while lying on that subject, to have again in our country the fairness and opportunity and reigniting the american dream that we've called for in the opportunity to take responsibility and a plea by the rules unless we change the political system it has again been drowned out that the date and if you tie it to the voter suppression it is in itself undemocratic but so too. ..

and a the responsibility that he has, and so given he has a think tried very hard to take us down the right path. the republicans have been obstructionist in that regard. this election will be about that and i feel very comfortable about the message that he is conveying. blame it on the do-nothing congress because they have obstructed so much in addition to the policies that he inherited and now have to go to vote. i thank you all for being here today.

>> national intelligence director james clapper warned of an increasing risk of cyberattacks at this house intelligence committee hearing. he was joined by the heads of the cia and fbi and the defense intelligence agency. this panel also testified before the senate intelligence committee on tuesday. this is two hours, 20 minutes. >> we call the committee to order and the committee will come to order. i want to thank our guest and witnesses today. first let me thank you for your service to your country and i hope you will pass on the committees thanks to the men and women who serve and do the real work as we say in the intelligence business. please pass along our admiration and respect and support and great thanks for really what has been a very very good year and

the intelligence business for the united states of america. i also want to thank all of you, since we started this very hearing last year the very fact that we have established i think a very professional working relationship with the community and i think that has netted very valuable results for our national security posture. we had to authorization bills, lots of great oversight. we have been professional even when we have disagreed and i think at the end of the day that dialogue has been important for the community to move forward in that classified realm, so i think americans get to see publicly you all here today but it's that classified work that really makes a difference for our national security posture and i think we can say from my ranking member and myself that we appreciate all of your cooperation in the work we have been able to do. i want to thank the ranking member and fellow democrats for making this committee a

bipartisan effort on national security and i think that is certainly refreshing and we hope to duplicate it around this town. i am going to get a little bit off statement. i thought the senate hearing was instructive. i thought it was certainly highlighted some issues that deserve our attention and i just want to cover three issues quickly and turn it over to my ranking member. on cyberand i heard some of the comments made in the sentence hearing on cyberand there seems to be a little bit of finger-pointing. we are fighting a two-front war today on cyberand it is happening today. one where countries like china beth -- china have embraced xp notch as a part of a national security framework and are waging an unprecedented economic assault on united states companies and their intellectual properties and second i believe growing threat of a large cyberdisruption or attack is on

its way, because of the exponential capabilities that are growing with countries like china, and russia was good before and getting better. other countries like iran and others are investing heavily in their cybercapabilities relatively cheap investment and a big tank for the buck if they are successful. i argue, given classified briefings we have had discussions with all of you and your counterparts and the working part of those agencies, that a cyberattack is on its way. we will suffer a catastrophic cyberattack. the clock is ticking and winding down. i have to say that we have admired this problem for a very long time. we have made movies about this problem for a while now. we have think-tank to this problem to death. we have created working groups across every executive branch to try to study the problem more and work on it and i saw that

some of the blame is going on in the community and while i will take exception to that. i think you all, given the resources that you have and the authorities that you have today have done a phenomenal job on what is the hardest problem i think i've ever seen because it's so complicated and so difficult and the target set is large and growing still. so i do believe our problem here is i hate to say it, the united states congress. there are some 30 cyberpills out there. again we have looked, studied and understood the problems. there are lots of approaches but at the end of the day we must act. congress must act. i will say this is the only committee that has produced a bipartisan product, very narrowly focused that has huge coalition support that we believe takes a small step to at least allow that she'd covering.melon.go then pull it over to the dotcom realm.

i hope we find it in ourselves to understand the risk that we take by not taking action and get something done sowed next year we can brag about the work that you have done to keep american networks safe. on reconciliation i want to talk about that in my questions but i want to commend the administration for keeping congress fully informed. they didn't do so well on the advice and counsel part of this particular event. in a bipartisan way some very strong conversations about opposition to the path forward they were taking on reconciliation with the taliban. i think generally the comments were that we are going to legitimize nonstate actors that we have been trying to delegitimize with the afghan people for the last 10 years and it sounded horrible message to the people that have been with the united states and afghanistan, women, entrepreneurs, people who believe that democracy would

ring a better day in afghanistan. normal afghans don't want to any longer fear and be intimidated in their daily lives. it crosses a pretty dangerous line in a policy change in the united states that i find very disturbing. it sends a horrible message to bad actors that as soldiers, prisoners, citizens are now to be treated by commodity. i think that is a horrible precedent and one that i hope this administration strongly reconsiders. lastly, iran. and iran nuclear bomb triggers a nuclear arms race across the middle east. i think of that there is no doubt. iran's irrational leadership clearly and simply does not have peaceful intentions. it is clearly a state sponsor of terrorism. it is doing so in a breathtaking pace.

iran has systematically been involved according to a state department report and this is based on department of defense statistics, has direct blood on their hands in iraq alone as many as 600 u.s. soldiers through proxies, through introducing weapons systems that are very lethal. they sponsor to the world's most dangerous terrorist organizations, hezbollah and hamas. the syrian president bashar al-assad regime even with this violent upswing of late. following north korea's lead they have actively sought to subvert iaea inspections and obligations. iran continues to threaten to choke off the world's energy supply by closing the strait of hormuz and their navies dangers tactics in the persian gulf put our sailors at risk. in october of this year and this is what i find so shocking. the iranian operatives planned

to set off a bomb in washington d.c. restaurants restaurant and assassinate saudi ambassadors, the saudi ambassador to the united states and kill countless american citizens and thought it was worth the risk. most concerning is i think how disjointed our policy on the middle east is. i had a very senior arab intelligence official tell me recently that if he could be king for the day what would he ask of the united states and his quote was sir you could please tell me what your middle east policy is. it makes you paz given the nature and danger of the world that is certainly evolving in the middle east and just how serious the consequences are for a national security. we will hope to flesh that out a little bit today in our questions. i want to congratulate congress

for its two bipartisan bills in the administration pushing for second shins and the second round i think it's had a devastating impact something i hope you can also explore today. given the cuts that are coming, we know that, we think we worked well with the intelligence committee last year and a bipartisan way and found over a billion dollars in savings through efficiencies without attacking missions. we think we gave at the office when it comes to intelligence given the world threats and what faces the united states of america and we hope to work with you again to say that maybe we can find some efficiencies but we also ought to make sure we make the right investments in our intelligence community and policymakers to get an opportunity to respond versus react. i want to thank you again for being here today and i look forward to having discussions on those issues and many more and i look forward to hearing your responses from all the members questions today. with that i'm going to turn it over to our ranking member mr. ruppersberger.

>> thank you mr. chairman. i want to thank the panel. on my years on the intelligence committee i have seen before a view, general burgess director petraeus director clapper and director mueller. i think your leadership in the intelligence community is as good as i have seen it with your members alexander and other members on this committee and we look forward to having an open hearing. we know there are many things that are classified that we can't talk about to protect their country but i think it's important for the public to understand as much as they can and we can inform them on what is going on and why he intelligence is so important. the landscape has changed since the last worldwide hearing we had a year ago. 2011 was an important year for the intelligence community from the heroic takedown of osama bin laden to the arab spring to the end of the war in iraq and the change of leadership in korea. all of these events dramatically impact the national security. the intelligence community could not a predicted everyone of

these events but it is their challenge to give policymakers the information and tools they need to take action. the professionals in the intelligence community can meet that challenge every day. was chairman rogers and i took over the leadership of the committee last year we made a commitment of bipartisanship. we both believe politics has no place in the intelligence committee. there's too much at stake protecting our country. we are working together with the other members of the intelligence committee as one team, republicans and democrats, to make a real difference and do what is right for the men and women risking their lives around the world to keep our country safe. we made a commitment to pass an intelligence budget every year to ensure proper oversight of the intelligence committee and provide critical financial guidance. last year we passed not just one but two intelligence authorization act for fy2011 and fy2012 with overwhelming bipartisan majorities. in fact we had close to 400 votes in favor of each build and

in this area partisan politics those numbers are pretty impressive. last year marked the tenth anniversary of that september 11 attacks when close to 3000 innocent americans lost their lives. on that fateful day we learned the community was not sharing critical information that may have prevented the tragedy and the icu was not working together as well as a cut. we spent the last 10 years trying to change that. the raid eliminated osama bin laden proves we have come a long way. is clearly the most fundamental intelligence achievement in recent memory and was the result of far-reaching teamwork. our intelligence professionals work together across different agencies pulling together hundreds of pieces of information. the they were methodical and persistent and utilized every resource capability and authority they had. they figured out where osama bin laden was hiding and they brought him to justice. but the threat of the foreign terrorists as well as homegrown

violent extremist to look system we cannot let our guard down. we must work together with their international allies to deny safe havens for terrorists around the world while also staying vigilant as we stop those who want to hurt us here at home. in the intelligence community must continue to work hard to collect analyze and share information about the threats we face on our own soil as well as around the globe. no one could have predicted a street vendor setting himself on fire in tunisia could have sparked massive protests across the middle east and north africa, ushering the term arab spring. the leaders of egypt tunisia and libya are no longer in power. these countries are attempting attempting to embrace democratic ideals but their future still uncertain. the i.t. community continues to focus on that part of the world which has proven to be a perpetual hotspot. we must continue to keep up defense and yemen were al qaeda and the iranian polin celesta plotting to kill americans and disrupt our way of life.

even with the death of anwr awlaki who inspire people to murder americans we still have more work to do. our intelligence community must have global reach remain agile and have the capability to address the ever-changing threats including iran. iran is a definite threat to world peace. alone is trying to create a nuclear weapon that could destabilize the entire region and threaten national security. iran has become more brazen in their recent actions against our nation. the plot to kill this saudi arabian ambassador without regard to american casualties crosses the line. that is why iran cannot be allowed to create a nuclear weapon. and nuclear-capable iran threatens her safety as well as the safety of israel and the rest of the middle east. the united states on the rest of the world must prevent iran from creating a nuclear weapon. i agree with secretary of defense leon panetta 20 talks

about iran and his point was there no options that are off the table as it relates to iran. in addition north korea with its new young leader kim jong-un threatens to share the ballistic capabilities with iran and syria further complicating the situation threatening instability. the intelligence committee must keep watch on this powerful situation. at the same time china and russia are joining iran with aggressive espionage depleting america of its intellectual property and now they're using technology as a weapon. a review released by the national counterintelligence center last year highlighted how china and russia are using cyberto steal american ingenuity from the safety of our own soil. cyberattackers are trying to catch americans cutting-edge research and development information. some are calling it a cybercold war. $300 million of intellectual

property stolen from american companies every year according to the u.s. cybercommand. every day u.s. web sites in our nation's networks are threatened by foreign governments and criminals trying to steal her money caesar did and disrupt their critical services are shut them down affecting millions of americans. we know the threat is real because the web sites of already than compromise. the nasdaq and international monetary fund have been hacked. cybervulnerabilities threaten key sectors of the u.s. global economy. our critical infrastructure must be protected and we have a long way to go. this is not the time when american economy can afford more instability. now's the time to act as a relates to cybersecurity. the intelligence committee passed a bipartisan cyberlegislation in december by a vote in our committee of 17-1. the cyberintelligence sharing and protection act which is the bill, gives authority to share

