, thank you again for appearing here today, and i look forward to your testimony. the chair now recognizes the ranking minority member, ms. richardson from california, for any statements she may have. >> good morning. thank you, mr. bill bilirakis fr convening this hearing to evaluate fema's progress in mandating the reform act. i would also like to thank administrator fugate for appearing before the subcommittee today, and i look forward to hearing your assessment of fema's ability to manage effective emergency preparedness and response efforts. we're here today because just over six years hurricane katrina ravaged the gulf coast and was a sobering test of our comprehensive emergency management system. history reports that fema failed that test, and as a nation we learned how ill equipped the federal government was to manage

disaster recovery and response activities. determining who's in charge, who should coordinate federal, state and local response efforts, what resources are available and how to asquire needed -- acquire needed supplies efficiently was not done well. in the meantime, a nation watched television coverage of this horrific disaster. ironically, television news crews were able to get to the scene, but relief supplies were not. in response congress enacted the post-katrina emergency reform act. although the bill was not perfect, it made much-needed changes to our emergency response infrastructure. notably, it streamlined emergency preparedness and response operations by consolidating all components of the comprehensive emergency management system into the federal emergency management agency. it established a clear chain of command for disaster response activities by giving a federal coordinating officer, fco, statutory authority to head

disaster response coordination. it directed fema to administer grants and guidance to state and local governments to improve their preparedness capabilities. and it established something that you've been known for, administrator fugate, for implementing. it established ten regional offices charged with coordinating with state and local governments and nongovernmental organizations to develop effective regional disaster preparedness and response plans. the post-katrina emergency management reform act directed you, administrator fugate, to appoint a disability coordinator to insure that vulnerable populations have access to and knowledge of and means to evacuate, emergency housing and any other necessary resources in the event of a major disaster. under your leadership fema has made progress in implementing the post-katrina emergency management reform act. for example, you've taken significant steps in integrating

the public alert and warning system which i'm a strong proponent of which will facilitate effective public warnings regarding future public disasters. these warnings will give people like those in american samoa the opportunity to seek safe shelter in the wake of a major disaster. despite the progress five years after the enactment of the post-katrina emergency management reform act, significant gaps remain in our comprehensive emergency response system. i'm concerned that a combination of budget cuts and other obstacles will hinder our ability to realize our preparedness goals. for example, another issue of particular importance to me is one that i'd like to address later in my questions, specifically regarding the disability coordinator. and whether that coordinator has the adequate resources to carry out the responsibilities of this act. this coordinator was appointed in june of 2009, however, in the

full year 2011 the office of disability coordinator had a budget of just $150,000. and i asked about this last year: there was no request for additional funding in the full year 2012 budget request. i'm concerned that this budgetary amount may be the clearest sign of the priority fema places on the mission of this office. i will be interested to hear your comments on this issue and others regarding -- [inaudible] as this hearing progresses. again, i thank you for being here today, and i look forward to your testimony. >> thank you. i now recognize ranking minority member of the full committee, mr. thompson. >> thank you very much, mr. chairman. thank you for holding this hearing to review the post-katrina emergency management reform. a perfect storm is a popular expression. it describes an event where isolated conditions merge to create a radically-worsened situation. in the process deep and profound problems are revealed.

katrina was a perfect storm. hurricane katrina's devastation of the gulf coast revealed a federal emergency management structure that was disorganized, uncoordinated and seemed uncaring. in the aftermath of the storm, numerous investigations led to suggest changes in the organizational structure and the culture of fema. these changes were not to be merely window dressing. fema clearly needed to find a way to fulfill its mission, improve disaster response and regain the trust of the american people. congress acted and passed a post-katrina emergency management reform act. five years after the passage of that legislation, i think we can all agree that fema's implementation of the legislation is a mixed bag. improvements were made, but challenges remain. i am pleased that administrator fugate is here today to report on both the improvements and the remaining challenges.

i look forward to hearing his testimony. but before we get to mr. fugate, i want to take this opportunity to talk about disaster relief. i hope that we can all agree that funding for disaster relief should never be held hostage to political ideology. when a hurricane, wildfire or earthquake strikes a community, it does not ask about party affiliation. this is why i was troubled to read that some on the other side of the aisle are now accusing this administration of using the federal disaster declaration process as a way to turn low-cost storms into federal disasters. instead of addressing the underlying need to assure adequate money in the disaster relief fund, claims are being made that the act of declaring a disaster is some kind of political game. they are saying that declaring a disaster is simply a way to drain fema's aid from the

federal government, weaken the capacities of the states to respond to disasters without federal help and divert fema from preparing for catastrophic events. these are conspiracy theories worthy of a tom clancy novel. so before we begin this hearing, let me set the record straight. in 2010 there were 81 major disaster deck declarations. in 2009 there were 59 major disaster declarations. while the numbers are clear, the reasons for the increases are summit to interpretation. subject to interpretation. it could be more disaster declarations occurred because more disasters have occurred. it could also be more disaster declarations occurred because states with stretched-thin budgets are seeking disaster assistance. it is unlikely that fema is forcing states to take disaster declaration funding. but whatever the reason, given the increase in disaster

declaration a compassionate congress would hear the cries of those who have lost everything and provide help. instead of this congress has called for fiscal discipline. fema's budget for management and preparedness program has decreased. fema's management budget was reduced by ten million between fy-2010 and fy-2011. fema's predisaster mitigation fund was cut from 100 million in fy-2010 to 50 million in fy-2011. fema's grant program directorate was cut from 4.165 billion in fy-2010 to 3.38 billion in fy-2011. this is a situation that's not sustainable. as we move forward, and i'm hopeful we can focus on the facts and provide the help that people in the united states truly need. mr. chairman, i thank you for calling today's hearing, and i yield back. >> thank you, mr. thompson.

other members of the subcommittee are reminded opening statements may be submitted for the record. i'm pleased to once again welcome administrator fugate. of course, before our subcommittee today. mr. fugate was appointed by president obama to serve as the administrator of the federal emergency management agency and was confirmed by the united states senate on may 13, 2009. prior to coming to fema, mr. fugate served as the director of the florida division of emergency management, a position he held for eight years. mr. fugate began his emergency management career as a volunteer firefighter, emergency paramedic and, finally, as a lieutenant with the alatch what county fire rescue. mr. fugate and his wife hail from gainesville, florida. administrator, your entire written statement will appear in the record. i ask that you summarize your testimony, please, and you're now recognized, sir. >> well, thank you, mr. chairman, and ranking members.

staff spent a lot of time coming up with a bunch of facts and figures on how we've gotten better, how we've improved under the post-katrina format, and after i kind of read it, i kind of took the approach that hive heard today. we've still got a lot to do. so i want to focus on what i think are the key elements of the reform act and how they played out in the last couple years that i've been here in response to disasters. i think one of the key things that came out of that act was we were able to move away from utilizing only the stafford act as a tool to look at how we prepare, respond to disasters. and that's important because if you look at the stafford act, you must wait until you have a request from a governor. it then has to go through the process of whether the president declares it a disaster, and then you begin the elements of that response. as we saw in katrina, as we've seen in other disasters up and down the seaboard this year across numerous river floods that reached records, if you

wait until it's that bad, the response will take time. and this is one of the things, really, i think we've spent a lot of time in fema trying to educate our own staff that we no longer start with the stafford act. it is not our enabling legislation. it is the post-katrina emergency management reform act. it establishes fema. it establishes our mission, our structures including the regional office structure, it clearly defines many of the activities that we are to engage in and prepare for and recover/respond and mitigate activities. but i think it's most important that we recognize that that access and the likelihood that an event would be declared or potentially require federal assistance, the federal government must not wait until a governor requests or identifies that they are overwhelmed. it says we shall be prepared and will begin response with the tools that we have including the ability to use, as ranking member thompson spoke about, disaster relief fund.

prior to the president getting a formal request from a governor. now, this may seem rather bureaucratic, but i think it's important that if you wait until you know how bad something is to begin a response, you've lost time. you have to be able to respond in those events that will likely require federal assistance by anticipating needs, not waiting for the formal assessments, nor waiting until the full impacts are realized. other aspects of that allows us to do things such as prestaging teams or equipment in areas that we think will need help. when you look at what happened with hurricane irene, we were actually starting down on the virgin islands and in puerto rico, and as it approached, everywhere from florida to maine and inland who were potentially going to be impacted by this hurricane. we didn't wait for the states, we were able to send teams in to link up with the states and begin working with them as they go through the preparations and decisions about evacuations and sheltering.

and not wait until they're hit and then ask for help. that ability to get teams in place, to have equipment prestaged, to really work across the federal enterprise with our state partners as they're supporting local government, integrate in our faith-based and community-based organizations and i think really start to be able to embrace and integrate the private sector, particularly those sectors that provide goods and services so that we're not duplicate what they do best, but focus on the areas where they're either expecting significant outages or challenges. that response sped up, in many cases, the time from when the incident occurred to actual results were happening. people were on the ground, resources were available. and i think this is one of the things that we really continue to focus on is that the post-katrina emergency management reform act gives us speed. not haste, but speed in responding to and insuring we get resources in there. and i would be remiss if i said this was entirely a fema effort

in that much of the response we saw, particularly in the tornadoes across the southeast and up in the missouri area from joplin, much of what people saw on television -- the search and rescue teams, the mobile communication command posts -- all of that response was actually generated through state and local resources mutual aid, paid for and built and trained and exercised with the preparedness dollars this country's been investing since 9/11. if those dollars had not been invested, those teams built and trained and exercised and equipped, the response this spring would have looked vastly different because those local teams would not have been there, the equipment would have come from further away, we would have had to deploy more of our federal assets to those disasters which would have taken more time to get there. as it was, as we saw, unfortunately, time and time again in tornadoes which oftentimes give us little warning, rescuers and teams from throughout the area across state lines using the emergency management system's compact

which receives funding through our program were there on the ground doing their job. we were able to focus quickly then on the recovery challenges that were going to be faced by those communities. so if anything el, the way you see this act has been able to insure we work as a better integrated team to focus on the survivors in the local communities with a clarity that we don't have to wait until everybody is overwhelmed before we begin the response. >> thank you very much. be i have a couple questions, so i'll recognize myself for five minutes. again, fema has clearly made strides in its capabilities since hurricane katrina, i know you addressed some of this. what lessons have we learned from more recent disasters about gaps in our preparedness and response capabilities, and what additional authorities do you need to further advance fema's response capacity? >> i'm not sure yet about additional authorities, but i do know that there are some areas that we are working on, and this comes back to some of the technologies.