cyberthreatening intelligence malware malicious code and other cybersignatures within the industry. companies can use this classified information to protect their cybernetworks and the networks of their clients from cyberthreats to disrupt destroyer otherwise disable it. this allows the private sector to benefit from the expertise of the intelligence community all on a voluntary basis. the legislation without companies to power our homes provide clean water and manage other critical infrastructure information to protect from cyberthreats. the bill also which is very important protects privacy and civil liberties and i applaud my side congressman thompson and congressman schakowsky langevin and congressman schiff for working with us on the issues of privacy and civil liberties. another critical component to our national security, and 2011 the department of defense director of national

intelligence published the first joint national security space strategy. it's a good start but we need better definition on the way ahead. the technology and expertise perfected by the space industry drives innovation in many critical areas but because of trade restrictions such as itar image or resolution restrictions we are losing our competitive edge on a daily basis. when it comes to launcher systems are reliable but too expensive because there is no competition. as a result the united states will not effectively get satellites into space at his launch costs are to find schedules unpredictable. is a critical component of national security and we must support this commercial industry to promote policies and funding to help legislatively and internationally. restrictions prevent our commercial industry from selling its best product. today frances marketing imagery at a half a meter. as a result countries like china are purchasing imagery to have a

perfect view of u.s. military and strategic forces worldwide. i cannot emphasize enough that u.s. companies must be allowed to compete in a free market. the competition will promote innovation in our space industry. finally want to address the resource challenges we face in our impact on national security and efforts are intelligence community. the president has stated he wants to curb and trim defense spending without impacting the mission. the intelligence authorization act for fy2011 and 2012 did that. we'll soon have the opportunity to review the president's budget request for fiscal year 2013 in this tight budget environment and we are continued to give our capabilities they need to keep our country safe. our nation deserves no less. i look forward to hearing from you all and again thank you for coming before us today to educate our public on the issues of intelligence. thank you and i yield back. >> mr. ruppersberger i will

start with you. dr. clapper. >> thank you chairman roger's ranking member ruppersberger and distinguished members of the committee for inviting us to present the 2012 threat assessment and let me say to both of you that i completely agree with your characterization about your leadership of the committee and the manner in which we are working together. and we all appreciate that and specifically to ranking member ruppersberger's comments you have more than lived up to your commitment to make this bipartisan. technology and the fact that as you alluded we are not always going to agree. i'm joined today by our distinguished community colleagues. to my right cia director david petraeus and to his right to attend a general ron burgess sent to my left fbi director bob

mueller. these remarks and our statement for the record reflect the collective insights of extraordinary men and women of the united states intelligence committee whom it is our privilege to lead and again we are most appreciative of your knowledge met of the work sometimes and a very hazardous conditions that is done by the men and women in the community and around the world. we won't attempt to cover the full scope of worldwide threats in these brief oral remarks so i would like to highlight some of the issues that we identified for the coming year. some of which you have already done for us. never has there have been in my almost 49 year career in intelligence, in fact today is the 51st anniversary of my enlistment in the marine corps in february 1961. anyway i don't recall a more complex and interdependent array of challenges that we face

today. capabilities technologies know-how communications and environmental forces are confined by borders and can trigger a transnational disruption with astonishing speed as we have seen in the past year. never before has the intelligence community had such a resource constrained environment. we are rising to the challenge by continue to integrate the intelligence community taking advantage of new tech knowledge is implementing new efficiencies and is always simply working hard. maintaining the world's enterprise in the face of shrinking budgets will be a challenge. we will be accepting in managing risks more so than we have had to do in the last decade and when i say we i mean both the legislative and executive. we began our threat assessment as we did last year with the issue of terrorism and proliferation.

the intelligence community sees the next two to three years as a critical transition phase particularly for al qaeda and like-minded groups. with osama bin laden's death, the global jihad is movement lost its most iconic and inspirational leader. danelo qaeda commander is less charismatic and the death of prominent al qaeda figures has shrunk the group's top leadership. however even with its greater capabilities and its focus on smaller simple plots al qaeda still remains a threat. as long as we sustain the pressure on it, -- but regional affiliates and to a lesser extent small cells of individuals will drive the global jihad agenda. proliferation and its efforts to develop, acquire or spread weapons of mass destruction is also a major global strategic threat. among nationstates iran's

technical advances particularly in uranium enrichment strength in our assessment that iran is more than capable of producing enough highly-enriched uranium for weapons specifically the supreme leader choosing to do so. north korea's export of ballistic missiles and associated materials to several countries including iran and syria as you alluded in your opening remarks illustrate the region of the north proliferation activities. we don't expect kim jong un north korea's new young later to change the basic policy of attempting to export most of its weapons systems. i would note in this year statement for the record reallocated our discussion on cyberthreats to follow terrorism and proliferation. perhaps a little bit of -- cyberthreat is one of the most challenging ones we face for all the reasons you describe. be for csi were environment in which emerging technologies are developed and implemented before

security responses can be put in place. monk stayed actors where particular concern concerned abut entities within china and russia conducting intrusions into the u.s. computer networks and stealing u.s. data. and a growing role that nonstate actors are playing in cyberspace there is a great example of easy access to potentially disruptive than lethal know-how of legislative groups. tuber greater strategic cyber challenges are definitive real-time attribution of cyberattacks, that is knowing who carried out such attacks and where perpetrators are located and secondly managing the enormous vulnerabilities in the i.t. supply chain for u.s. networks. looking geographically around the world in afghanistan during the past year the taliban lost some ground but that was mainly in places where security system isaf were concentrated. the taliban senior leaders continue to enjoy safe havens in

pakistan. isaf's everest to partner with afghan national security forces are encouraging but corruption challenges continue to threaten the afghan forces operational effectiveness. most provinces have established government structures but they struggle to provide essential services. isaf and the support of afghanistan's neighbors notably and particularly pakistan will rain essential to sustain the gains that have been achieved. although there is broad international political support for the afghan government there are doubts in many capitals particularly here up about how to fund afghanistan's initiatives after 2014. in iraq violence profile attacks continue by a minister malik you's progressiveness against sunni leaders heightening political tensions but for now the sunnis continue to view the political process is the best menu -- make a venue to pursue

change. those pushing for change are confronting ruling elite sectarian elites sectarian ethnic and tribal divisions, lack of experience with democracies stalled economic development military and security force resistance and regional power initiatives. these are fluid political garments for extremist to participate more assertively and political life. states were authoritarian leaders have been toppled such as tunisia egypt and libya, to reconstruct or construct their political systems are complex negotiations among competing factions. in syria regime and transient tents and social divisions are prolonging internal struggles and could potentially turn domestic upheavals into regional crises. in yemen although the political transition is underway the security situation continues to be marred by violence and fragmentation of the country as a real possibility. as the ancient roman historian

tacitus once observed the best day after a bad emperor is the first and after that i would add it's very problematic. the intelligence can use placing close attention to developments across the african continents and across asia. here too few issues are self-contained. virtually every region has a bearing on our key concerns of terrorism proliferation cybersecurity and stability. throughout the globe whenever their environmental stresses on water food and natural resources as well as health threats economic crises and organized crime we see ripple effects around the world and impacts on u.s. interests. amidst these extraordinary challenges is important to remind this distinguished body and the american people that in all of our work the u.s. intelligence community strives to exemplify american values. to carry out our missions with respect to the rule of law and the protection of civil liberties and privacy.

i pledge the crucial recommendation to you on our highest legislative priority this year and it requires the support of this committee in both houses of congress. i refer specifically to the foreign intelligence surveillance act amendments act court's aa which is set to expire at the end of 2012. title vii of fisa allows the intelligence community to collect vital information about international terrorist and other important targets overseas. this law authorizes surveillance of non-u.s. persons located overseas who are foreign intelligence importance meaning they have a connection to our information about threats such as terrorism or proliferation. it also provides for conference of oversight by all three branches of government to protect the privacy and civil liberties of u.s. persons. the department of justice in my office conduct extensive oversight rupees of these activities and we report to congress on implementation and compliance twice a year. intelligence collection under

fisa proves crucial intelligence that is vital to protect the nation against international terrorism and other threats. we are always considering whether there are changes that could be made to improve the law but our first priority is reauthorization of these authorities in our current form. we look forward to working with you to ensure the. >> enactment of legislation reauthorizing the fisa amendments act so there can be no interruption in our ability to use these authorities to protect the american people. i will end this brief statement where i began, the fiscal and garment the face of the end our intelligence committee will require management of the challenges the intelligence community focuses on and the risks we must mutually assume. with that, i thank you and members of this committee for your dedication to the security of our nation and your support for our men and women of the intelligence community and for your attention today. my colleagues and i look forward to your questions in our discussion.

>> thank you director and congratulations on your 51st anniversary of your enlistment and i will bet the boot camp looks pretty good right about now. >> it does. >> in ranking member and i have agreed to allow members to work through their questions and with that in mind i will turn it to mr. fortenberry. >> thank you chairman. director clapper i want to start with afghanistan. has the intelligence community produced and agreed upon written assessment of what the afghanistan security forces capabilities will be in 2013? >> sarah, i guess the most current such rendering would have been addressed in the national intelligence estimate that we recently published. >> well i noticed in your statements he is said that there has been some loss in the

taliban insurgency in areas where we have troops, but it remains resilient and capable of challenging u.s. and international goals. i also noticed that there was articles in the british press yesterday. it says that the taliban strength and morale are largely intact and talks about significant number of defections to the taliban. and so, i am concerned about the announcement that was made yesterday that we are going to end all combat roles and 2013 and just be in a supporting role. general petraeus you have obviously the most recent direct involvement here. maybe we ought to start by just asking the question, is there a good reason for us to be in

afghanistan with military forces that are fighting and dying and if so what is that cors? >> let the ask general petraeus to speak to that. >> there is indeed one important reason. we are still there for a very important reason and that is to ensure that afghanistan does not become a sanctuary once again for al qaeda or other extremists that they can dot wha they did prior to 9/11 which was to plan the 9/11 attacks on that soil. soil. if i could i might want to clarify a couple of points as well that you have touched on here briefly. before doing that though i actually would like to address the committee as a whole and the chairman and ranking member and thank you as well for your recognition and the intelligence community who have indeed as you noted been part of some very important progress against extremist and others, to thank you for your support of those men and women in a hole for 80 different fashions but most material if corstin the two authorization bills and then to

note we in turn have worked very hard to keep the committee and congress fully and currently informed and we will ascribe to do that. >> i appreciate that but with respect to first of all the u.s. report, that is a report that is done annually by the u.s. special operations element and it encapsulates interrogations of detainees and it is interesting because you almost should have the warning that is occasionally on the top of human intelligence that says this individual may have sought to influence as well as to inform. needless to say these are individuals who have been captured and in some cases knew there was some risk of that and we think in some cases they have a message. it is very interesting to contrast with their messages to each other prior to their capture. we have insights into that as well and at many cases they are frankly apprehensive i think

would be an understatement because they have a need that targeted quite effectively by isaf and increasingly afghan special operations forces. what they did say is not all that different frankly from what we have observed in other documents which is that there has been progress against the taliban, but indeed this progress always remains fragile and reversible and the enemy is indeed resilient as well. also in the an ie, which was for post-2014 by the way, and again postulated that the risks and so forth of various scenarios. >> let me, excuse the interruption but my time is -- the question i have is this announcement yesterday and nietzsche said the nie is out until 2014. if you have tribal leaders in afghanistan, so if you announce

that we are going to end combat roles and we are going to be gone by 2014 and you are a tribal leader in afghanistan what effect does that have on you about this? >> first of all let me say that i think the quote announcement the conversation that secretary panetta had was more than a bit overanalyzed shall we say. the policy adopted by the leaders of the coalition of the isaf coalition with afghan president karzai at the lisbon summit. at the time in the latter part of over a year, 15 months or so ago, was that at the end of 2014 isaf will have transitioned all security tasks to afghan forces. to do that we embarked on a policy of transition, progressively over time are going back the first transition of security tasks of the leadership of security gas from isaf to afghan forces took place

in july 2007. there is a subsequent transition being completed right now and what secretary panetta was discussing with this progressive transition and if you are going to have completed totally by the end of 2014 obviously somewhere in 2013 you have to initiate that in all the different locations so that you can complete the remaining tasks. that is what he was talking about. in fact our u.s. army brigades they go in there will have a knock mentation to enable them to perform more and more the combat enabling role rather than the leadership role. they will have what are called security force of pfizer teams to augment them and again the idea is that we gradually stop leading combat operations in the afghan forces grassley take the leadership. there has been a successful series of transitions that take place as the result a result of the whole process in isaf leadership and again i think as

i stated up front on this one his comments have been more than overanalyzed. >> mr. thompson. >> thank you mr. chairman and thank you all for your service to our country. please pass that onto all the brave men and women who work in the intelligence community under all of you. it is very much appreciate it. i have a couple of questions. general petraeus, the iranian plot uncovered last year to assassinate the saudi arabian ambassador here in the united states, what has emboldened iran to move in that direction, and do you assess iran's willingness to sponsor future attacks here in the united states? >> well that plot, i think the only way you can characterize that is to say that was really quite reckless.

it was a case in which of course someone was going to recruit a hitman basically to come here to washington to the café milano of all places to assassinate the saudi ambassador to the united states and it reflected a degree of recklessness that is probably more than renounce and we have seen in the past although it's important to note that various revolutionary guards quds force, hezbollah, hamas and some of the organizations in iraq have indeed also been active in a variety of plot some of which have been interrupted. in fact there has been a public statement on that out of thailand and of course a plot that this was disrupted there. we have seen arguably a bit more of that in recent years than in the past, partly to account for that shift in thinking that might lead them to that. i would hope that the

interruption and the disruption of this plot when a legal case comes out and so forth will give pause to the quds force as they contemplate further such activities. >> i might add in terms of a possible explanation for this, of course the iranian narrative has been or talk themselves into the belief that arab spring represents an advancement if you will for them, opportunities for them to extend their reach and there is that factor in the fact that they may also feel somewhat under siege. we have seen this general -- sanction and in general the international pressure that has been placed on iran by virtue of their nuclear activities. >> and general clapper to you see any indication for this sort of activity will raise its ugly head again?

>> well, it will. this is again part of a general campaign either through their proxies as director petraeus indicated, and the proxies and has the lot have been it as aggressive as ever have been the last decade or so so i expect we will see more of this and i think as general commentary and even as we are not quite as preoccupied with al qaeda and this is going to morph to other forms of such nonstate active privity that we will have to be vigilant about here and other parts of the world. >> i think we all know that we can't continue to grow our budget and our workforce in the manner we did after 9/11 and director clapper you stated that we need to find efficiencies and savings and earlier this year you indicated that you have the way ahead in doing this by this

last december and i'm interested to know what actions you have taken to try and identify some of those savings and what we can expect to save, and if you could point to any successful intelligence community wide efforts in regard to enterprise licenses that have allowed us to capture economies of scale and improve our cross-agency's abilities? >> i think next week we will be rolling out the intelligence, the national intelligence pledge as part of a larger budget and of course we will have subsequent hearings on the budget but i will say here at the outset we have worked hard as a corporate body i think to lay out a roadmap for how we can

achieve efficiencies. i think the big idea for the intelligence community is this notion of going to the cloud and with attention to security identity management etc. and having a single i.t. enterprise, a subject we have talked about for years in the intelligence community and now we are held to it and we have the technology the wherewithal and the leadership to do it. most important this is secretary of petraeus's commitment to join in this intelligence enterprise. i think potentially their huge savings here particularly in the i.t. arena so looking to the future that as i say is a big idea looking ahead. >> thank you. ms. myers. myers. >> thank you mr. chairman. one thing i follow closely over

time is what is happening with iran and south america and what they are doing in mexico in particular relative to us and the lieutenant general burgess i wanted to ask you, i know over the past few years the cia along with the defense department has worked with homeland security on the southwestern border and i understand that you all want to terminate those operations and i recently sent a letter to you and the office of management and budget just asking if you would read look at that because of what is happening not just with mexico and the drug cartels but with iran. we have all been talking about it this morning and it does concern me. when you look and again it's been mentioned over and over but the attack and the plotting by the quds force relative to the saudi ambassador and what kind

of access they have here in to the united states across that southern border. it just seems like by continuing the operations of being on that order it's going to lessen that threat in the sense that we have a better chance of stopping something. so you know i also have a question of what are they going to do and i know the answer previously relative to what they are going to do in the united states, continuing plotting etc. seems to me like this is an important mission and i just wondered why if you could give me some insight into why this is happening and is in a thing going to take its place? >> first i would agree very much so that it's an important mission and we are in consultation with the director of national intelligence because defense intelligence agencies role in terms of how we do some of these missions.

we provide some research and development technology that we look at providing. we come up with the capability. once we have the capability, then who best inside the intelligence community along our border should on that capability so i understand you have submitted a letter and we are in current discussion on that now. >> well you know, when you look back at what is happening in egypt with the muslim brotherhood and you know how things are changing over there. i know general clapper you and i have discussed this many times and this isn't a good situation i just don't want to see the same thing developing here in the united states access it's very obvious what their intent is relative to what they intend to do to us long-term. that is really a major issue with me. anything that you can get back to me on i would appreciate very much. of the other question i had on

russia's involvement. what they have been doing over the years, where they are right now and why they are really not being upfront with us while we continue to slide them. i know we have this policy with russia but what is really happening with that? >> well the russians have been very protective i guess i would say of the assad regime as they have particularly been with respect to attend chile the u.n. security council resolution. i think that stems frankly from a long time and profitable client relationship which they very much want to preserve and so i think that is what that is about. and just a general aversion when they have a chance the chance to be assertive in the world for him. >> well you know, where does it stand relative to what we are doing with russia, not just with

syria but the whole situation? are we doing anything to make any progress with them? i know they seem to be very obstinate in everything they do. >> well, i think the new s.t.a.r.t. treaty could the scene as a positive, but in truth it wasn't done for altruistic reasons. it was done for pragmatic budgetary pragmatic reasons but that is an area where we converge so we agree. i think it's well-known that the russians are paranoid about missile defense and the implications that has and they to use director petraeus' phrase they overanalyze that and that is a profound threat to their status as a national power so where are agreements convert several big remitted there will be many cases where they don't. >> thank you.

we do appreciate you. >> chairman thanks and another example actually of cooperative endeavor is in the northern distribution network that supplies afghanistan to the north, transits one of the ways of that transit through russian soil is very important especially as pakistan has closed the nato ground lines of communication that run through pakistan so in this case of course it's not in russia's interest to see afghanistan fall to the taliban again or to see the illegal narcotics industry or extremism penetrate further north into the situation states that already has so that is an area in which they have been cooperative. their commercial interest as well but there is a huge security -- for us. >> mr. langa been. >> gentlemen i want to thank you for your testimony, and the

extraordinary work you you are doing on behalf of the country and i hope you will express our appreciation to the men and women of the intelligence community who do this thankless job many days day in and day out. where in their debt or god i want to first of all associate myself with the comments of the chairmen and ranking member. we talk a lot about cybersecurity here today and it's appropriate we are focusing on one of the most serious threats in the country today. i've spent a lot of time on this issue with the chairman. i see that a catastrophic cyberattack is coming to this country and we had better get prepared. time is running out. i appreciate the work that you are attempting to do in this area given the constraints that you have and not having the proper authority and we obviously have to beef up our efforts in every way possible. i do want to focus right now on

the issue of cyberespionage because that is something that is happening right now to the tune of hundreds of billion dollars of the year to our adversaries that are stealing particularly those that would affect national security. in october of 2011 the national counterintelligence executive indicated china and russia are responsible or illicit intrusions into cybernetworks and u.s. intellectual property. my question is what do you recommend to further protect against cyberenabled espionage and in your opinion what legislative changes are needed to facilitate better protection against cyberenabled espionage? >> well, first i agree with, and i think we all do agree with your characterization. senator alexander's character is

what is going on here with the chinese as the greatest pillaging of wealth if you total up the value of the intellectual property. that has been stolen. so it does obviously point out the need for a rational and comprehensive cyberprotection policy for the whole country, which does account for new consideration for civil liberties and privacy. person when i would like to get specific about things entire to envision what he scaled up but i have always touted what former deputy secretary of defense bill lynn lynn did invading the industrial-based pilot which has evolved into i think a great model for particularly what the intelligence community's role should be in all of this which is to provide a threat

information and advice on the larger infrastructure and beyond that of the government. i believe that kind of approach is what is workable. there are all kinds of, the chairman and ranking member alluded to, many bills, 30 or 50 or so in the congress. there is one proposed by the administration and there was kind of a seminar session here this week with the senate on the subject and i think the white house is trying to arrange a similar session here in the house. there are some are found policy issues, who was in charge issues that we in the intelligence community i don't think can prognosticate or recommend but the way we are set up now to

react and respond to both foreign and domestic marks a team effort across the intelligence community the department of defense, the fbi is a huge player here and the department of homeland security. but it's clear from all that we have said and i hope that the predictions about a massive attack will become a self-fulfilling prophecy but clearly everyone's attention is alerted to this and we do need to do something but as far as what to do i would just commend the industrial-based pilot as a good model and it connotes the organizing principle i think of the importance of a partnership between the government and all the private sectors. this cannot be done all by the government all by itself. >> my time is up most up-to-date think i am very pleased that this committee passed the bill

but the chairman and the ranking member and all this really worked on and the information sharing side that talk to the importance of the pilot program and hopefully that will be a great success. we have the greatest trends on the information sharing side and this bill is going to congress in and i do appreciate the time, effort and focus of the committee putting into this issue in a thank the chairman and ranking member for their collaborative work on this. i have another commissioned -- question but i will submit it to the record. i yield back. thank you. >> thank you to her her langa ben. mr. conaway. >> thank you mr. chairman in thanks for coming. want to hit a couple of things that have been asked and give you something more broad. with respect to the afghanistan has the i see changed or amended their analysis for the karzai government to control their

country over the last couple of months that would have given rise, and i know david you said we overanalyze what leon said yesterday but that was a startling statement. did the i see changed their assessment of afghanistan and their capabilities over the last several months and if so why? >> i think it was a startling overanalysis, not necessarily a startling statement. if you go back and read what he said. sir, if i could this is exactly in line with the policy. we started back in the summer of 2011 transitioning leadership of combat operations, i isaf to afghan forces. and progressively completed by the end of 2014. >> i understand david. he said he would have all troops out by the end of 2013. >> he did not say that. he said all troops out i think withdraw forces by the end of 2014. the president has stated during

security relationship that would indicate some continuing beyond that as have the leaders of other major coalition countries who just signed agreements with president karzai. >> this is the assessment of capabilities that has not dramatically changed? with respect to iran in the leadership there, given that appears to be they have got actually nothing to lose at this stage as they move down this list or down this path with sanctions, can you give us some sense as to what impact serious collapse in a change in regime there would have on iran and their intentions? ..