we've been working very aggressively with the geospatial nga in providing us better information. one of the things we know is our ability to get information before people actually get on the ground to begin describing impacts can help all of the team make better decisions in early response. and so this is an area where we have a tendency to wait until we're down there in an area to get information, and we're waiting for things to come up through official channels when they're busy responding. two things i think we're focused on is how do we get information from various types of sensor platforms, but on the other hand, how do we get more information from the public. this is one of the things that i'm seeing more and more of and the benefits in these recent disasters. often times we were getting faster and more accurate information from people that were sending out everything from social media to local and national news media that had reporters on the ground that were sending uplinks of those disasters. and looking at that going, you know, just based upon that, i'm seeing a lot of damage. we can go.

but how do we do this in a way that we can get this information out that's action able and speed up that response. and the faster we're able to adjust to those issues, the better our response is. so i think it's one of the challenges that we look at, you know, how does the public share information, how are they communicating, and are we listening to what they're telling us, and then combine that with a lot of the capabilities that we now have working with nga on how to use better geospatial information to put together a better operating picture so we're responding faster. >> good. as part of the national preparedness system, ppda requires that the development of various frameworks to enhance the ability to prevent, protect against, respond to, mitigate and recover from natural disasters and terrorist attacks. as part of this requirement, a requirement of -- [inaudible] fema recently released the national disaster recovery framework. i understand fema is in the process of reviewing the national response framework.

what is the status of this review, and what is fema's role in the development of the other frameworks, and what is the status of that effort? >> status is ongoing. we have various delivery dates that are published. the national disaster recovery framework was in its inception when ppd8 was being developed, so it conformed to one of the elements of that framework. the other framework will be updated as we go through the process of implementing ppd8. fema's been charged by national security staff and secretary napolitano for the coordination role, but some of those goals will actually be managed by other agencies that are more focused on some of those activities. but we have the overall responsibility for coordinating all of those documents and all of the frameworks under ppd8. >> thank you. earlier this year subcommittee held a hearing on i-pause, and ranking member richardson mentioned it, and i'm also a

supporter. we heard from assistant administrator about the plans for the implementation of the personal, localized alerting network. would you, please, provide an update on the status of a plan. and when you and chairman genachowski and mayor bloomberg unveiled the program in new york city this summer, the intent was for the plan to be operational in the new york and washington, d.c. by the end of the year. give us a status, are we on track for that, and how would you say the cooperation between the fcc and fema has been through this process? >> well, let me start with the cooperation of the fcc. the chairman and i have been working closely on this and other activities including the national emergency alert system test november 3th. and there's a lot of activities that i think we've built a good partnership of working in their roles of regulatory, dealing with licensed carriers and the broadcast industry, in our role working with the user groups and the warning systems. as far as i know, things are on track, but i'll go back and make

sure we are doing that. one of the things we had hoped we are seeing is there was a time frame for industry to adopt as we published the rules the technology to do the plan so you had the personal location capabilities in cell phones. from my understanding we're actually seeing industry adopt to that faster and so that they're actually going to exceed a lot of those deadlines. but i'll go back to damon and get an update on the status of all of those. >> please do. i'm very interested. i know the ranking member is too. i yield five minutes to the ranking member, representative richardson. >> yes, thank you, mr. chairman. um, as i said, administrator fugate, regarding the disability coordinator, in each region is there a disability, is there a person responsible for disability coordination? >> as far as i know, i think we finished hiring the last one. and several of them, in fact, in all of the recent disasters they've been deployed and particularly across the

tornadoes, were deployed into those joint field offices. most recently, the recent hire in region four based in atlanta was deployed into north carolina which was a tremendous asset helping us work with the hard of hearing and deaf communities. >> is that that person's sole responsibility in each region? >> it is their primary responsibility. again, we also like to remind ourselves that we're all emergency managers, and we do what we have to do during disaster. their primary responsibility both preparing for and responding to recovery and the mitigation is looking at being inclusive across our programs. so not only do we look externally at our response functions, but also internally to make sure we're being ip collusive, everything from meetings to accessibility in our buildings. >> what else are those individuals responsible for? >> i would not be aware of any additional specific tasking, but i can get that in writing. >> okay. what i'd like to know specifically is, is there a specific person responsible for disability coordination in each region, and if so, what percentage of their work is

inclusive in doing that. and of their other work, what is that, and how much time does that take. um, the disability coordinator has a budget of approximately $150,000. what's used for that? >> i'm not sure that's the full extent, and i'm not sure how we're accounting for it. we just hosted a conference that i know was far in excess of that on disability integration hearing in washington, the chairman spoke at that. we've deployed these folks out, we've done training, we've been working on guidance. so one of the things i these to look at is this being reflective of all the money across various programs, or is this just part of that. so i'd like to respond in writing and get you the full accounting, all the resources we're pulling from other elements. you're correct, i did not and for a line item. we took a lot of these out of activities we were doing and focused on disability integration and, basically, got

different parts of fema to provide the resources. >> request okay. so we look forward to that in writing. as you know, i represent the largest amount of samoans outside of samoa. what current energy system do they have there working right now? >> as last i knew, we were going through the testing phase of the island-wide siren system. that was one of the concerns we had after the tsunami that there had been previous studies, but they'd not actually carried out and implemented the warning system for the island. my understanding is it's been going through the test. i don't know if we've certified it yet. but that was to address the issue of not having island-wide warning for a tsunami which occurred in 2009. >> okay. at our july hearing, the federal warning and alert witnesses identified an increase for training as managers as a critical area to address. what status have you taken to increase training with managers in i-pause, and then further i'd

like to build upon, it's my understanding that there's a test of the emergency alert system sedge scheduled for november 9, 2011. although i understand the is not a pass/fail, i'm interested the know the performance of the system and how it will be evaluated. can you speak to that? >> i'll ask damon to provide you an update on training. i know they've been working to do more training on i-pause in the emergency management community. regarding the national emergency alert te, this is the first test outside of alaska of an emergency alert notification which would be a presidential notification since the creation and all of the history of the emergency alert system back as far as the emergency broadcast. it has never received a national test. so this will be the first time that we'll actually begin the activation as an emergency action notification from the white house as the origination. and we'll utilize this to look at how the system performs and how that message is carried out.

because this is a legacy system, it does not have a test function, so we're using the actual alert notification message, and it's important that we remind people that on the date this is just a test, we're working with the fcc and the broadcasters to insure that. but this will be the first time, an historic test of the system on a national basis. >> mr. fugate, i just want to say although we can all make improvements, it's been very assuring to see you at the numerous disasters that we have had. i think you've been very proactive, you've been very visible on television providing updates and reports, and i think it's been a huge change and want to thank you personally for your work. >> thank you. >> i yield back. >> i now recognize the ranking member of the full committee, mr. thompson, for five minutes. >> thank you very much. i'd like to echo the sentiments of ms. richardson. i've been here pre-katrina,

post-katrina, and i've seen a different fema. obviously, it's always a work in progress, but i've never seen you as administrator not address whatever problems you were presented with, and i thank you for that. just for the record, um, mr. fugate, just so the public understands that a declaration of, from the presidential level is only after the state and local requirements based on some kind of request have been made. can you just kind of walk us up that chain? >> yes, sir. this goes back to, um, under the stafford act only the governor of a state or a territory is authorized to request from the

president a disaster declaration. and that disaster declaration is based upon the governor certifying that that event has overwhelmed state and local capabilities. we look at impacts on a per capita basis for public assistance to determine part of that, but it is not the sole determination. it can often times be based upon the significant impacts of what the trauma is to a community. in addition, we look at individual assistance. again, it is not based on a homeowner's destruction. it is based on the overall impact to the state, and it is based upon the size of that state. so you will see disasters declared in much smaller states because of the population that in a much larger state you would assume would have more resources to deal with that. so it is not based upon a numerical formula for that assistance. it's always based upon the governor certifying this exceeds their capabilities, and they are formally requesting the president declare that disaster.

>> thank you. so the president on his own by law can't do it without the necessary request from that governor. >> the president has some limited abilities, but in most cases and in all the disasters that we have dealt with the only time that we have responded to is when a governor hats made that -- has made that request. >> thank you. if, in fact, fema in its prepositioning and mobilization efforts was limited in doing so based on some standard of, um, offset, what would that do to fema's ability to respond to a wildfire, hurricane, tornado if, if an offset had to be identified before you would be able to move?

>> to be honest with you, sir, what i'm looking at is what is the fund balance in the drf and how the money gets there really is now secondary to that. what i did see as we approach the end of our current fiscal year last year, our response levels cropped d our response funds dropped to a level where we would have been extremely compromised to respond. we looked at the various options, but when that balance drops below a certain amount and that amount is often times, you know, up to about a billion dollars, when you look at the cost of the response to some of the large-scale threats this country faces whether it's earthquakes in california or a major hurricane making landfall in, let's say, miami or tampa or up in new york, response cost is not in tens or hundreds of millions, it literally can quickly escalate into billions of dollars. and our national level exercise we did this year, initial response costs estimates were about $1.5 billion. so when you're sitting this with

a fund of only 100 or so million dollars at the end of the fiscal year, it begs the question, mr. chairman, how will we respond to the next catastrophic disaster? and that is one of my greatest concerns is. we should not look at the drf just for the disasters that have been declared. it's also those funds needed to respond to the next no-notice disaster that we have to be prepared for. >> to what extent have you directed your staff to close out, pass disasters that are still on the books? >> we've taken a tiered approach. our first goal in looking at open mission assignments from previous be disasters that the federal agencies had completed but they still had fund balances, so we closed those out. that returned over $2 billion last year. the next steps have been looking at projects that were completed and the states were no longer drawing funds against, but they had outstanding balances.

and working with the states we were able to deobligate those dollars, and that was over a billion and a half that we were able to recover in the past year, and we expect be about another billion in the next fiscal year approximately is what we're looking at. as we get to those recoveries, we'll start looking at these older disasters which still require -- there's no more money, but our first goal was to get money that was obligated but was not going to be used back in the drf so we could continue paying for the more recent disasters. >> thank you. just for the record, can you provide the committee with a status report on those disasters that are still open -- >> yes, sir. >> -- whatever the accounting is? thank you. i yield back, mr. chair. >> thank you. now i recognize the gentleman from pennsylvania, mr. marino, for five minutes who was, obviously, affected by the storms, his congressional district. >> thank you, mr. chairman. director, it's good to see you again.