at another hearing about the extent to which the iranian leadership notably the supreme leader himself, just how connected he is with reality, what kind of information he is getting. i think there are growing signs of dissent among the populace because the impact all of this

is having and syria of course -- >> one reason the iranians have expended a great deal of time and energy, resources on trying to prop up al asad is because having access to that territory, and also as another client so they are very concerned about keeping speed and power. >> to talk about as the resources shrink across the system we are going to have to accept risks. how are you going to communicate with decisionmakers, risks that we are going to have to take because we don't allocate resources to those risks and can you give some sort of a sense how you were going to approach this idea that we are as a

community not going to have the resources we might otherwise enjoyed? >> as we always have when we have gone through these cyclical patterns of expansion which we've done the last ten years every ten years the intelligence community has gotten more money and more people, we went through this in the 90's after the fall of the wall and we were induced to take reductions which frankly we didn't manage very well. and so for one i'm going to try to profit from that experience and not neglect things that we did then try to preserve and protect first the most important resource in the community which is our people, and those resources and capabilities to provide a global capabilities of that we can react and respond anywhere in the world. we don't cover the earth like sherwin-williams paint. there are things we will pay

less attention to, less critical problems, and one, you know, we are not going to do more with less than all these other cliches. we will simply have less capability. so in a closed environment we will be able to discuss that more in particular when we have the deliberations and certainly we will advise the white house and you as where we may be taking some risks. >> i appreciate your comments and i would be derelict if i didn't mention the idea that your financial statements of the organizations are not all the trouble at this point in time and that better information and systems and better internal controls will allow all of us to have a better sense as to where the money is going or not going to read >> yanna absolutely right and that is an opening to thank you and the intelligence authorization act revision for the fund's balance of treasury which is crucial to the ability in the intelligence community. we will be discussing with you

as well some funding that we will need for the financial management. >> thank you. i appreciate the pushback on that issue in your time. thank you mr. chairman. >> thank you mr. conaway. >> thank you mr. chairman and gentlemen for being here. i think that open hearings very important for the public to hear some reports from the intelligence community, so i think you for coming. there have been recent media reports that indicate that the nypd, the new york police department is biased and misleading materials to train officers on islam, and last year i asked the director about a smaller situation in the fbi and i have a couple questions but also, director petraeus, press reports have discussed the ties between the nypd and the cia and i have a couple questions on

that as well. but director mueller, since our last discussion about this, what steps have been taken to standardize trading in the fbi situation so they don't occur and was the review of the training that we discussed completed and when will we see a copy of this review? >> congressman, has we've discussed before and you were aware last summer we had indications that there were problems in terms of our training in this area, and we developed a two-step process to respond. first was to look through our materials and put together a panel of experts from within the fbi and also from outside of the fbi and to look at our training materials and identify the best practices when it comes to training in this arena. so any training in the future will be done according to the guidelines the panel has put

together. second, we undertook the review of the training on the tiberi live in the last ten years and looked for those materials and determined those materials that were inappropriate in some way and to make sure that they didn't show up in the training in the future but also to assure that any training that had been done pursuant to that was rectified. we've gone through approximately 160,000 pages of materials used in training and the bureau for the last ten years. far less than 1% of the materials has any inappropriate material in at. we also have been disclosing these training materials over a substantial period of time. the review that you mentioned is going into its ending stages and my expectation is in the next few weeks or month we should be

completing their review at which point in time we will again review you and your staff as to what we have found and what we anticipate doing in the future. >> thank you for your attention to the issue, appreciate it. dr. petraeus, i'm wondering if your officers have had any involvement in the nypd training on islam. in addition the press is reporting the assignment of the cia officers the tilt to the nypd as being curtailed in early april. and i'm wondering what that individual was doing and if that report is correct. >> thanks very much. on the first question i need to get back to you on the record on that to be sure that i have the absolute precise answer. on the other issue, with live it

say is as we believe the committee before the oig has looked into the provision of agency personnel in the week of 9/11 to provide liaison with the new york's finest given how new york has been such a prominent target of extremists, they determined that there was no violation of law or executive order. and as you mentioned for what it's worth, the final agency augment he who has been there on a fellowship over the course of the past year will rotate in the spring and ensure that liaison between the agency and new york's financed through another mechanism that we have established director clabber, you quoted there isn't quotes around it, but it says in an article that you thought the arrangement looks bad and will be addressed. i wonder if you to -- >> last time we had an open

hearing on this i just thought it was a bad optic. that's not to say as the cia, ig and its investigation which i have read found no illegality. and the other concern that i would have is just the president in the resource constrained environment of the police department's asking for similar support from the national law intelligence pergamon so in less era of austerity that we are entering from that standpoint, too, i thought tat was something we had a hard time sustaining. >> thank you. >> if i could follow-up on matt, i think it is fairly reasonable in the wake of something like the 9/11 attacks for all of the intelligence, law enforcement agencies to try to figure out how they can help the city that was the object of that attack and has continued to be the object of that attack. i shouldn't imply my statements that this is something that wasn't toward. as i mentioned, they found no

violation of law or executive order but what we have determined is it is still an efficient and effective way to ensure that there is the kind of liaison that is necessary and goes around the country but without the provision of somebody actually to the forces. >> there is controversy around the demographics unit at the nypd, however, and their relationship and appropriateness of their activities regarding the muslim community. i just wanted to make sure that we are paying attention to all these civil liberties issues. >> by understand, thanks. >> ms. schakowsky come it's good to note publicly the agency has been exceptionally good. we've been briefed on the report twice by the agencies themselves and the ig was made available by the committee to talk about the report and the director was actually good when the report came out to make sure that we had access to the information we were all concerned about it. i thought that was handled exceptionally well and again the

ig had the opportunity to come to the committee to talk about their investigation. >> mr. chairman, let me say for the record first the nypd is an outstanding job and counterterrorism. they have police officers the ticket to this and there's been a number of attacks against the 14 different stops because of the cooperation with the fbi, the jttf for the local police agencies in new york i believe the relationship has been extremely helpful and beneficial and it's been extremely irresponsible by the press to meet some of the obligations they've made. the associated press, general petraeus last august 23rd, quote, the cia helped nypd moves covertly in the areas. the new york city police department is targeting the communities in many ways would run afoul similar to the practices of the federal government and associated press investigations. these operations have benefited from the unprecedented help in the cia partnership that is

blurred the line between the four men and spying. we've january 27th the associated press and the inspector general completed an investigation into the relationship between the cia and the nypd after the article showed that the police collaborative with of the federal agency to set up operations to scrutinize muslim communities and we have programs that have incurred the communities. we have members of congress sitting around asking the attorney general to carry out an investigation saying we are deeply troubled by the press reports that the new york police department help with the cia has been collecting information on the muslim community in new york city and surrounding areas. this would be a violation of civil rights and trigger the laws and they then call on the attorney general saying that the nypd with the cooperation of the cia has engaged in efforts to collect information on muslim community in new york city and other jurisdictions.

recently "the new york times" says the cia and the nypd have an unusual and highly troubling relationship. i think it is disgraceful that the community is carried out these reports for a number of reasons. the cia can defend itself and the nypd can defend itself, but this is of course such trouble and confusion in the muslim american community which is to carry out its job and i wish members of congress before they talk about press reports would look into the facts behind them and i just again what to do with you, general petraeus, the cia inspector general said there was no violation of the national security act as the relationship between the nypd. is that correct? >> that's correct. if i could point out,,, we should remember that the cia is an independent individual. he is the only person in the agency beyond the director who is nominated by the president and confirmed by the senate aide spent and there is no violation

of the national security act. you also concluded that there was no a executive order by the cia or the nypd. >> that's correct. sprigg is there any evidence, did they find any evidence at all the cia carried out or engaged in any spying or type of surveillance or clandestine activity in new york on its own or with the nypd? >> no. >> is there any evidence that the nypd in any way violate it reduced its relationship with the cia? >> now. >> i think it's very important that this be made known again and again because this is causing problems with the muslim community and is allowing politicians and other places to take shots at the nypd which again they can handle themselves but it makes it difficult for them to carry out their job. in my district alone i know with the nypd is doing. there's always room for legitimate criticism. there's been friction over the years the nypd and that is

legitimate to me for action and the law enforcement agency. but spreading lies and spurring the clandestine activity this is disgraceful and i know the reporters are for it to the surprise and "the new york times" is engaged in the campaign against the nypd but i think we should realize these are real threats come always ongoing threats and as far as i can tell, i would hope that the cia does nothing of all to diminished level of support for the nypd. >> life went up to new york to see things for myself, and for what it's worth, my assessment is i met with the commissioner and other law enforcement personnel. my impression is there is a very good and very productive and very proper relationship between the various oil and for some agencies that includes the fbi by the way, and then also the elements of the community in any

properly products of their intelligence collection analysis. >> this is the record that's been out here and when they rode the story about what they disclosed whether the cia and new york call or announce the fact or report the fact the council on the america islamic relations care is also calling for the investigation never mentioning at all the muslim american civil rights organization never mentioning it all and the terrorist funding case in the country and the fbi has cut off the care. that is the type of discrimination that i think we as a community should stand up and speak out against. i wish the members of the committee with line up with those doing the job. i yield back. >> thank you.

>> whimp you gentlemen for your service. general petraeus, i have three questions my chief concern about afghanistan is the safe haven and pakistan and my questions are these, first do you anticipate any change in the status of the sanctuary and that concerns the fines in pakistan, and second, if we can't expect this to be much of a change in that safe haven for the taliban insurgency can we expect that the afghan forces will be able to defend against insurgency that enjoys the safe haven once we draw on the troops? and finally, should the afghan special forces be allowed to take the fight to the enemy leadership in pakistan and the sense of community from the risks of the senior taliban leadership enjoy in pakistan. >> first of all there is no

question that there are elements in pakistan that have enjoyed sanctuary and that caused major problems for afghanistan and the afghan coalition forces to provide security to enable the development of the new afghanistan. having said that there is also no question but that the pakistani partners have confronted a number of the extremist organizations foremost among those are al qaeda and the cooperation does continue in the various forms. but also the taliban, pakistan and again and under the police. now admittedly, the organization focused mostly on destabilizing pakistan, but not entirely. it does cause problems for afghanistan as well. but when it comes to the haqqani network and the afghan taliban, there is no question that more needs to be done to them. there is an important case

recently where very significant interest explosive devices expert and builder has been detained in pakistan again there are a couple other developments recently but i think we should be cautious and what we anticipate in terms of the ability of the pakistani partners and in some cases the willingness to go after again the haqqani network in the federal minister tribal areas down in baluchistan. they have sustained a very heavy combat operations against the taliban population affiliate's and they tried to squeeze some of these others, but again they would go in and go after them is probably over the optimistic. if no change the prospect of the afghan security forces can continue the defense has in the past i think the will depend on the amount of assistance that is

provided. the character of that assistance if you will. are there enablers in addition to just say money or equipment or various traditional forms of security assistance. we have obviously nearly three years before the end of 2014 to develop that kind of what that would consist of. noting again not just president obama but the leaders of the other coalition countries of the nato forces in afghanistan have all pledged continued support in the varying forms for afghanistan beyond the end of 2014. with respect should the afghan forces be about to go? i think that is obviously a question from afghanistan, but i think they probably have sufficient fight on their hands without invading the soil of another country even as the threat is posed by some of these safe havens across the board.