yes, we were affected by the storms in pennsylvania, but i want to commend you and your staff. i know we've had communications during our hurricanes and irene, and i see pat sitting behind you, and he's quite the trooper. he was on the phone with me a dozen times when we needed water, we needed food, and we needed strategic changes made. and i want to thank him for the service that he provided. i know he got a promotion, but, pat, i still have your cell phone number, and i'm going to take advantage of it. you brought up a good point on being notified, and just briefly go into how important it is for states to be in touch with fema so you can get on the ground running. and that, there are many indications that you didn't have that in katrina. you know, there are also indications that just the request, requests weren't asked,

or they with respect asked for in time. how important is it? >> i think it's absolutely critical. all the lessons i've learned over history is when we're legalling with these types of events, and i'm going to break this into two pieces. those that we're dealing with that are recoveries and those that are an active response such as we saw with irene, it's always hard to be effective if you're always identifying yourself as a local, state fema or federal perp. so to get in there quickly, be responsive this anticipating needs versus waiting for things to get so bad that it overwhelms before you get the next request. so i think that's one of the hallmarks of the post-katrina emergency management reform act is really getting rid of these artificial divisions. saying, look, when it hits that level, we've got to work as one team. and it should be something where we're literally passing paper up the food chain to get an answer. we should be able to work together to work and solve problems quickly. >> do you have the authority that you need now, post-reform

act, to step in even if a state fails to request for whatever reason and say, look, we see this as a disaster, ask we need to come in the -- and we need to come in and assist you in doing preventive measures. do you have that authority as far as you're concerned? >> >> with we can do quite a bit without a formal request from the governor to preposition supplies, move resources in. but the -- i don't know if post-katrina reform act can address it, sir, because you're seat getting into a constitutional question. as we reserve the police powers for the state under article x of the constitution, again, i think we find it much better to get our teams in there with the state and work those challenges behind the doors to get things done versus waiting until people fail. so i would say that our goal is to get there early, work with the state, anticipate needs, not wait on their request, and where we can advise and help get to a better decision faster. >> well, i'll surely be

supporting you in that aspect, and if we need more legislation, i'll be taking the lead on that with you as well. i know we did a lot of things right in irene the last few weeks and over the month. and my district is an example of it. i've never seen the feds, state and locals work so closely together. but tell me what was, what you realized there this last round what was not effective and what can we do differently? >> well, i'll pick on one aspect of this because it's going to come up, and particularly when we deal with flood events is looking at the national flood insurance program. one of our challenges is we have communities who have chosen not to participate in the national flood insurance program and they get flooded, it severely limits our ability to provide individual assistance. and it is to an effect we're holding individuals responsible for the tail your of local governments to adopt and join the national flood insurance program. so it often times puts us in a

bind where people have been flooded, they've had losses, their neighboring communities are getting assistance, but they can't because their community didn't adopt the national flood insurance program. and i would think that it would be, to me, make more sense to put maybe the burden back on the local governments and look at their public assistance versus the individual assistance. and i realize with the flood insurance program our goal is to get people at risk to purchase flood insurance and have that protection so the taxpayer's not having to pay for flood damages. but it is an area that it will be difficult. it's part of the reason why we have to send out remittances when we provide assistance to people and they with respect in a flood insurance program, and as ranking member thompson can tell you, that is a difficult proposition when we get to that point. >> look, i know you need the funding. i was one that stood up in the house and said, look, let's not argue what's going to happen here, let's just get the funding out. and my district appreciated it. i think there are enough inefficient agencies here in d.c. that deserve to be cut, and

those funds that we can, hopefully, make certain that you have so you can serve so well as you have in the past. thank you so much. i yield back. >> thank you, and i now recognize the gentleman from michigan, mr. clark, for five minutes. >> thank you, mr. chair. administrator fugate, appreciate you being here. i represent metropolitan detroit which includes the city of detroit also, includes the northern border with canada. a couple questions. my first deals with promoting interoperability among communications with our first responders as well as with our federal officials along with our canadian counterparts. and let me just illustrate that. there was, according to one of our local law enforcement first responders, a few years ago there was a accident on the

detroit river. that first responder had a hard time communicating to the coast guard about it, and in turn none of them could notify their canadian counterparts. as a result of the new law in 2008, fema established the disaster emergency communications division. particularly, how does this division help coordinate response on the northern border or could be used to coordinate response on the northern border in a way that woulder interoperable communications among first responders with their canadian counterparts and the federal authorities? >> well, we'll start with the disaster emergency communication function. i think it does two things. one, it helps bring in and reestablish communication to local and state jurisdictions that have lost it in a disaster. but a more important element that we saw was really beneficial is helping states

develop their communication plans. again, i'll be honest with you, those have been state-sent rick, and the question you raise is interesting because i know secretary napolitano is looking at how do we work the cross-border issues that are transnational but in a response world, first responders can see each other across a river. and how do you get better integration there. i know that our region five administrator is working with some of your shop on this, but@one area that i would like to take back to secretary napolitano as a concern you've raised and look at how our plans which are really focused on the states could be tied into more activities at dhs particularly with the coast guard, immigration and cus toms, some of the others that are working across the border. because we know the first responders are. and i think that's kind of an area we'll go back to the secretary, say this is an area where the committees maybe could work close hi and maybe with our

canadian counterparts. >> thank you very much. and, administrator, one other question, and it deals with how can we best prepare citizens who are struggling right now financially to be prepared in case of disaster? you know, in the city of detroit our city, our region, we've lost more jobs, more people, more homes than any other city or region in the country over the last ten years. so in downtown detroit in particular we have many people that have special needs who may be physically challenged, get around with wheelchairs or other type of devices to help them with their mobility. we also have folks who are struggling every day just to provide for their own basic needs just financially, just don't have the money to do so. so how can fema help better prepare individuals who are

struggling right now to be able to be prepared for a disaster? >> well, not to sound trite about this, but i think we oftentimes make the entry level into being fully prepared to expensive. even people of means look at this and say that that could coe hundreds of dollars. i think we've made that such a high bar is we want to start out with more basic questions. and, again, your office and folks can help get this word out. you don't have to make sure you've got everything, but just start with the most basic thing. do you have a family communication plan? we know for a lot of folks they don't have -- they're very mobile. they use mobile communication devices, they use their cell phones, they don't have anything else. do they have a plan of what to do? we saw here with the earthquake, you're not going to be able to get dial tone, but do you have a back-up plan, do you have rally points, there's someplace we can meet? be often start with the basic steps of developing your family

communication plan, how you're going to let friends and families know and where you're going to go if you can't get home. we'ral sensitive to the fact, and this is one of the things we've been working with our state partners on, durable medical goods and other supplies that may be needed for people that have additional resource needs. and we're really trying to be focused on making sure we're inclusive on the front end and not as an after thought when a disaster strikes. >> thank you. >> the gentleman yields back, correct? >> i yield back. >> okay. now i recognize the representative from the great state of texas. you're recognized, sir. >> thank you, chairman bilirakis. administrator fugate, we've been plagued in texas by wildfires this past year. of the disasters fema faces, wildfire bees can actually be mitigated while they're going on. so i have a two-part question for you to begin with. first, can you outline what

fema's responses have been to the wildfires in texas, and how has fema and the federal government as a whole cooperated on bringing the resources necessary to mitigate those fires as they're going on and afterwards? >> well, the two pieces of this, i'll start with the last one first because the lead agency for coordinating federal assistance is the u.s. fire service, forestry service, agriculture through the interagency, and we support them there. on the financial side of this has been through the issuance of a record number of fire management grants that are fire-specific as well as a major presidential disaster declaration focused on individual assistance in some of the more recent fires and a large number of homes. the wildfires are merely a symptom. what we've got is a sustained, long-period drought that doesn't seem to be ending. and one of the challenges that i experienced in florida, that our farm management programs are

really designed around large, centralized fires. and what we have in texas is a lot of little fires that will grow into the big fires. so there's quite a bit of activity going on across texas. a lot of it's being done by volunteer fire departments. aye asked my -- i've asked my staff to look at some of these issues, but my concern in texas is this is not a situation that's improving, and it's not a fire by fire. it is the understood lying drought. until that drought breaks, my concern as to wildfire situation in texas will continue to be active, and we have to continue to look at our tools on providing assistance both through our interagency process with the us forest service as well as the financial assistance through fire management grants and declarations. >> well, short of praying for rain, i would appreciate if your staff could get with my office and the rest of the texas tell gaition to see what, if anything, can be done to improve that situation. um, i also want to move over to

the eas just for a second and shift gears. you've got the test coming up. i would imagine having been in broadcasting since i was 16 years old, i see firsthand the flaws of the ebs and what it has evolved into. is fema looking at with the advent of new technologies like cell phones, text messaging and the internet coming up with a new technology to either replace or supplement eas? >> yes, sir. in fact, that was some of the remarks that ranking member richardson and the chairman were talking about with what we call ipas. it's taking advantage of technology and using protocol to go across all devices. part of this is working with the fcc where personal location alert notifications can be geographically tagged to your cell phone based upon your location as well as the ability to now operate across a lot of

different technologies. >> and my concern with that as we saw this the earthquake up here, the cell phone network especially in times of disaster is substantially more fragile than we would like to believe. um -- >> that's correct. and, again, if we were trying to use the cell phones for the way you would be doing voice traffic, it would not work. but cell phones are always radios, and can the cell towers actually have broadcast functions that you can actually send one-way transmissions to. and that's the benefit of that. the other benefit is rather than alerting everybody in an area we can specify those areas that are geocoded to the threat so when a tornado -- remember how we used to have to alert the whole county? now we can -- >> is that based on tower location or gps from the phone or both? >> it's based on the phone knowing where it's at. we don't track that information. it just tells everything in that tower area to alert. and it doesn't track the actual phones. the phones are self-aware, but

the system doesn't monitor the phones. it just broadcasts to that specific area. >> all right. i appreciate your response bees. thank you for being here, and thank you for your hard work, and i'm yield back. >> thank you. i'll now recognize the gentlelady from new york for five minutes. >> thank you, mr. chairman. we're talking about personal communication systems, from administrator, how you can give information to the public. what troubles me is that the public is not able to send a 931 text messaging to -- 911 text messaging to public safety dispatchers. whether it's in a natural disaster, whether it's a situation we had at virginia tech where there were young students in a lockdown situation, and they're sending 911 negligences out there on -- messages out there on their cell phones believing fully they're going to be heard, and we don't have the capability. i find that to be a national embarrassment. i'm not casting apersians, i'm just saying how do we solve that? fcc will say it's going oven

over at homeland security, homeland security might say it's fcc. what's preventing that? there's a generation probably from my age on down or lower me on down the expectation is when they send 911 on a cell phone, it's going to be received by shall be in a position to help them. and very sadly, that is not the case today. >> i'm going to get my staff to have the fcc respond in writing. ..

>> we have to adapt the way the public communicate, not necessarily force them into lazy systems. that's one of the challenges as we move forward. >> i appreciate your attention and i would urge you make that a major priority because natural disasters or natural disasters or in lock-in situations or any kind our public needs help, they are assuming they are reaching us. we have a situation where gunshots were fired in one of my suburban high schools outside rochester. 50 kids at 911 messages and they thought they were received. i would like this to be a major priority because i think it could be a tremendous help. if you are talking about pilot program's, i'll sign up right now. i sat down with many dispatch operations throughout my seven counties and they are ready. they need resources to get going. i commend you on your attention. you have so many issues in this country to pay a two -- pay

attention to. i want to make sure we don't lose sight after some flooding in the spring, and i can give your copy today again because we mail this out. this is from our new york delegation. asking for assistance, if you could please commit to reevaluating the governor cuomo's request to reverse your denial of assistance to areas that were flooded in the spring. i still have farmers that are never going to behold again and might economy relies on my farmers planting, harvesting, getting to market. if you take another look at that as well. you probably have the toughest job in america with all the different disasters that come your way whether the fires in texas. who would have thought upstate new york would've been taken to an earthquake, a hurricane, a tornado all within a couple weeks? we are living in seems like unprecedented times but hope you're up to the task. i'm sure you are. if there is anything we can do to assist you, we are partners in protecting the american

people. thank you. >> thank you. does the gentlelady yield back? >> yes spent if it's all right with administrator fugate, i think it's such as an important topic. i will begin i recognize myself for five minutes. as part of their effort to engage in the whole communicate, and i commend you for that, administered, you have include a rotating seat for the center. housed the initiative working? >> it's working very well. not only are we getting the private sector a seat in there, we're really looking at some of the things that will speed up our ability to see what they see. 's such as really get to the point of the major big block stores, recognizing they don't provide everything but they're a good indicator of how areas are impacted, giving us live data on store openings and closures a we can see what's going on. we virtually saw this when we're dealing with the i storm earlier this year. it's kind of hard to remember that far back when i storm across the center u.s. moving to

the northeast. that they were literally giving us updates on store status in real-time as we are making decisions about where we may be the generators. we saw was in puerto rico when i read it. we were getting reports of flooding. they came back and give status of drug stores, hardware stores, grocery stores that pretty well told us that the bulk of the services were attacked and our focus was really on flooding and some of the higher elevations where several towns were destroyed. that real-time information made us more comfortable with a decision that the governor's request was not, for more resource but focused on recovery so we could shift those attention to the east coast of the united states. without the information we would have been concerned that we didn't have all the information and what if we didn't send the supplies, would we get behind. retailers were assuring us, they were up, running, the airport is up. that information coupled with governors request made since and we were able to be shipped our resources down to the east

coast. >> follow up the emergency management officials i've spoken with see this engagement with the private sector as a very positive step. however, they have expressed concern about the ps3 program. they're concerned while fema has instruction place for the program, it is yet to create and send for participation with the private sector. recognizing that ps prep is a voluntary program. what can we do to better engage the private sectors and encouraged him to take place, take steps to enhance the preparedness? >> to be honest with you, mr. chairman, i think when the program was turning out we are looking at the private sector as getting a certification to be able to sit at the table. in some ways what we found is that there should be an entry requirement to be a part of the team. they're doing it already. we need to work closer. i think ps-prep going through an

evolution from and i'll ask my staff to come back to you with more specifics but i think one of the things i learned in this process is often times when we start programs with good intentions we find we maybe are not going to win without we're going and we need to reassess. i think this is a airy of how we reassess that program to get better participation at the same time recognizing there maybe some entities that will not participate but they're still going to be part of the team. >> okay. i think if you have suggestions for us as well we can work with our constituents. i think that would be very beneficial as well. i'm interested in your assessment of the national level exercise 11. what are the main lessons learned from the exercise? how are we sharing these lessons with participants, state, local, tribal level? >> that's a large exercise and in the short time i have, i would like to give you some written responses to that.

one thing i haven't had a chance to talk about but i think has been tremendous improvement in our capability, and that is the resolution of the issue of applying federal forces to the state, particularly active duty forces when the government has the national guard on state active duty and running realities of how do you manage that. under probe in those initiated by congress in forming the council of governors to work with national guard and governors as was with department of defense we now political dual status commanders. this is a program that's been enthusiastically supported i must say by north, and department of defense to take national guard flag officers in all the states, train them as dual status command where they can now command at the request of the government and the designation by the secretary of defense and the president, command folks state active duty national guard under one commander.

not having to two separate joint task force. and international exercise they showed the ability to bring in federal forces in support of the state along with in the national guard, minimize the confusion and the duplicity of having multiple joint task force operating in the same state. so i think this is one of the things that we were able to look at in exercise, but i think it's one of the huge unheralded we have in this country of resolving i think once and for all the issue of how we bring active duty forces to the governor in a way that does not duplicate or replicate what they are doing to the national guard, and workers wanting. >> very good. thank you. i now recognize ranking member richardson for five minute. >> thank you, mr. chairman. mr. fugate, i need to come back to the eas test. first of all i want to clarify, does eas test include all the territories and all the states, everyone or just --

>> my assumption is yes, because this will be an activation of the emergency alert notification which we of presidential message and a national message. so my understanding is it should go out to all the systems but i will verify that. we than two separate state tests in alaska to test the system, but this'll be the first time we will be activating it across the entire country and i will verify that it will go to the territories. >> if it does not are you committed to including an? >> absolutely. if it isn't, it has imported do with a legacy system them any intention. this is one of the things we're hoping as we move to get past some of the limitations in our existing infrastructure. >> when we were talking about american samoa and their alert system test was this one and the same forward to having a separatist? >> this was a separate test certified the outdoor warning system. this was a key component that, when the tsunami warning system,

issues warnings there was no outdoor warning systems and american samoa so as a testing of the system. >> has that already occurred in? >> i will have to get back to you. i know they were doing it but i don't know if they complete the tests on the. i really don't have that all microchips. >> if you could supplies the results of that. as i said, i don't believe it includes a pass or fail. in particular could you tell us how the data will be gathered, what would be the caps identified and improvements to the system may, and is there a specific timeline that you have associated with its? >> the actual test itself will be looking at all of the primary entry points for the system, activate the local primaries and how many of those stations that are supposed, one of the things but emergency alert system it is always voluntary except when a presidential notification occurs because we don't have a test capability. this is the only one that will trip everything because it's

designed to automatically engage all of the retransmit functions. so the tests will be how far did it go and women are caps or breaks in the chain? it starts a chain, a primary entry point that then set off their tones which within activate other receivers. and because this is the one function that was built in the broadcasters are option everything else and they can set the record to manual or delay, this will be the first time we'll see if all of the systems go to. the first part is, did that happen and where the bricks? the other part will be as it went out, did we see any difficulties? we know of some issues that are germane to the legacy systems that will be a challenge with this one. >> i apologize. i have two minutes. will your assessment include improvements that need to be made? >> yes. spent i'm sorry. just that. and then, do you have a specific timeline when you anticipate being able to give us this report? >> i will defer back to david

and get an update on what we expect to get back on that when we have a report. >> i have three really quick questions spent i will give you more time. >> is going to give me more time. one of the issues that i found and american samoa was that they owed prior money to the government and, therefore, because of that were hesitant at extending on additional services beyond the initial whatever it was, 72 hours. had to establish a new process or haven't had a discussion of how to deal with may be states or territories that might have a has to situation? >> the issue of those that still owe money from previous disasters or previous grant programs is one we're looking at of the process and whether or not and how we go forward. we know it's going to be a challenge there and american samoa. there's also other territories that are facing the same situation. i will respond back in writing but it is again similar to other processes where is the money under ig or general accounting

office finds money is a backward look at a collection process which will it offset future costs or have to be tied to some of the reduction. >> so if you could supply this committee of two currently owes how much they owe, what's the process of paying it back. last two questions. twice now we have had colleagues who have brought forward a concern about the grant and whether the funding should be intuitive level since one. could you please share your particular feedback of why you think it should stay the same or change its? >> as we present the options, she made the decision she can no longer continue to fund all of the cities and the list and need to focus on those that were in the top tier based on a variety of information we used to make those decisions. given the amount of funding i think that would be the continued recommendation as we present to her this year as a look at this year's appropriation, with reduced funding.

fully fund the top tier cities versus reduced funding across the board. >> if i'm hearing you correctly if we're not to reduce funding, which some folks on this committee have advocated for, we might have a better ability to assist all cities? >> that would be an option to look at. >> my last question is, for full year 2012 the proposal level of funding refers to -- for first responder is less than half the amount congress appropriate two years ago in full year 2010. congress appropriated a total of 4.17 billion in grant funding for first responders. further, h.r. 2017 is enacted by congress, the grant funding will have been reduced by almost 60% within two fiscal cycles. how do you plan on addressing these cuts to ensure the regions have adequate resources? and i want you to know, i'm asking you this on the record and intent upon bring it back up when the committee then discusses things like cutting

what i believe very reasonable level. >> the short answer is that with these reductions of funnies we're looking at what we can do to maintain current capabilities and putting emphasis on those items that are more critical to the national interest and national capabilities which means that everything will be able to find and then they have to be decisions about what cannot be supported. but looking at things that are rooted signed to be at a national interest and have capabilities to support the national threats. again as we saw with a visual aid for the past disasters one of the things we know is making sure that regional mutual aid through state directed responses is the most effective use of these resources. so looking at how we can leverage more regional response capabilities with fewer dollars spent if you could provide to this committee want, in light of the proposed cuts, what you view would fall within the national realm of being a national

interest and what potential things could be cut if in the event we have to operate at the levels you have been given. >> we will do that. >> thank you, sir. >> i recognize the gentleman from mississippi, the ranking member of the full committee, mr. thompson. >> thank you very much, mr. chair. mr. today, will you comment -- mr. fugate, we comment on their efforts to get fema to start buying locally in disasters and whether or not that effort has rendered a positive result? >> yes or. early on when i got to fema one of the things we've done is we use a use a lot of national contract, kind of one size fits all. it is forced to administer. but it tended in this bind resources and bring is outside the disaster area when they were already there in the community.

after several disasters, particularly when i served in haiti i realized that one of the flaws in a system by doing that is we're not putting any money back in the local economy when it's at its greatest need. and so we adopted a philosophy of buying local and hiring local whenever possible to put money back in the local community. in many cases at no additional cost to taxpayers and sometimes a savings because it's faster and it's right there. i would say right now it's been mixed but where it has worked i think it's significant in that we can go to local computer store, we can go to a local vendor can local print shop and we buy services for people that are in the area that are trying to get their lives back together. what i know from all the things i've seen, small businesses are the most vulnerable. if they don't get work quickly they don't survive. i think as this we can if we can buy local services wherever possible, we will benefit not only the community itself but ultimately speed the recovery.