>> i wouldn't suggest the invasion as to whether they should be able to carry targeted actions against leadership figures and the haqqani network for example. >> is probably one that is best continued in a closed session i fink to flush out all the different issues that are at play and i would ask that we probably do that. thank you, mr. chairman. >> thank you, mr. chairman. i find it rather ironic that ten years ago the intelligence community was chastised for being stovepiped, for stovepiping for holding information back and just to expand on what mr. king was pointing out that here we have the various intelligence agencies who are trying to work with the local pd to prevent a terrorist attack in the future so everything they were criticized for ten years ago when nine allyson occurred.

now they are being criticized for actually doing what the congress and american public asked them to do which is to work as closely as you can to protect civil liberties, but to make sure that we are sharing information across the board, and as it relates to the folks i represent, i hope that the folks are focusing within the intelligence community on the activity of the drug cartels who are now operating in mexico and other parts of south america who are also operating in california and parts of the west and i assume all over the country. every day and some americans are being killed in this country because of the foreign drug cartels and other criminal activity. and so, my only request of all of you in the intelligence community is that you please

look for ways to cooperate and share information with the folks that i represent in the various sheriffs and the d.a. that can be helpful. if the need information on the cartel or other extremists or of the constituents need help on hope that you are hearing from order least some of us on this committee do not want you to take this incident that occurred in new york or in the false press reports that a rock there and somehow think that the converse is now asking you and the american public is asking you to go ahead and start stovepiping again and not share information with our local law enforcement or folks on the ground. >> if i may let me say a couple things and i would like to have director petraeus add to this one of the profound changes that occurred in the intelligence community the last ten years which was not the case prior to

9/11 is the interaction with the state, tribal and sector. i take this as a major responsibility that i have towns my staff to foster those interactions. i've engaged a lot with what i think is a great organization with the association in the police who are committed to this and are very sophisticated and the ways of intelligence. one of life rests for 2012 is to further working with the dhs and the fbi to refine and bring greater stability to that relationship. so i take your point whether it is drugs or any other issues connected with terrorism or proliferation. >> well i think first thing the advent of the dni and the dhs in particular has followed in the

wake of that has brought about considerable progress some intelligence sharing and intelligence integration. we are all committed to furthering that progress in the years that lie ahead. for those comments,,, i was just in mexico and colombia and met with the heads of the state and each of those countries and with the intelligence counterparts and other security officials and in fact were hosting this afternoon a delegation from mexico in return to discuss the way ahead in some of the areas that we were discussing. i have to say i was impressed by the concept of the mexican leadership has adopted, the comprehensive approach is clearly the right way for word and by the establishment of institutions still the early days and some cases, but the dramatic expansion of the national police for a sample of

the penitentiary system, the corrections system, the attention to the need for the various additional walls and so forth all are exactly what are required to stem what is obviously a very, very serious challenge that is manifested by the violence and the breakdown of the will fall in some of the areas in mexico. columbia on the other hand has adopted a comprehensive approach for a number of years. it's now looking to literally take it to the next level and we are obviously partnering with them as effectively as we can. as you know the agency has a counternarcotics center that integrates not just within the agency but throughout the intelligence community and indeed with law enforcement agencies as well and that is something that we continue to focus a great deal of effort on given the threat that it poses our country and the world. we were done in colombia and mexico prior to your arrival and

we are happy with the success that all of you are having their in the intelligence community with our war on drugs and international crime. >> i just want to add very briefly on the working with state and local law enforcement that has been the key to the success of the timber 11 we have over 100 tried to run was a task forces that take local representatives. we have hundreds of task forces related to the violent crime and narcotics trafficking what we call the safe speech taskforce is and leverage the capabilities throughout the country by coming together with the state and local law enforcement and the task forces. even with the threats of the future including cyber it is going to depend on our relationships not just with other players, nsa, cia, dia and the like but also the relationships with the state and local law enforcement in the building of the law enforcement

capacity to address that threat as well as ourselves. >> am i also mentioned the 70 tuesday and major metropolitan fusion centers for which the national intelligence program provides funding to ensure which is the nexus for providing information a powerful local level to the national committee and a downward. which are another instrumentality that network have grown since 9/11. >> thank you to the panel, and mr. chairman, i yield back. >> ms. bachmann. >> thank you mr. chairman and gentlemen, thank you all so much for the work that you've done on behalf of the american people. i know that my constituents are grateful for all of the work you do. i just wanted to note that it was a year ago when we had all gathered here in this room for the public hearing and at that time we all have our televisions on and we literally were observing history in the making

with the arab spurring and we saw the devastation occurring in cairo even as you are all speaking to this committee. and i am just struck by the fact that what has occurred in the last year. my questions regarding egypt in particular as we are observing that on television. since we've seen the attack on the embassy in egypt we also called for breaking the 40 year peace treaty that's been enjoyed between egypt and israel and also in the last year result elections take place in egypt and 70 present of the power is now controlled by either the muslim brotherhood or elements of the islamists who are both groups hostile to the united states and call as well for implementing the sharia law in egypt and i just wondered if you could comment particularly the director clapper he said to the committee the muslim brotherhood

was a secular organization. i just wondered why did some of those events in the last year mayer brown you still stand by that statement on the muslim brotherhood in the secular organization? >> i didn't make myself clear in that statement clearly obviously, and that is a danger of the sound bites and all that sort of thing and the subject appearance i try to clarify that what i was referring to was to that point behavior with the political system to participate in elections and this sort of thing. it's scholars and middle class people, but to the point is going to be for us the sheep in wolf's clothing remains to be seen and the other related

parties there's a wide spectrum on the political parties that have emerged on the upheavals have gone on in egypt. this is something we need to watch very carefully. there been calls for the treaty with israel and not surprisingly israel was very concerned about that and i was not as precise when i made the statement a year ago about the muslim brotherhood as i should have been. >> thank you for your response, and another question about egypt as well i sensed that mubarak was overthrown, it has become a highway for the transport of the material and the cross border attacks on israel to the motorists in august and the needed bombing of egypt is just the notable example but we have

observed. egypt also is losing its land border with the control gaza and currently we have the two battalions i think stationed in northern and southern sinai as the elite force in in the observers in charge of observing the implementation that each of israel peace treaty. would you in your estimation say that our u.s. forces are at risk and have the rules of engagement changed and are they involved to prevent the efforts of the transformation to another terror even that will continue to destabilize the peace between israel and egypt? and if so, how, and if not, why not? >> i think at best, and unless director petraeus knows this is probably best to consult with the department of defense on your question about the sinai engagement so i will get that

supply it to you. >> congresswoman, first of all, i think it's important to note that in all of our interactions with our counterparts that the egyptian government very much shares the concern over the emergence of the challenges that some extremists have flocked there and it's been used as a transit point for weaponry and so forth. they truly do take this seriously and we can talk a bit more about that perhaps in the closed session and with respect to the observers obviously it is my old a real live as a central commander almost as an unchanged there's just one u.s. battalion there and it's in the southern part of the sinai which is actually further away from this area we are talking about and there is another battalion from

another international country that is in the north. i would refer to the department of defense on the rules of engagement although i can't imagine why there would need to be a change giving every opportunity for the protection, and so again i would be surprised if there has been a change. >> thank you mr. sure. >> thank you, mr. chairman. i would like to go back and revisit your southern hemisphere with mr. nunes brought up. obviously we almost had a field staff in colombia and number of years ago. the united states stepped in forcibly and turned that around, and i think that everyone here would say that it's been a success stories and columbia is coming back. we've just been entered into a trade agreement that i think is mutually beneficial, but obviously we have a significant problem in our southern

hemisphere. venezuela, ecuador, bolivia, central america in many places a basket case, guatemala i think has the highest crime rate in the world and i think they managed to make that list and obviously mexico. 50,000 people have been killed in the last three years. as horrible as the number in afghanistan may be higher in mexico on our border, the united states, and that violence is coming across our border along our southern states especially states like arizona, texas we still have problems in california. we have significant problems in central america, but we have got big problems right on our

border. these are our friends, and by golly we need to make sure we can help them out and help ourselves out at the same time. i just want to mention my head up the caucus in the bipartisan group and the man to man is coming across the borders and the worst job we have ever seen and it is tremendously addictive. i think 90% of it, the director comes from mexico the precursors are coming from china, india, everywhere else where there mixing this stuff up and the amount of money that is being made is being very corrective to the folks in mexico and the united states and so i want to hear all of your comments about this. what can we did in south america to focus on the problem that we had which i think is a huge national security issue. >> i will only start and as a director mueller i think we all

share your concerns leaders in the intelligence community and the citizens about the threats and issues that confront us in this hemisphere. and obviously we have been focused on other things with the two wars and all that sort of thing we have problems in our own backyard. a director petraeus has been a marked success story from the intelligence perspective and partnership that we forged with the government. we are extrapolating the lessons learned only in mexico. i think that it also shows this is a long hard slide and once a country is willing to partner with you, which some of them

are, then the work begins. what concerns me is the network that exists in central america as a highway if you will for the drugs flowing northward, and even as we draw down or are trying to bring more resources to bear which we can talk to perhaps in the closed session about with the u.s. can do for the partner nations. and i think's director petraeus can share of more detail in the closed session with what we are attempting to do. >> we are very concerned about that on a number of homicides in mexico and also for the possibility of the spreading of violence north of the border. if we are focusing a number of

connections. first of all, where there have been done kidnappings for instance we have a number of kidnapping task forces that are believed to our agents on the border are looking for the mexican counterparts. second, the board and we have the task forces that are addressing that particular area. the third area is making sure that the intelligence that we gather with the dea gathers or other law enforcement or intelligence agencies in the united states is matched up with that intelligence that is below the border by the mexican authorities by the u.s. intelligence agencies and consequently there is a concerted effort to make certain that there is substantial the information sharing along the border. the last point i would make as has been pointed out the cartels from mexico have reached into

the united states seeing the lucrative markets quite obviously and not being suffice if to move drugs over the borders but exert control and have pockets of the cartel personnel inside the united states and to the extent that that is happening we have enterprise investigations or are addressing those aspects of the movement of the cartel's within the united states. understanding that the thrust of the defense along the border in the narcotics trafficking is the customs border patrol and the dea. >> congressman, if i could, first of all with respect to columbia, no, we really have to give credit to some very courageous colombian leaders over the years who implemented a very difficult strategy. certainly be provided considerable assistance but it was their police and their military that really implemented

the strategy that was developed. with respect to mexico, as i think i mentioned earlier, there was actually a delegation here today quite high ranking. on will meet with them this afternoon after we get back to the headquarters on how we can further our work together noting again steps that mexican leaders have taken to develop a comprehensive approach under the current president and to begin building the institutions needed to implement it, but again that is going to take a good bit more, a lot of hard work ultimately to develop the kinds of forces, judicial structures, corrections facilities and all the rest to be able to implement what is needed. >> thank you pay i just want to point out that there is a war going on in mexico. more have been lost in mexico than we lost in the vietnam war and it's right on the southern border and it's coming across. so, i would appreciate your attention to that problem. >> thank you.

i have a couple areas that i want to try to cover and some of it and trying to understand its ackley where we are policy bias from the united states government in relation to our intelligence responsibilities. with just some things i think we need to understand is the haqqani network hell would you describe the network? give me two sentences on the activity to give pause for concerns. >> well, the haqqani network which is affiliated with the taliban but probably not an organization that is likely to reconcile based of course primarily in the north waziristan and the tribal areas of pakistan, and a very lethal organization that has been the behind a number of the most

important attacks, the attempted attack on the basis for example in the province just south of kabul. they were implicated in the attacks on a number of the bases and of course on the embassy attack effort as well. >> they've also expressed interest in reaching outside of that year as well have they not? >> they have been over the years indications that they would like to be a bit more transnational. i'm not sure that we can say that with seen examples of that yet. they are still focused on trying to regain influence over the provinces in which they had historic control during the taliban time so you could add least say that it's aspiration. >> absolutely. >> the taliban has over time expressed some desire to go beyond their operations and seems to me that seems to be inspirational as well.

is that correct? >> yes, that's correct. the taliban continues today to have some relationship with some of logistics, finances, recruiting, sharing basis, those kind of things, is that correct? >> that's correct. and as we have discussed before, chairman, there is a syndicate of the extremist elements located in some of these sanctuary areas, and particularly in the waziristan you will find not only the haqqani network but afghan tel dan, pakistan and taliban come some al qaeda elements, islamic movement among others. >> and some of this a strong relationship as well, is there not? >> the overarching taliban structure certainly does encompass a number of those, but not all and again, al qaeda wouldn't necessarily be viewed as a part of that although there is a relationship. the haqqani network calls itself tel dan but we will respond to

the central direction but not always. >> the tel dan use is acts of political assassination to further their gains, do they not? >> yes, absolutely. >> i just want to cover a few of these quickly. as to other groups. >> the implicated the islamic movement of uzbeckistan in the northern parts. >> they also use the political -- >> yes, all of these organizations. >> and they are very lethal and successful to some degree is on their tax. >> from to cover a few of these to bring the light. going into the fall the taliban, these are held responsible by the taliban. we are successful in assassinating the chairman of the afghan peace council, the former president of afghanistan. going into this year or late last year, excuse me, the

district governor of the helmand province was successful assassination. the member of the afghan parliament who had been a former chief of the police in the province was a successful attack and assassination. the police chiefs in the kandahar province would fail. it wasn't successful but there were deaths and casualties associated. going into this year, the district governor from the kandahar province was assassinated by the taliban. of the antitaliban tribal leader in kandahar was successfully assassinated by the taliban. the u.n. reports that 462 civilians were assassinated by the taliban 2010 alone. so you would argue by these

numbers that the taliban hasn't abandoned its practice of the political assassination. it's a form of intimidation, is that correct? >> certainly. >> and so one of the things we see in the reports coming out of afghanistan is the one thing that the taliban has been telling the afghans is in fact we are coming back. the united states is leading. we are coming back. we have some great analysts to walk us through that not all that long ago. is that is a disturbing trend, don't you think? >> it is, certainly. >> and so, you can see where maybe someone who looks at all this information might scratch our heads and wonder given the fact after the negotiations started they were committing acts of political assassination to undermine all of the work, all of the sacrifice of the united states military and intelligence forces on the ground why some of us might get a little bit cranky about what we are doing when we talk about reconciliation and in fact, and

you can clarify for this we already stated in the senate hearing that the individuals who were discussed in the possible transfer as they call it the confidence building of i guess what they hope is our peace negotiations were deemed dangerous to release, as we have established that. is that correct? by the report? >> my understanding is an agency report. >> well, most recently the agency was asked to assess these five individuals, the significance, and the risks that could be incurred by their release not to the afghanistan and to get an eerie latif third country with a varying degree of mitigating measures and indeed obviously the risk is higher. if you have fewer mitigated measures and lower if you have more of them and that is what the agency provided.

>> at one point there's a report that says they are too dangerous to release. that is i think a couple of years ago and director clapper i think that's the intelligence committee report. >> i think that is an extrapolation of the determinations that were made by the interagency group on those who would be retained or not from the guantanamo. i don't think that was the exact language used, but in essence the was the recommendation of the agency that they would be retained at guantanamo. >> i have to say i understand your concern with all of this, but whether or not we negotiate, and with whom we negotiate and the terms of negotiation is not an intelligence community called but a policy issue. >> understand that, director, however the intelligence that i hope that the national security council is having access to, and i imagine that they are getting

access to the same information we are; is that correct? >> yes, they are. >> this is important because i want to make sure we understand what information we see and what information they see coming and why i think from a policy perspective, which is at the end of the day why we are engaged in this whole debate. it's important to have the discussion. i happen to believe this is -- if this happens because crossed the line that we will never be able to get that. it is a serious doctrinal change for the united states government. i believe as a member of the committee seeing the information that we collect tracks very well of why this is a bad idea. i just want to make sure that they are seeing what we are seeing so that we can come to the conclusion and why there is so much a bipartisan opposition to this during the national consultation if you well with congress, trying to establish

basically what we are all looking at some regional determine the was a perspective that this is a good or not a good idea for the national security in the united states. fuel the information to the policy makers are going to use to make this decision. >> i want to understand and be made clear that the intelligence community writ large has been a part of the deliberations in the interagency and of course i don't think that anyone harbors any illusions certainly not in the administration about whether there's been a decision on this whether this will pan out or not, but it seems from the administration point of view worth exploring. >> understand and i will take exception to one comment, director. i'm not being critical, but there have been operational things that have been conducted

up to this point so this isn't an aspirational policy change. this is something that is well under way and has been at least a suggestion has been passed along to the people that we would like to negotiate with. that's different than we haven't made any decisions. it's not really done yet. i will take exception on that and again, i just think this is so serious that we get this piece right and what our concern was, and i did that mr. thornberry brought this up and we wouldn't pull the quote to make sure we have a right, it said from the secretary by the mid part of 2013 would be able to make a transition from the combat role to the training advising rule. i can't find anyone here that would find the timeline that we are on from the time services committee on the appropriations

and certainly the intelligence community. i was never a more understanding so that is in fact the change because if you're going to begin by mid 2013 by the director's the assumption of time lines you have to start that earlier. so i guess i am confused about all this is the rhetoric of which we are pursuing this doesn't match the intelligence of which we are receiving. we have just clarify that they are still using political assassination and by our intelligence sources of the taliban is in fact looking at -- this is triumphant. they know the time line is when they have to survive. but we've seen the reports of the defections to the tel dan and it's all about intimidation. that is who we know they are. are you familiar with the -- in 2006, it may have been into 2007 the pakistani effort. i'm going to call the peace

negotiation with some of the tribes and some of the taliban. are you familiar with that? i call it the peace accord. it wasn't necessarily the are you familiar with that effort? >> well if you are talking about the effort with the taliban and pakistan that's correct, and was limited to the area of swa valley in what used to be known as the northwest frontier province and obviously they broke that in short order and that's why the pakistani army subsequently went in and cleared of valley in the northwest frontier province, something they continue to hold today and they lost a lot of soldiers and doing that. >> which is important because that negotiation gave them breathing space to both reconstitute, recruit, refinance, retrained and we just saw that as a matter of fact and we have seen that with the taliban over and over and over

again. and i am just -- we are frustrated in the sense that we had some very classified and sensitive briefings along the way and i commend the administration for that. we thought those conversations were going to remain in a sensitive and classified setting because they were the opportunity to advise and consult. you can imagine how frustrated we are when we find out a was a little bit further along and certainly the press conference january 22nd basically alluding to this peace process the fighting case very, very dangerous to the national security interest and i just thought god was important that we get this on the record to know that negotiating with people who are associating with this level of violence is very concerning given that they haven't even slowed down their political assassination during the course of those very negotiations. jerry, very disturbing. again, i hope that the packages of intelligence that we see are

in the hands of the nsc said they can make a wise decision. and i would hope listen to the advice and council of the intelligence community to turn this around before i argue it is too late. i want to talk about iran quickly. director, i have heard several times, and i think this is so important, that the operation that the force tries to conduct here in the united states to politically assassinate which is a state sponsor terrorism act the saudi ambassador, and with this regard by the way for the civilian casualties among u.s. civilian casualty, was buffoon and and measure i want to cover a few facts i think are important. the criminal that the approach in mexico, but he has cast a criminal, vetting if you will of being a pretty good bad guy to double to move weapons and

conduct operations across the border in the united states? >> it's hard to definitively say that certainly we have the wherewithal. if not himself to contact others who would have that ability. >> so there has been some -- the way they transfer the money was a bit ridiculous. can you talk about that? those accounts were because the fbi was engaged in the celebration was a bit of a stroke of luck was it not? >> it was. we had this was handled by the dea and brought to our attention. and again so, you can imagine that sort of surprise when cooperative shows up and says i have a deal for you but it is the dea. that is the kind of information that they would normally take is that correct? >> it may not be -- i think all of us now take whatever information we can.

with the dea, fbi and get it in the right, but absolutely the right thing. understood the importance of this, and we then immediately followed including carrying the investigation all through the point in time where the money was provided to go ahead. >> i stated my question. we were fortunate that the dea had gotten to this matter and showed up and was on the ball quickly. >> i might add if i could going back to the discussion of those had before on this particular issue is this was a viable plot and as representative of the willingness to utilize the proxy's or others to carry out attacks, which as i think director petraeus pointed out as a notice the operandi of iran.

.. >> so we have to be vigilant tamara batt. be not that's not only acquiescing globally. it reached other places in the world and done something similar. maybe not the exact time out, but they did something similar, had they not?

>> well, there have been other instances of outreach to proxies and attempts to plot thailand case in point. >> someone of the things we saw in reporting is eerie and strategic shift to iraq. they've believed to draw down with the opportunity for them in iraq. can you talk about that a little bit? >> i will start. yes, they do. they see the power departure from iraq as a favorable condition for them and they certainly want to try to exert influence to the sense that they can, and iraq i'm not sure the environment they are is entirely conducive to die. i'm sure they are not as welcome as they might need, then surely they are interested in that. >> well, they've tried to do

this all along. there's no question they have exercised a degree of influence at varying times sent the end of the saddam hussein regime. the fact is though that the iraqi leaders have no desire to become, if you look, the 51st state of iran. they do want a relationship. iran is so is going to be to the east of iran. so it's going to be larger. it has a durable resource that is how, but they also remember they fought a bloody war with each other that one is persian, the other is arab, one speaks arabic, the other farsi. so while the predominant religion in this country is same, shia, again, they are conscious that the difference is that iraqis are really quite nationalist in their approach. so why they will take assistants, what they want the religious tourism, what they want their electricity, their diesel and other necessities

right now at this stage in iraqi development, they don't want to become a satellite of iran. but they have been very engaged not only in killing u.s. soldiers in iraq through their proxy -- they've also been iraqi, by the way. >> they have been very engaged in feeling this caring violence that we see in iraq today. they supported groups without question over the years while they were there in force and they still continue to support groups now that have caused significant security problems and also sought to intrude in various ways in the political realm, also in the economic realm as well. so i guess my point being if you see their expanded roles they are supporting al-assad, they should throw him over the keyhole if they thought they could get a pro iranian regime. i don't think there's any loss there. they have a lot to candor.

hezbollah in southern lebanon as a destabilizing force now feel like they could conduct an actual attack on the united states, brazenly moving their operations. what is the sense that they believe that when we say all options are on the table to be honest we please all options are on the table. you can see that meredith might be of little different. that jibes with the intelligence that the committee that their calculus is not looking to the uss clearly, but hey we're making progress and we have some destabilizing efforts in iraq. it's not going well in afghanistan by general clapper mentioned in i.e. so it seems to be looking at it from an iranian perspective things are going a better way, how do we get them to understand that we are deadly serious about all options on the table?