>> thank you. there have been some issues in fema on an ongoing basis. provide us with your efforts to resolve many of these issues spent first of all, it comes back with one of the things are looking at is we have a remediation going on in florida, and what we have worked with with the ig on this one, i think what we're going to do with the state is go back and do a remedial training and provide them with additional guidance oversight as they're issuing the grants. we've also put into our office fraud investigation, the title vi functions for investigating those complaints, because again we felt it needed more focus on those complaints when they came up. so i think it's two parts. what is important piece of it where we it where we to have the complaints and investigations and determine if it needs to be referred to the ig.

the other part is the education to make sure on the front and providing grant guidance people understand the requirements of title vi and our comply with their, particularly these large projects. >> thank you. can you provide the committee with some current statistics on the oh complaints and what have you, say, over the last two years, not now, just come back to us with it and, to give us how many have been resolved, how many are ongoing, this kind of thing, and whether or not you have looked at that situation and whether or not you will recommend changes are what have you going forward. i think it would be helpful with respect to recruitment, i couldn't let you get away with that recruitment, with the issues of recruitment. we are still, i guess weekly,

getting gained by constituents who are receiving letters, two questions. to what extent can other constituents expect these letters to come? but on the other hand, except for the katrina victims, a disproportionate number of people have been misplaced, bad addresses, things like that. and i'd like to see whether or not when letters go out and those individuals will move to houston from new orleans, and subs going somewhere else, that

basically, through no fault of their own, but from an address standpoint you still have been in houston. i would not want somebody who is reseller, getting themselves back together and now all of a sudden because they didn't get a letter, they would, in fact, be breaking the law. and if you come up with a solution for that, if not, when you do it would be very helpful to people like me who have constituents getting those letters. >> yes, sir. there's going to be more passionate more lives. that's an actual fact. they're still a lot more to go out for recruitments. regarding, we similar to the last known address and when that letter comes back and what do we do? i've asked staff and with a briefing on and i will provide provided in writing is we have a

process with a third party try to track and any additional financial records, tried to locate a person. one of the concerns i know that was raised, with penalties and it is passionate interest ticking and when she referred them to treasure for collection? that's the area where i don't have an exact time i because i don't know what we do as far as how long it takes was to go through due diligence and try to locate them. and it's generally because they're not responsive where we have exhausted our ways of locating them that they would actually get referred to treasure to see if they can recoup there. because when you point out when you send a letter to them the first step is to see if they're going to appeal that if there's another information that was lacking in the initial application that may mitigate that, or they can apply for forgiveness if they don't have financial ability. but asked staff, we do use third party to try to track folkestone. what i don't know is what is that timeframe that we go before we would say we are unable to serve this letter or we are not getting response and go to treasure and start occurring penalties and interest. >> thank you. i appreciate the.

i have a couple of questions and we will finish up. thanks for your patience. i really appreciate it. with regard to mitigation, i know you believe in a strongly, but i believe, and that's why i filed my bill to encourage businesses and residential owners and to rebuild. but i feel that maybe the federal government is just encouraging folks, and this is all we have, the authority we have is to basically rebuild the way it was before, instead of building stronger and better. that way building, the structures are more resilient. comment on that how we can improve things with regard to that. >> i have found that i will put a lot of emphasis on the stafford act, so it's just a section member, does me think

anybody else but it's part of the stafford act is as if you damages, you've got public or eligible nonprofit and you damages and we are going to give you money to repair it, we also need to look out, does it make sense to build it back better to reduce future damages? and under that session would look at things such as cost-benefit analysis that says we realized the building code may be for 110-mile an hour growth, but if you got wiped out by hurricane and we go this route back to maybe 103, 140, then that billy survives the next time and that's not a good investment. and the stafford act, this is my guess tied tied to the actual damages. we have another part of the program called section 404 which provides an overall percentage of funds that state at which the medication that doesn't happen to miss a beat damage did -- tidy damage properties. and particularly with some of the funding we've seen we know that many states and local committees be looking at those additional funds of how to

reduce future flood lost. tell you what, drinking we saw a lot of areas where they've done things such as buyouts that in previous years had flooded severe to have much less impact even though they were seen records let's. we've seen elevation work. we've seen safe rooms work. so again it's one of those areas that is important. but the problem with these programs they're always after we've had a disaster. i think the greater mitigation actually comes back to states that are willing to develop and implement as we did in florida, building codes appropriate for the hazard and a tremendous difference that made in homes built prior to that building code and the performance and the '04 and '05 hurricanes was so dramatic. you can literally fly over neighborhoods and tell when the roof was built. so again i put a lot of emphasis, if we're going to spend federal tax dollars to fix something, build a back better. down in charlotte county they lost all seven of their fire station. the building code required to be

built back to the wind hazards but the reality was they get hit with a category four hurricane. it doesn't make sense that will take public safety building and only build them back to the code. we need to go code plus so they survive the next hurricane. so the fire crews are not losing the equipment and the stations are there to respond to the aftermath. we are very much supportive of continuing the practice. where it makes financial sense. >> one last question. again, require fema to develop a training program of waste, fraud, and abuse, federal disaster relief assistance. comment on that and what's the status of that program? >> we've been breaking that into training. one of the areas we focus on our leak was are, through our chief procurement office, as was looking at overall training for folks to recognize in our national processing tenders when

people call him. there some steps we take to try to rule out bogus addresses and things like that to minimize that. but also things to look for that would raise suspicion, where we define instances of fraud and individual systems we refer those for investigation it and where we find cause we refer to the ig. but i think what we've been trying to do is convince people we can be fast and not have that kind of abuse to the system we saw in previous disaster. that means you've got to change how you look at things. you can't hold onto the in and try to capture. our most recent audit that we got from the outside auditors on our, the high which is an outlier, an extraordinarily large storm, double-digit down to less than one percentage point error, but we continue to look at this of how do we minimize error rate without putting undue burden on people applying for assistance. but and also look at everything from our contracts and how we do this is, how we proceed to do

her business. and we be more than happy to provide you with at the. had another request one very similar. >> thank you very much. that will conclude the hearing. i want to thank you for your testimony today and i want to thank the members for their questions. members of the subcommittee may have, they will have some additional questions for you, and i'm sure you'll be able to respond in writing, administrator. and we ask that you respond of course. hearing record will be held open for 10 days. of course, with out objections the subcommittee stands adjourned. thank you very much. [inaudible conversations] [inaudible conversations]

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>> from the texas book festival last weekend,. >> president calderón strategy is one of kingston strategy going after the head of the stay, you chop off the head of the snake and the rest of the snake does. that's been the idea. unfortunately, the reality has been very different spent while almost all of the other founding fathers are thinking primarily of the colony on eastern seaboard, jefferson is already dreaming of his empire for liberty that will go all the way maybe to the mississippi, maybe up the missouri, even to those great harbors on the pacific, san diego, monterey and san francisco. >> so i had covered the military and cia after that in the years before and after 9/11, and as a reporter i had seen things grow up around me that i wasn't sure what they were. people i've know for longtime disappeared into worlds that didn't exist before, or they had

new titles for agencies that i'd never heard of. after 10 years of working in that realm, you sort of say what is going on? >> decided to call it the ripple effect which was a chapter titled because i realized that every time we use water, it sets off a ripple effect. a series of consequences that most of us are unaware of. >> watch everything from both tvs coverage last weekend of the texas book festival online at the c-span video library. archived and searchable, watch what you want when you want. >> congressman barney frank, ron paul and joe barton recently introduced legislation making online gambling legal in the united states. the house subcommittee today held a two and a half hour hearing on that issue. among the witnesses, former senator al d'amato, who now chairs a group called the poker players alliance.

[inaudible conversations] >> the subcommittee will come to order. good morning. today we turn our attention to a controversy in america, should internet gambling be legalized, and if so, what role should the federal government play? we have to purchase things represent on a panel this morning, and if i were a betting person, i would wager we're going to have a very interesting and. and the chair now recognizes herself for an opening statement. in many ways, the debate over legalizing internet camera is a lot like texas hold 'em poker. three cards are dealt face up. if it's any further expansion is a good bet, can online gambling be regulated effectively? and what role should the federal government play to protect american consumers from sharks?

this is a flop we've been dealt for today's hearing. then there's the turn card with billions of dollars sitting on the table can congress afford not to get involved? and finally the river card. what impact would legalize internet gambling have on american consumers and the u.s. economy. clearly the stakes are high and a showdown is likely on capitol hill in the months ahead. as chairman of the house subcommittee on commerce manufacture and trade, this is an issue which i will be following very closely to make certain americans are dealt a fair him regardless of the outcome. the purpose of our hearing is to simply take a close look at the face up card. the things we know after eight years of legalize regulating gambling in the united states. today we'll hear from both sides of this important yet very contentious issue. one thing we do know is this. the vast majority of americans have gambled at some point in their lives. according to the ucla campus studies program, approximate 85% of u.s. adults have gambled at least once. 60% in the past year, what's

more, some form of gamma is legalize in 48 states plus the district of columbia, the only two states without legalize gambling our hawaii and utah. gaming quality and regulation is generally handled by the state although the federal government has been involved in shaping the boundaries of what is not permissible. the legal status of online gaming is a lot more complicated. in 1961 congress passed the interstate wire act, more than 20 years before anyone had ever heard of a thing called the internet. yet according to the justice department online gambling is under the interstate wire act because approach the use of wacky mutation for the interstate facilitation or transfer of wagers. in 1988 gamma in u.s. began to proliferate after congress passed the indian gaming predatory act addressing the jurisdiction and authority of tribes to establish gaming on their land. since its passage tribal gaming operations has seen tremendous growth. the ravenous last exceeding

$26 billion. speaking from my own experience, with seven casinos located in my congressional district tribal gaming has been a huge plus. it's created thousands of jobs are difficult economic times and the tribes have been great neighbors, contributing regularly to charities and civic events. unfortunately illegal gambling has been growing in popularity as well. so in 2006, to combat the proliferation of illegal internet can when congress adopted the unlawful internet camera enforcement act. this effectively outlawed interest in online gaming in the u.s. by printing gambling related businesses from accepting payments in the form of checks, credit card payments, or electronic fund transfers relating to unlawful internet camera. the law also establishes fines and penalties for banks and financial companies that process such payments. in april of this year three of the type poker websites were shut down and 11 people indicted for bank fraud and

money-laundering raising new questions about the law. proponents argue the statute has not raised in the gimme. it is driven and grant an offshore was shocked can operate with impunity. legalizing internet gambling the are you would allow them what action allow the government to provide greater protection for consumers. proponents argued that internet gimmick is legalize the u.s. would realize significant tax revenues from online beds that are currently address to non-us gaming company. america's wager $16 billion last year on internet poker sites alone. those who want to keep the ban on in a gamma in place argue that repealing the current law will expose more americans to serious problems such as compulsive gimli. they are worried about an increase in fraud, money laundering and organizing crime. still others have expressed concern that state budgets could be harmed by the loss of lottery revenue and an impact on existing legitimate gaming operation. so as policymakers the issue of

legalizing internet gambling certainly raises a lot of questions for us to consider. how effective his current enforcement of online interstate gaming? what, if any, form of interstate gaming online should congress consider allowing? what consumer protections exist for online game today, and do they need to be strengthened? how would any easing of legal restrictions on internet gaming affect consumers and others. hopefully at today's hearing will have a better idea of whether we need to hold him or to fold them. so with that unhappy to recognize the chairman from north carolina, mr. butterfield, the ranking member of the subcommittee for five minutes for his opening statement. >> let me thank the chairman for convening this important hearing today. this is a topic that i've heard so much discussion about since i've been in congress and i'm just looking forward to the six witnesses that we have in front of us. and hopefully you can bring us perspective that we have not heard before. or perhaps you may be able to reinforce some of the views that we have heard.

as your ranking member, madam chair, i look forward to working with you on this issue. congress is no stranger to this issue. we have grappled with how to best address it for some time now. my good friend, congresswoman shirley berkley talks about this very often. both to us privately and in our caucus meetings. we want to keep her involved and try to bring some closure to this issue. part of the reason why i think is because members of congress, just like all of our constituents across the country, have very personal feelings about gambling. certainly in my community, there are divergent views, and all across the country is this thing. some are strongly opposed, all forms of gambling, while others see it as entertainment. the debate should be over whether kim is moral or not moral. instead we should acknowledge that internet gambling, gaming

is happening now all over the world, including here in our country where online gaming has been treated as illegal by the justice department. as a result the american internet gamblers have turned to unregulated foreign offshore entities for access to games. the offshore entities may not provide consumer protections for those who gamble. and it is the u.s. oversight to ensure u.s. citizens are not harmed. there's often no legal recourse is for consumers who have been wronged by bad offshore actors. there's also the small issue of money. last year alone americans wagered $16 billion just on internet poker. while that money went back to players in the form of winnings, the overwhelming majority remained offshore, unregulated and i'm tax. with our significant national debt, a commonsense solution seems clear.

we need a robust debate on whether internet gaming should be legalized in the u.s., and if so, we would need an oversight structure put in place to ensure that, to ensure consumers the strongest possible safeguard. games like poker and bingo are as ubiquitous in the u.s. as baseball and football, and are played by young and old alike. but technology, technology has indeed evolved, permitting individuals to participate in games of chance and skill in real-time and remotely. instead of embracing a new twist on an old game, our inaction has let americans spend their money offshore, and at their own peril. permitting internet amy introduced -- could yield tremendous financial benefits to struggling federal and state coffers through unrealized direct and indirect tax revenues. it would also allow oversight of

and accountability for the industry's business practice. most importantly we would have the opportunity to create and implement the strong consumer safeguards that each entity would have to fall. having anytime access to gamble raises significant concerns. compulsive gambler would no longer have to expend any effort like driving to a casino in order to play the game. a mouse click and a credit card number are all that he or she needs to play. but with no human interaction with the house, there's no one and no way to cut someone off if they have played too much. before long, that same gambler has maxed out his or her credit cards and faces of the dreaded bankruptcy. of worse, he turns to criminal activity to finance his habit. while my example may be extreme it is very possible. it happens daily at conventional

gaming houses. people ultimately must have personal responsibility to know when enough is enough. but when the line blurs, safeguards must be in place. that is why any legislation that permits internet game in the u.s. must, must have protection in place to mitigate compulsive gambling. consumer protection must be in place to ensure that the games are honest and fair and truly randomize. economic boom that could result from legalize internet gaming is perhaps the most compelling reason to get serious consideration consideration. hundreds of millions of dollars in revenue could be realized i struggling states. tens of thousands of jobs could be created all across the country to directly support the new industry. considered de facto and struggling state of our economy i strongly believe that all potential revenues should be considered to return us to greater prosperity. thank you, chairman. i yield back i yield back. >> i thank the gentleman, and in accordance with committee rules, the chairman has yielded his

likeness to me and i would have recognize the gentleman from texas, mr. barton, chairman emeritus for three minutes. >> thank you, madam chairwoman. it's good to have senator d'amato on the panel and i see former congress and john porter in the audience. it's good to have you here. poker is the all-american game. president richard nixon finance his first congressional campaign partially with poker winnings from world war ii. our current president, president obama, is reputed to be a very good poker player. iphone to play poker, believe it or not, in the boy scouts. so if you learn something in the boy scouts, it's got to be a good thing, right? [laughter] unfortunately because there is some chance to it, while it is a game of skill, there are those that think we should not allow poker to be played for money on the internet. consequently we passed a bill or law several years ago that's unenforceable.

it's a bad law regardless of which side of the debate that you are on. i have introduced a bill as the chief sponsor to remedy this, into a micro sponsors are barney frank and ron paul. i will postulate that if you have a bill that barney frank, joe barton and ron paul all four, who can be against it? [laughter] i mean, we have covered the spectrum. you can't see this in the audience, but this is a photocopy of the registration from yesterday, a person who's in the audience today sign up on bodog.com to play poker for money. he deposited $50 got a $5 bonus for making a deposit and he got a solicitation that if he could get more people to sign up, he could get an additional i believe $200 in poker chips.

people are playing poker on the internet in the united states for money today. we think as many as 8 million players per month play poker for money online in the united states per day, or per month. having said that, it's not regulated, and so the sides are offshore, overseas, and consequently outside the ability for us to tax the winnings, to regulate to make sure that it is a fair game and everybody has an equal chance to win, based on their skill. the legislation that i've introduced, h.r. 2366, if not perfect. but it would remedy most of the major problems we face today. i want to thank chairwoman bono mack for having this hearing. i want to thank the ranking member, mr. butterfield, for

what he said in his opening statement. i think we should have a robust debate. perhaps there should even be an additional hearing, but at some point in time in this congress i hope we can move 2366 or something similar to it, madam chairwoman, to let everybody in america who wishes to play poker in states that allow it to do so. and a bill that i've introduced is a state option. if the governor of the state says there shall be no internet poker played by residents of that state, it does not happen. happen. so weird are not preempting the states, but in passionate if the state thinks it's okay we set up a regulatory scheme and a taxation scheme so that we have a fair game and everybody has an equal chance and future president nixon's and obama's can play on the internet for money and use those earnings to join us. with that, madam chairwoman mac, i'd yield back the balance of my time spent i think mr. barton.

>> thank you, madam chairwoman for yielding. i went to college in the state in 19 any sort appreciate your service. i'm from kentucky and is all you know in kentucky where famous for our horses. with two of the greatest racetracks in the world at churchill downs in louisville, and keeneland in lexington. we breathe the world's best horses at one of them. nomad how you cut internet gaming will affect the horse racing visited expand on linking or result in less gaming dollars being spent and tracks. fewer dollars in the racing business doesn't just affect the tracks, bridges, jockeys and trainers. it affects thousands of other jobs in these communities that depend on the horse industry. because of this concerns the effect on horseracing must be considered in the expansion of online gaming. i look for doing from the witnesses and my college on the underlying issue of online gaming legislation. however, as the chairman of the

congressional horse as i must remind my colleagues that we cannot overlook the impact that any legislation would have on a $50 billion decline industry. hithis is not a one state issue. the horseracing industry to support over 1 million jobs nationwide, we cannot ignore the support industry as we consider changes to online game. thank you, madam chairwoman, and i yield back i yield back spent i thank the gentleman, and now we turn our attention to our panel. we have one panel of witnesses joining us today. each of our witnesses is prepared and opening statement that would be placed into the record to each of you will have five minutes to summarize that statement in your remarks. for introduction, one witness is very well-known to many of us, former united states senator from new york, the honorable alphonse d'amato now serves as the chairman of the poker players alliance. we welcome you. and we have advisory board member of fair play u.s.a., also

testified with keith whyte, executive director of the national council on problem gambling, we have kurt eggert, professor of law from chapman university school of law. we have ernie stevens, and our final witness is dan romer, director of the adolescent communication institute at the united states. good morning, thank all very much for coming. again, you'll be recognized for five minutes. to keep track of the time to our lives and timers in front of you. when the timer turns yellow you will have one minute left. please remember to turn the microphone on and bring it close to your mouth, although we might hear you, the tv audience might not at home. so it's very important to remember to do that. so senator d'amato, we are very pleased and welcome you and recognize you for five and. >> madam chairwoman, thank you so very much. let me wish you a belated very happy birthday. understand yesterday you

celebrate your birthday. i'd like to thank you again on giving us an opportunity to testify an issue which i care very much about. indeed, in my capacity as chairman of the poker players alliance i've been privileged to represent a million 200,000 americans who have joined our organization, and to love this great american pastime. they love playing poker in their homes, casinos, cartoons, charitable games, and yes, on the internet. i want to congratulate the committee for holding this hearing, and opportunity for getting a better understanding of what the status quo is as it relates to poker and internet. let me say, status quo is badly broke. and it benefits no one. although it may have been well intended, the legislation that passed four years ago, the fact of the matter is that it has

created many more problems than it has solved. it has endangered young people. it has endangered problem gamblers. it endangers those who want to participate in an honest, legitimate game. and it's my fervent hope that this committee will respond by taking up legislation similar to the bills introduced by congressman barton and congressman campbell, and at this point let me take a moment to congratulate chairman emeritus for his leadership on this issue. congressman barton, you have stolen my speech. you said it all and you said it much more eloquently and much more succinct we in any former united states senator could do. because we never have time limitations. [laughter] so this five minutes is rather difficult for me to do with. but let me just touch on one or two points. internet poker ask the congressman has just said has

not gone away. and it's hard to envision a scenario where it will. what's taken place not is it takes place under the radar with no regulations, with no taxation, with unscrupulous groups who can and to operate. they operate in the public, and the government can do little, if anything, and certainly doesn't safeguard the general public. as the congress been indicated just yesterday, a young man by the name of john baptist with his federal credit union debit card, very interesting, i guess it's the right patent debit card, went and opened an account at bodog.com. now, and he could have been anybody. he could have opened up an account, then under age, been under the age of 21, they give these carts just about anybody.