>> well, i think a change in the rhetoric connected with the strait of firm used in the initial threat to close it and i think we made it clear that was not accept the role, the kind of tempted to rhetoric and also by their behavior the street is indicative of that. so yes there is the rhetoric. there's assertiveness, but i do think they have respect for what are potential capabilities are here. i think as well the sanctions are obviously led to the united states. are having an effect by having an impact on the economy as never before in iran. so do they take it seriously? again, this all gets back to

what extent the leader of this country or any other for that matter is seeing reality. >> isn't a little disjointed on a policy something we need to work out with both executives in congress if we don't focus together on this problem, it really shouldn't take the congress acting on both the distinction built to get the executive branch to oppose sanctions, which i do believe will be crippling, but you also have two has a layover. the narratives is they have to believe we are serious when we say all options are on the table. i'm not convinced we are there yet. >> chairman if i could, could i make the comment quickly on the enemy because they think it's really important that folks understand because there has been some mischaracterization, as you know, this is the night that looks at those 2014

afghanistan. not looking at how do things develop in the recent years other than just as with the implications are for post-2014. it devotes the one character after the stage of the insurgency over the last year noting it did this, but remains resilient, which is something we all recognize. but the way we did a word search for the word stalemate is not either in there. but it does do is postulates levels of support for afghanistan post-2014 and assess this book with the situation be like under those assumptions and if you put more and you probably get bit more out. so again very important no because as we have discussed before, it does not necessarily characterize correctly. >> i understand that. i read it again last night just to make sure.

some of this also we can cover in a closed session, but there seems to be concerned about. >> there's plenty to be concerned about in afghanistan. >> the secretary of defense without getting into details of the i.e. also moving creedence creedence -- len primus, excuse me to the less than rosy predictions of an i.e. how is that for not trying to get around that one? >> i've got it right here as well. >> mr. chairman, thank you for having me here. as you know we have to deal with the benefit of our country national security, but it's very important for us to communicate as much as they can, especially about the intelligence community so people understand what we do, what our mission is an that we protect our country and not

invade civil liberties or anything avante chair. i think the hearing has been good. the two areas i would like to listen and then invite persons dress questions his first as cyberthreat. those of us have been on this committee for a while to ask questions which keeps you up tonight, if you look at the two biggest threats from where i sit, is the issue of the weapons of mass destruction in the radical groups that are out there that has capability to kill people. and the other is cyber. what concerns me about the issue of cyberis the average person in our country is not really where to cyberthreats out there. for whatever reason we know our media stories about a lot of issues especially republican primaries. at the issues that are out there -- but we have a cyberintrusion or attack, it

seems like it's not a front-page story, where other areas are attacked they really could have a severe benefit, we note that our pentagon and we know that our business that are. just as an example in october 2011 the national counterintelligence indicated china and russia are responsible for extensive intrusions into computer networks than that of u.s. intellectual property. we go further. we can expect an impact on national security and where foreign deployment. so we need to be very concerned as the country. i think it is important that we start talking about that. what is the impact of cyberattacks? we have to get the language. cyberattacks are considered like a war and sometimes we call it intrusions come on the fact regular basis that the countries

and my concern would be is radical extremist group b. in the $2 million to go in and take on a major banking city. north korea just took on just took them to manufacture a couple days in south korea. so what i would like to hear, what do you use your concerns as far as a catastrophic attack. i know alexander has talked about it as even i have have had discussions. how serious this is and what is catastrophic. we know there's a lot of issues out there. how about for the national security of our systems? >> let me start by pressing remarks by saying that i do believe that the cyberthreat will equal or surpass the threat for counterterrorism in the foreseeable future. the efforts we put on counterterrorism, same

intensity, same breaking down mr. pipes has to be undertaken with regard to cyberthreats. quite obviously there are a number of ways of looking. i'm the one hand you've got the electrical grid or the power grid and the ability to bring energy or other materials or pipe went to lake -- >> air traffic control. there's very little we do in this day and age that is not somehow associated. the fact of intellectual or d., r&d, theft of the plan and programs of incorporation for the future, all of which are vulnerable to be exploited by attackers. so i'm the one hand you have to defend the infrastructure. on the other hand you have to identify as director was saying, the attribute should possess critical as anything else.

what is somewhat unique in this venue is that she don't know whether the attack on aztec or rsa or google or sony or other is undertaken by a russian or chinese at their word organized criminal group and could be a terrorist group, an organized crime group may be associated with intelligence service or a country. or it could be just an organized criminal group for profit. or it could be a high school student who has the hacking capabilities this hack into a financial institution that could ring is to its knees. so for us in the community you do not know the program in which you undertake the investigation quiet is it a criminal that domestically, which has required us to come together and develop

mechanisms as much as we did with the terrorism arena to share information. we have a national cybertask force be put togetherth 27 ages these so when there is a substantial intrusion, we are all sitting at the table, able to bring our resources together to identify them. and in addition to the breaking down of stovepipes, sharing information that's important if not more important that we saw. so the cyberbills are out there. they allow the sharing of information with the government, but also the government of the privacy or is tremendously important. the last plant equipment for legislation as a data brief reporting requirement that requires those institutions that have been hacked into have been proven and three mandated to report that.

we cannot prevent the next event from happening. 47 states with different reporting mechanisms has to be one mechanism that requires that reporting structure. >> i was a pretty strong statement to say that you feel that cyberattacks could be more serious and national security and counterterrorism. i happen to agree. does anyone else have an opinion as to the threat and how serious it is? >> as we discussed, we all recognize this is a profound threat to this country, to its future, to its economy and its very being. the intelligence community whether foreign or domestic and i think i have to acknowledge the other components of the government, dod, doj, homeland security all recognize this and are committed to doing our best to defend the country.

>> absolutely very serious. >> general burgess, you haven't had a lot of questions. >> identified myself as a previous remarks. [laughter] >> one of the things that are wrong congress oversight as we need the money and it is important i believe that we move forth quickly. i'm going to talk a little bit about our bill and how we got really got to where we need to go. we work very hard for every year to try to find a bill that would very quickly move us to a level where we can at least start protecting our country. whenever we pass legislation in congress, sometimes an unintended consequence. one of the things we try to do is make it very small bill, 11 pages in the very important issue i said before that i statement that members on my side of the i/o, congressman

thompson and congresswoman lee, work very closely and we felt very strongly about the issue of civil liberties. and sometimes we felt that we worked through and not the bill the issues that are there. and still sometimes you don't always deal with the facts but it's perception. you have to be very careful when you're trying to protect your country that you don't do with this issue. i say this though has been an 11 page bill that we feel strongly mr. move forward. i know already there is some pushback. i want to read a statement that i have but the possibility that the military arm of government, assuming nsa could become the gatekeeper of information on the commercial industrial site there is to serve concerns about privacy here. and when i see this i know a

comment was made by another member on the committee looking at this issue. we purposely left out of 10 for the administration because we understand the sensitivity as much as i respect and they, we have to understand the perception of what is out there, especially this issue and what we have to do. but my point i want to ask you this is that we have to acquit a lot of buildup there in the area of cybersecurity. there's very few people and now it's time to move quickly because this attack could be imminent. i want to ask you, director mueller. we really don't have the totals and we believe because of general, utah about really our bill is based on a program that were and then we do with the issues of civil liberties that moves forward. you feel that we need to quickly move forward with a very small

bill that gives you the authority to protect this country? to filter it could happen tomorrow or a month from now? >> well, the attacks happen daily. some are a lot larger than others. and particularly when the attacks are coming on the infrastructure, look at the financial or electrical grid or what have you come and it could be devastated. a great deal has been done in the terms of breaking on the road between the various asian these and working closely with nsa. the same way they were closely with cia, would like to address a catastrophic attack should have been. but our effort in the same way we try to prevent the attacks in the counterterrorism arena, our goal was to prevent the attacks and where we really need to help is the resources and the support

of legislation in the two areas i talked about sharing the intelligent and data breach would give us the ability, not just to investigate after the fact, but also prevent the attack before they can have a devastating impact we anticipate >> we have always been concerned by now you have been of the homegrown terrorist and i think when we were successful in bringing a lackey from yemen whose focus was to recruit homegrown terrorists who have the magazine come even how to make a bomb that we came a long way. but it still is very difficult issue to identify homegrown terrorists will try to kill americans. could you just very quickly talk about where we are, what happened as a result.

are we still under great concern that especially the hammond group people should come to the united states? >> well, removing bin laden, removing al-awlaki was contributed substantially as a threat around the world. the military agency and the others contributed substantially to the american public. for the last two years we have seen an increase in global fact cavity. principally because you have the internet that can be utilized or radicalizing to be less for instruction, training organization and the like. the growth of the internet, growth of the ability to undertake attacks has come substantially. the work we've done the last couple of years and almost

everyone the internet has played a role and we can anticipate that happening. not just affiliate summit with the whole ecology of a lackey or al qaeda, so individual who wants to kill people for other reasons not to say to those in yemen. it is not yemen is they have currently. individuals who want to undertake attacks out there in somalia. >> any further questions? >> thank you very much for your time. thank you, senator burgess for second time in the avoiding heavy fire. the teacher in closed session. i notice that they are three generals than this one director there. you feel instigator today, director mueller?

>> i'm the one fbi guy. i was just getting ready to congratulate general clapper at the outset and that is joining the marine corps. >> thank you very much. glavine appreciated -- and to keep you on schedule and i freeze and refreshments on the way down so you can take a breath on the way down. we will reconvene within a few minutes. we will reconvene at 12:30 in the close basis for a preheated close session. [inaudible conversations]

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>> by 2020, at least half of all energy debuts to full potential comfort nonfossil feel sources. we are too dependent on either potentially or actually placing the energy. we are susceptible to supply shocks and even if we've got enough, we suspect the bulk to the price shocks. i mean, when the libya situation started in the price of oil went up $40 a barrel, that was almost a billion dollars additional fuel and the only place we've got to go get that money as operations are training so our

planes fly less, we train our sailors and marines lives. [cheers and applause] this weekend, but tv in american history to be explored the history letter a culture of oma, where the tech that goal industry got started.

>> as part of congress' investigation into the bankruptcy of financial firm mf global, this house financial services that committee questioned the company's former and current chief risk officers. federal regulators today announced that they had found 90% of the hundreds of millions missing from mf global customers accounts. this was the fourth congressional hearing on unless global. it's just under three hours.