once i get one for my dog, believe it or not. and so 16, 70, 18-year-olds cancer to do that. so where is the protection for young people? let me take and we have people on this panel today who speak up for young people. perry has done a fantastic job. one of the things that the congressman's legislation provides for is their reputati reputation, and the type of verification that will keep youngsters who are under 21 from playing. that's the kind of thing that you need to do. one of the things that the congressman's legislation will see to it that you don't have unscrupulous operators, and use it for themselves. we have seen that situation with full tilt. horrible situation where people to poker players money that should have been placed in a trust account and distributed as

dividends to the people who ran that corporation. terrible but trail of people. -- terrible betrayal of people. let me say, there's are those internet sites that operate where they do have a trust account, poker stars, for example, legislation required that they have a trust account for those dollars, and that's what congressman barton's legislation does, so that you can't have this, so you have proper supervision. and again, if you want to protect young people, and i understand the genesis of this came from a genuine concern that so many young people were flocking to the poker rooms, poker sites, tv was carrying it. i think the third most watched game on television was poker, online poker on television. and so you had kids getting

involved. how do you keep them from doing it? by passing legislation that will require verifiable identification. that's how you do it. how do you keep the deadbeat dad from becoming a problem gambler? i'll tell you how. you passed legislation similar to that, congress and barton put forward and you stop it because states can then post the deadbeat dads that will not permit them to go on the internet and gamble. and so, for those reasons and lots of others, time will not permit, i don't want to test your patience, let me say that i really hope that we have an opportunity to do something to permit a great game, a game that requires a skilled to be played in people's homes, shouldn't be you can just go to casinos and play. lots of people don't have the ability to do that. they should have to go to someone else's song or have people been invited to their home. they might -- they may not be

able to get together again. great pastime. this legislation has created and clouded the legislation, the situation may be well intended. it's missed its mark. spent i thank the chair and the committee for giving me this opportunity and i look forward to any questions that you might have. thank you. >> thank you, senator. i recognize the next witness for five minutes. >> good morning. thank you very much, chairman banner and ranking member butterfield and other members of the subcommittee for enabling me to speak today. i am representing fair play u.s.a., as a member of the advisory board. i am joined in that advisory board by louis freeh who is director of the fbi, and the first secretary of homeland security, governor ridge who are unable to testify today. as look at these issues we need to recognize that they have a

lot in common with issues that the subcommittee has been working on, privacy, security, authentication. protecting our consumers. it's very much a matter of protecting our kids and protecting our families as well. so i've been to the extent any of you know my work, i can probably best known for protecting kids and families online as the unpaid executive director of wireless safety, the oldest and largest internet safety group in the world. we handle all issues. and in that capacity i receive phone calls and e-mails from people who have gambled online, one and not retrieve their winnings. people who are confused about whether or not it's legal for them to play poker online. i'm a lawyer, and i have to parse the law to really understand it. you walk up and down the street a lot of people don't. they don't understand the difference between online poker fun games that are just part of computer games and those where there's wagering's that take

place. a lot of the other countries around the world look at this and found a solution for the problems that we have identified with online gambling. identity theft, money laundering, underage gambling, problem gambling, fraud, identity theft, privacy security breaches. all of these issues can be dealt with the ironic position of legalizing a certain aspect of online gambling, but regulating it and been able to enforce it. the benefits of this allow us to help people who are defrauded, put in a safeguard that that it didn't put in brick and mortar gamma situation. as we look at this is not a matter of whether gamma is more or not, i think that issue was dealt with many years ago in state lotteries were put in place. when we looked at tribal gambling and we saw how many schools could be funded with this. but we can put safeguards in effect that are not in effect now. what's happening out isn't working. there are millions of people

gambling billions of dollars online, without any protection at all. and because of the laws we have is really a hear no evil, see no evil, speak no evil situation. these people find themselves with no place to go but calling myself up at 3:00 in the morning. so, i have a group of teen angels, and some of the representatives on the subcommittee had teen angels in the district and they're familiar with them. and they knew i was testify here today and they are team internet safety experts. so they said well, it's really easy for us to find these online poker sites in particular. and they went to several of them, and one they went to, i have here, it's poker sites.com. it took them about two and a half seconds to find that one. and it has top list of places that are the best legal u.s. poker sites 2011, bad online, bulldog again, they called it, i knew they did this because they called as my credit card number

to put in place or for permission to use one of theirs and one of the girls was 16 years old and had her own credit card her parents had given her to build to shop the mall. it easy. it's too easy and there's nothing we can do right now to keep underage gamblers out and protect problem gamblers with the kind of things we can do. .. >> i'm happy to discuss the issues if anyone on the committee has questions, and i'm happy to help any way i can, thank you. >> thank you.

mr. stevens, you're recognized for five mines. >> good morning -- >> can you pull the microphone closer? >> okay. >> thank you. >> good morning, ranking member butterfield, members of the subcommittee, thank you for allowing me to provide views on the internet gaming. to place views in context, let's start with the constitution. in return, indian tribes are recognized 2349 united states institution as governments through treaties with the united states, tribals seated their homelands to help build this great nation. in return, the u.s. promised to provide for the health, education, and general welfare of indian people. unfortunately, the u.s. broke many of these promises. after suffering generations of failed public policy, tribes took matters into their own hands in the 1960s and 70s to

generate revenue to meet tribal news, and that's when president johnson and nixon passed indian determination. after legal challenges by states and commercial gaming interests, congress stepped in and established a federal law through the indian gaming regulatory act or igra and acknowledges indian tribes as governments with the right to operate gaming and says the revenues are used for tribal purposes and tribal revenues are not subject to tax taxation. finally, there's tribal, federal, and state regulation. twenty-three years later, more than 200 tribes made igra work to rebuild their once forgotten communities. gaming revenues are working to improve education, health, elder care, and rebuild infrastructure and so much more.

for many tribes, gaming is about jobs. in 2010, madam chair, indian gaming created more than 600,000 american jobs. gaming is putting people to work. these tribes realize that the games are not possible without strong regulation. the tribal system employees more than 400 regulators along with state of the art technology to protect revenues. in 2010, tribes spent $375 million on regulation. the system is costly, comprehensive, and our record of experience shows it's working. because of gaming, tribal governments are stronger, people are healthier, and entire generation of indian youth have hope for a better future. as a result of these games, all tribes are weary when congress considers changing the playing field with regard to gambling. internet gambling raises concerns. in 2010, leaders conducted meetings to discuss the issues of internet gaming.

from these meetings, leaders nationwide somewhere unified behind the set of general principles regarding federal internet gaming legislation. these principles are listed in the written testimony, and i'll summarize them for you. first, our principles require that federal legislation provides similar authorizations and protections for tribal internet gaming that igra provides for gaming. internet gaming legislation must acknowledge that tribes are eligible to operate and regulate internet gaming. tribes ask they are vested with authority to regulate tribal internet gaming. the national gaming commission is the only federal agency with experience in regulating any form of gaming in the united states. indian country's fourth principle states that the federal legislation must acknowledge that customers may access tribal internet sites as long as such gaming is not prohibited where the customer is located. five, legislation must acknowledge that gaming revenues are not subject to taxation.

tribal gaming revenues are 100% taxed and these funds serve the public purpose of tribal and nearby communities. there's no room for federal and state taxation. the final principle is based on the fact that tribes invested significant resources on the current law, thus legislation should protect rights under the act and existing game compacts. gaming bills introduced in the 112th congress oppose these and we oppose the legislation as written. we have to hear from the department of justice, treasury, or the national gaming commission have been heard on this issue. my time is short, but i'll conclude. indian gaming 19 most effective tool to address more than a century of federal policy failures. tribes are concerned that legalized internet gaming will threaten these games. niga's dialogue has been close

to 15 years, and on the most recent discussions, tribes met and unified behind the core principles. we look forward to working with congress and the subcommittee ensuring any legislation moving to legalize internet gaming adhere to the principles developed and established by the tribes across the united states. i thank you for the opportunity to testify, and i'm here to answer any questions you may have. >> thank you, mr. steven, and happy to recognize mr. whyte for five minutes. >> thank you. i'm keith whyte, executive director on problem of gaming gambling. this is my 12th year with the council, and i started 12 years ago this week. it's the national advocate for programs and services to assist problem gamblers and their families, and we have a 39 year record in dealing with the controversial issue of gaming. we are neutral on legalized gambling taking no position for or against it.

our concern is advocacy for problem gamblers and their families. we believe strongly the most -- is a comprehensive public health approach. problem gambling like other diseases of addiction will not be eliminated, but we can and must make better efforts to protect consumers, prevent addiction, and mitigate the damage. it is inconceivable that internet gambling would be legalized without dedicating a portion of the new revenue to addressing the cost of addiction. as said, 85% of adults gambled once in the past year, 15% once in the last week. that's $95 million generated by casinos and legal gaming alone, not including sports gambling or internet gamebling today. $6 billion comes from the special federal withholding tax

on legal winnings. unlike the federal excise tax on tobacco and alcohol, not a single penny of this revenue from legalize the gambling is returned to prevent and treat the addiction of gambling. between 500,000 adolescents, meet criteria for addiction in a year. high risk groups include members of racial and minority groups, young males, and veterans. the estimated social cost to families, businesses, and communities top $7 billion per year from addiction, bankruptcy, and crime. problem gambling is therefore an important national public health concern. they are correlated with other use and abuse problems that we know are exteemly costly to the state governments, families, and individualings. problems are correlated with higher rates of unemployment, bankruptcy arrest, incarceration, and poor physical health.

in addition, millions of spouses, children, families, and parents, employers, are often negatively impacted by gambling addiction. it's not clear what the impact of legalization of internet gambling with have on problem gambling. research shows internet gambling has the lowest participation rates regardless of legality. the rates are not significant whether it's legal or illegal. as we heard this morning, there are massive numbers of americans gaming legislation -- gambling online currently. there's high rates of gambling problems of those who gamble online. those who gamble online are very likely to gaming gaming gamble in traditional forms like it's an adjunct to people already gaming gambling online. it's possible that people who gamble online could be exacerbating their problems due

to the unlimited access, the high speed of play, use of credit, noncash instruments and all known as risk factors in the bricks and motar world. these programs provide an opportunity to create informed consumers with a variety of -- to provide informed consumers with a variety information encouraging safe choices and discourage unsafe behavior. the technology exists to set limiting on the amount of money gambles, the time they gamble, and the decisions they make. stronger regulation is important, but it cannot be effective alone. it must be accompanied by equally robust prevention, education, treatment, and research services. a portion of gambling revenue from legalized gambling, we estimate nos less than $50

million annually, must be set aside for such programs. this need is magnified among the states as one-third of the states including a number of states represented by members of this committee provide absolutely no public funds whatsoever to prevent or treat gambling problems. this is neither cost effective nor an ethical means to responding 20 a known public health concern. an important cost free first step is cutting costs in the gambling. there's testimony that gambling has been around and present in most states, there no single federal agency that coordinates efforts on this issue. i call your attention to hr2334, the comprehensive gambling act, introduced for the fourth time in the house designating the substance abuse of mental health department to address the public health concerns of this issue. i thank representatives barton, piths, whit feed, campbell,

frank, and others who are current formers of the legislation, and a as was said, we appreciate the broad sponsorship on our bill as well with you and representative frank. in closing, millions of americans are experiencing gambling problems today like my friend mike. he gambled away more than $250,000 over the internet losing his job, house, and his family. he sat in the grocery store parking lot here in virginia and contemplated suicide. he was able to get treatment, and now he works for hope that's available for families. treatment works. it is an investment that pays for itself many times over. those who legalize, regulation, promote, and profit from gambling have an *e9 call and economic imperative to minimize the social costs of gambling addiction. thank you for the opportunity to testify. >> thank you.

mr. eggert you are recognized. >> thank you, madam chairwoman, ranking member butterfield, and others. i come at this from a different angle than most. i come from a consumer protection angle where i've worked most of my career. i was an add provider to the -- adviser to the federal reserve board on issues on the consumer board, and you can imagine the fun over the years, and when i think about gambling, the question i have is what consumer protections should be in place? i'm very happy to hear many of you talk about the importance of consumer protection in gaming gambling because it's a crucial issue. gamblers used to be looked down on, but now they are consumers and it's just another industry, and we should treat them like consumers as we do in other

industries and think about what consumer protection is important in this industry. the perk of consumer protection is to make consumers good shoppers, to give them the tools they need to make smart decisions when they purchase, when they go to a cay casino, when they gamble on loin, whatever they do, we want to make them good shoppers and protect them from short practices because the engine of the consumer economy is that the consumers drive it and as long as they are given the information they need to make good decisions, that then companies have to compete based on quality of product and price, which is what makes our economy run. now, in the gambling industry, they talk about consumer protection is honesty, fairness, and making sure that the gambler gets paid. that's important, but equally important is that the gambling

industry provides accurate price disclosure to consumers who are gambling. now, the price of the game in the gambling industry is interesting. if you play a $100 slot machine, you put $100 in, but on average you get money back, otherwise, why do it? . real average price of a slot machine is the amount that the casino retains from the gamblers' bets. 23 you bet finish did you bet $100 and get $970 back, then the price of the gambling was $30. for slot machines, casinos know the average whole percentage of the slot machine. they can order a machine with a 5% hold percentage, 10%, 15%, and they know that's on average what that machine will cost. the problem is that information

is not disclosed to gamblers and may be at the 2% hold table or a 15% hold machine table and not know the difference. they could be sitting at one much more expensive and much cheaper and not be given that information. it's crucial that gamblers have this information so that they can make smart decisions, so that sthai can shop based on price, any internet gambling should include that and any legislation for internet gambling should disclose every slot machine percentage on the system. for internet poker, it's a different proposition because the price by the borrower is based more on competition than other players than it is by any setting of the site. here the problem is professional

players have new tools to use against recreational gamblers that far exceed the casino poker table. there's computer boosts they have, computer bots that are effective, and recreational gamblers find themselves playing against professionals who far exceed their ability to play, and the recreational gambler may have no idea that they are getting into. there's even computer tracking software using data mining that helps strong gamblers identify the weak gaming legislation whrers so they -- gamblers so they can follow them to tables and play against them. this is a real problem for the internet poker industry because the industry doesn't want all these recreational gambler's money drained out by profession als using bots or tools, so any

legislation has to think about how to have a level playing field in internet poker. i have ideas on that, but my time is up, so i appreciate any questions later on. thank you. >> thank you, professor, and dr. rohmer, welcome, and you are recognized for five minutes. >> good morning, member chair, ranking member butterfield, and other members of the committee. thank you for inviting me this morning. it's a pleasure to be here to hear the different points of vu of this very difficult issue to deal with. i've been doing research on adolescent gambling at the policy center trying to understand both the prevalence and harms that can occur to young people as a result of all sorts of gambling, not just on the internet. we found with the research we've been doing is young people at an early age start to gamble, and this puts them at risk

potentially for gambling dependence as they get older. it's important for the committee and the congress to think about what the impact will be on young people and their families as a result of any actions that are taken with regard to online gambling. one of the things we've done is over the last -- since 2002 is conduct a national survey of youth which studies young people ages 14-22, and what we found from this survey is that most of the attempts to restrict online gambling are not effective as we've heard already. we found in the last survey in 2010 that more than 400,000 male youth in the college age range gamble once a week, and 1.7 million or more once a month, so a lot of people are online as you've heard. same is true of high school kids, very high rates, but not so much on a regular basis. we think that age restrictions and promotion of laws that would

encourage age restricted responsible gambling, which is what we see in some of the other countries that allow online gambling could be an approach that would work, but we're still very much in the early stages of understanding oh online gambling works, and i think we need research to understand it better. if we have legislation that can provide some safeguards that potentially restrict underage gamblers and to the extent they go online, make it harder for them to lose control while online would be excellent safeguards to include in any legislation. i think the principle i see when i look at what's going on in europe is the idea of responsible gambling. one idea that's helpful is gambling operators should not receive income from users unable to control their habit, and i think the bill that's put forth

by mr. barton and others has a mechanism in it for the public to observe, monitor how funds are being made on interpret gambling so you can see if certain gamblers are disproportionally contributing to profits. other ideas we heard about age restrictions and so forth are important, the method of payment is important. we don't know how well they work. we need research in this country is actually way behind the u.k. and countries in europe on understanding what happens when young people gamble. we have to find that out. we need money that's dedicated to that question. i think we also need to consider and the law should consider money and time limits. we've already heard, i think keith mentions this is a good idea. this should be a running clock online. there should be a win-loss total

online so that the young person knows how much they are wagering, and this is true whether they are 18, 21, or 51. this is something i think that is just straightforward, you we really don't know how many of these kinds of restrictions would work. we also need prevention messages online. it's much easier to put these online than it is, for example, at a casino, and we need to regulate or monitor the advertising that's done to attract people. we don't want the advertising to target young people disproportionally or addicted gamblers disproportionally. i think the challenge is if you legalize this is to put in place both things keith talked about in terms of treatment, but also a program of research to figure out our restrictions in place working? what mix of restrictions work best? what can we do in the future to maximize the chance this kind of

activity will not produce harms to young people and their families? i've included a bunch of other ideas in my testimony, and i thank you for the opportunity to say these things, thanks. >> thank you, dr. romer, and i'll begin the questioning, and i thank the witnesses for their testimony. i recognize myself for 5 minutes. mr. whyte, beginning with you, and dr. romer started with this and, but they can gamble online because the use of credit and 24 availability. would restrictions on those factors reduce the problem? for example, limited times and limit on credit? do other countries offering internet gambling have restrictions and if so, can you talk about the results 1234 >> yes, i can. there's some evidence from canada and europe that there's restrictions put into place that generally include, as you say,

limits on the use of certain types of payment processing, limits on the time and money spent gambling seem to be able to not necessarily intervene with pathological gamblers who gamble despite barriers, but they are targeted at people at risk for problems or moderate problem gamblers. these have been shown to be effective in symptom -- some studies in stopping people from stepping over the edge in developing severe gambling problems. we are not sure what works best, but there's evidence to show these interventions are effective and some can be successfully implemented on the internet account based wagering than a tray -- traditional form. >> thank you. mr. stevens, you say it should

allow tribal governments with exclusivity. can you explain your position? >> yes, i can. i think that, you know, i think it's important to understand and appreciate that what tribes have been through in the history of the united states government. you know, i could speak to just quickly about my grandmother. sthees 101 years old, and she lives in her own apartment independently in an apartment that's assisted, but not a nursing home, and she lives in that apartment at 101 independently, but she started out her life going to boarding schools and working in wearing a uniform, and discipline for being left handed like my friend next to me and speaking her language, you know, and, you know, leaving her family. the family would go by the

boarding school and not even be able to wave, visit, or look at their children, and, again, as we approach a little bit emotional to bring that up because my grandma's fine, and if you called her apartment on the reservation in wisconsin, you would find she's not home, so she's involved in activities, which she's a retired schoolteacher. she spent her whole life teaching the language and the culture that was attempted to be taken from her. again, that's just a success story, but really if you look at the way her life was, her grandfather who raised her was a civil war veteran and road by the boarding school and threw candy, but couldn't look because you can't look at your kids. that's a mild story about what our people have been through. millions and millions of indian folks when first european contact, and in spite of the struggles and challenges we've been through, we persevered, survived, and fought back, and

if anybody deserves to be at the front line in this industry, it's native american people, and at the very least, equal footing, madam chair. >> okay, well, you also speak to why is it important that legislation permit tribes to operate internet gaming without renegotiating the tribal state come pacts? what is the concern? >> well, i believe that that is a new industry, and i believe that they should not undo or attempt to amend the current law in order to accomplish that. >> can you please clarify your principle regarding the preservation of tribal regulatory authority? should we legalize online gaming? can you speak to that, and how do you see that authority affected by federal legislation? >> i misunderstood -- >> i think i missed a comma in there. could you please clarify your

principle regarding the preservation of regulatory authority, should federal legislation legalize online gaming? >> i think that i spoke -- i had a little -- i think i spoke briefly that in my testimony, and quite extensively about it in my written testimony. the regulators in indian country analyzed this, and they are the ones responsible in the national gaming commission is the only federal authority that has experience in gaming, so we feel like in order to oversee this element of it, we should utilize experienced folks. now, i -- just by coincidence, i have my -- it's the nicest one i have, but the national tribal gaming commission and regulators -- it's a national association independent i niga, independent of the tribes that have worked to analyze the

expertise in the important aspects of tribal regulation to make us stronger and adhere to the responsibilities to our constituents, and -- >> i'm sorry, i hate to cut you off, but my time is up -- if you could wrap up in five seconds. >> the bottom line is we asked regulators nationwide if they are prepared to regulate this industry, and they assured us they are in strong preparation to do so. >> thank you. again, my time expired. pleased to recognize mr. butterfield for five minutes. >> i thank the chairman. madam chairman, i'm among those who is beginning to understand, i would say, online gambling. i'm beginning to understand that it could provide a great boost to our national economy and it could provide a boost for federal and state coffers, and i'm beginning to connect the dots and understand what this is about.