>> i have opening statements and in agreement 10 minutes to each side. also, mr. brin and mr. roy said joined us today. they are an era of the full committee. i ask unanimous consent that the members of the financial services who are members of -- nonmembers of the committee join us today. so good morning. this is our second hearing on the collapse of mf global. and the purpose of these hearings is really to try to find out exactly what happened and why a very old company ended up in bankruptcy. for creditors and shareholders and unfortunately customers lost money. we may have additional hearings and continue this investigation. one of the things they hope to

accomplish from the series of hearings and from the investigation we've been conduct team is to then publish a report to give a timeline and also some findings of how these customers lost their money, how a company that was allowed to kind of slipped through the regulatory groups that with not being knowledgeable of some of the problems going on, we are going to year from some people today that were inside the organization and will appear today some people outside the organization. rating agencies, mr. stockman and mr. rosen were risk officers inside the organization. again, the bottom line here is to try and figure out what happened. what happened since is that what we have seen another problems

we've had in the marketplace is there are those who are saying if we had dodd-frank in place for this regulation in place we would've five days. and you know, one of the things that happened is people jump to conclusions and try to overreact and do that. or we want to do is get to the bottom of what happened here and make a finding. and one of the things that i think we have seen is that when we look back in the 2008 crisis, a lot of people say the facts that lack of regulation. the truth of the matter is had we taken the time to ascertain exactly what happened, we would've found that 2008 happy and not because we didn't have enough regulation, but in many cases regulators were not doing their jobs in behavior that was not acceptable. and so the purposes of this hearing in the hearings we've had in the past is again to get to the bottom of that and so i

look forward to hearing from eyewitnesses. but that i would yield to my good friend, mr. capuano, ranking member. >> thank you, mr. chairman. thank you to the witnesses for coming today. this is another opening series of this particular issue and i don't know if they conclusions about what happened here at mf global. everybody i know, including myself is simply asking for questions and i would say is a supporter of dodd-frank, i have no idea yet whether dodd-frank could have or should have progressed this issue. there's simply not enough knowledge on the table. it might be simple basic criminality. for all i know it may be excessive risk. i don't know yet. i haven't had to anybody who is drawn any conclusion yet. i am here to learn, not to draw conclusions and i didn't come here tonight are probably the next hearing.

i have lots of different questions. i still fear that we may be ahead of the curve for a change were going to have bunch of questions as he did the last time that probably cannot be answered. i think to continue this investigation, to see not just in this one it since as i said before and i began to say, it's always bad for any company to lose a billion dollars. that's a bad thing. but there's a criminal aspect to it. that is not what congress does. the sec, those are other people. i believe we are here to see if this particular case represents any threat to the system, whether there is a hole in regulation, whether there's regular air force meant a or not. that's what i'm trying to ascertain and that's what will make consumers that sort been able to do that. i yield back.

thank you, mr. chairman. >> thank you, mr. chairman. this requires our persistent attention because there were many failures that it then expose. the ceo and the board keep their own risk managers and also i believe clear failure in the credit rating agencies to identify the risk at mf global is taken on. the reason why these particular failures want the attention of congress as i have an e-mail from a constituent received this morning. a substantial amount is still missing funds. the largest three credit rating agencies are likely to remain for some time major market movers. it is not a coincidence with snooty downgraded mf global at mf global soon collapsed. of course it was risky bets that

caused mf global to collapse under ratings and actions taken by an duties that hastened the result. i expected to be argued at the financial troubles were identified as soon as possible and the fact their situation was so precarious ballot did it the actions of the agency. however the demonstrable problem happens again and again. enron, lehman, which caused major market disruption. yet companies are favorably red up to the minute it collapses. if we can avoid this approach shots to the system, our financial system will be sounder investors will be more confident. when a situation like mf global appears, it is our responsibility to examine how it happened and carefully consider reforms and most importantly make sure it doesn't happen again. i appreciate your facilitating this hearing and i yield that. >> i thank the gentleman and now

mr. royce's record as. >> thank you, mr. chairman. this is three months now after the initial hearing. most of the questions unanswered in terms of the $1.2 billion i think the most pressing public policy left unaddressed in all of this is of course the breach in segregated customer funds. the shocking part is the rules have been around 75 years and according to the regulatory community they are not gross difficult to understand or difficult to enforce. there's a foundation foundation of the cft customary regime so that one question is to see it fail in its most basic task. despite what some have said i

might say again today, i'll just give this did friends cftc commissioner. he said the perception that mf global have been because lack of regulation is mistaken. and our regulations required mf global to segregate future customer funds. or about seven calls for coverage for the future's response markers. again, i think this would be a mistake on expanding the safety net this past market would be unworkable and compound that has a problem party present throughout much of our financial chair. it does appear there are several steps that can be taken to focus on it are the market discipline and ensuring business basic regulatory function of these agencies. i thank the chairman for holding this hearing. >> i think chairman.

mr. graham is recognized. >> thank you, mr. chairman. i have a bit of a different abundance. there is no question that customer funds be transferred. i think it speaks for itself. never should have happened. the law is clear. but on top of that, it is compounded by one of the biggest traveling visa market history. who made a decision to allow this bankruptcy to be a sip of bankruptcy and not under the commodities bankruptcy laws? what we did with someone stole their money and then this money stolen just got paid even worse because the bankers i was going to work against it? that is one of the biggest travesties indefinitely market history and undermined the entire u.s. market in commodities futures. with that i yield that.

>> i think gentlemen. i'd like to remind members that their opening statements remain a part of the record. now i will introduce our panel today. mr. michael grossman, former chief officer at global holdings ltd. and mr. michael stockman, global chief risk officer of global holding limits. gentlemen, before we proceed to raise your right hand. do you solemnly swear and affirm that his testimony you're about to give up the truth, the whole truth and nothing but the truth? thank you it without objection from a written statements will be made part of the record. you're recognized for five minutes to summarizer testimony. >> mr. roseman. >> chairman neugebauer, ranking member capuano, number said the

subcommittee. men with michael grossman, chief risk officer of global group from august 2008, january 2011. thank you for the opportunity to testify today. i hope my comments will continue to grow on your knowledge of the events that led to the collapse of mf global. >> and ask you to pull your microphone a little closer to you? >> regarding my background and career as an aerospace engineer i'm graduating from the university of north carolina and university of delaware. as an aerospace engineer, since 1994 i received an mba at the university of north carolina and received a career in financial services. i first joined the responsibilities for the risk analysis function are the following year he moved and comanage the u.s. dollar otc portfolios. for a number of years as global

head of market risk. in 2001, he joined the point of montréal and risk oversight of underwriting and investment that in the united states and with the mandated strength and risk management at today's in the u.s. then in 2004 i joined as a chief risk officer with the mandate to elevate the capabilities and fully support the growing business. each of these experiences i coordinate efforts with my new best practice policies and systems, analytics and bring transparency to the risk across the organization. in august 2008 i joined mf global with responsibility for the race department.

i also had a mandate to elevate the risk management capabilities using object is and recommendations by two consulting firms by the company. i provided leadership to the framework across risk. including sharing of the monthly price this committee. further as a member of the executive management team that provided particular importance for. over the next two years i coordinate closely with the executive management and the board to implement a new comprehensive and price risk management framework, including the establishment with risk policies and avoid a statement of the associated delegations and categories of risk. among other things, i courtney at the efforts to enhance the risk systems, implementing

analysts and strengthen the 24 hour global risk monitoring and implement comprehensive enterprisewide controls and with the ceo to his devilish management throughout the company. as a key part of my cro responsibility, are reviewed and mf global's exposure to the context of the improvement to executive management. both executive management and the board received a monthly enterprise risk report that detailed firmwide exposures against the risk appetites and approved limit. as cro, i also present limit requires from executive management, along with the associated risks. regarding sovereign depositions, mf global head of country level credit limit and specific sovereign limit in place of all activities all countries as well as control the specific

exposures. with respect to italy, spain, portugal, ireland and greece, there in place to support the european prior to joining mf global. these limits were well within the company's approved appetite for conditions. and i believe that physicians march 2010 across these issuers. in june july of 2010, the european business leaders, reviewed positions on the missing detail with the business had been miss corzine. i express my cautions on request, outline potential capitalist by default swap market and along with continued political and financial uncertainty under relevant countries. while mr. corzine and i had different views on default

rates, if we could find $1 billion total limit across the sufferings. by mid-september, i recall the limit to increase the sum 1.5 to $2 billion. during this time. i expressed my increasing concerns with regarding potential capitalist associated with growing conditions and begin to express caution ongoing liquidity risk. additionally around this time the strategies strictly increase the maturity traits being evaluated, even profitability of the transactions and the importance of generating earnings. at this point, i indicate to mr. corzine that we needed to increase sovereign limit giving increasing materiality of the risk is related to the board's approved risk appetite. as such a decision was made to discuss the strategy, risks and suffering limits in subsequent abandonment to present the two

approved by the board. i laid out over our reform positions approach some reported five or $4 billion i was asked to across-the-board on behalf of executive and it's meant to increase the total sovereign limit of $4.75 million. at this point all milliseconds and capital risk, was given a size now concerned with validity risk relative to liquidity risk by other positions held by the come to me. i discuss my concerns about the decision was scenarios that mr. corzine and others. the risk samaras for challenges. at the end of 2010 board meeting, at the end of november 2010 board meeting i presented the request along with the detailed analysis of potential risk stress scenarios. these scenarios include potential variations from price

changes of securities and as well as potential initial margin costs for retail counterparties. the samaras presented both individual sovereign levels as well as well as the correlate of public russell sovereign and counterparties. they also provide an analysis of the cbs market and how might the significant capital risk given a sovereign default risk associated with unresolved issues in europe. during this meeting, all the risks are faded. in particular they were challenged by some members of the board has not been possible. ultimately, the board approved the request conditional limits being being evaluated in 2011. when i left the company. i'd be happy to answer the committee's questions. >> thank you. you're recognized. >> thank you, sir.

>> chairman neugebauer, ranking member capuano and members of the subcommittee, thank you for the opportunity to make this brief statement. i am deeply saddened by the bankruptcy of mf global and its impact on its customers, shareholders and employees. although it is only at the company for approximately nine, i know my will help the community obtain a clear picture of what happened at mf global during my 10 years. i worked in the financial services for more than 25 years. of particular note notice of this risk officer for over a decade and eventually rising to positions of chief risk of error for the americans for that institution. since 2006 i can remember dnb advisory board at dartmouth college, which also served in the fall of 2009. i began interviewing for the position of chief risk officer

at mf global in the fall of 2010. during the interview process i was informed the mf global is in the process of transitioning the business model from traditional broker to full scale investment bank seeking a new chief risk officer with experience and skill set to assist in the transition. in january 2011, mf global offered the chief risk officer and i joined the company in that capacity, reporting directly to the chief operating officer. responsibilities included among other things the marketing credit rating for a company. i provided analysis about these risks to senior management and the board who use this information in setting the company's business strategy. i was ably assist in performance of my duty by strong's have of approximately 60 dedicated employees located in company offices around the world,

including the u.s., europe and asia. although the chief risk officer did not have formal was on managing the company's liquidity rates, my staff and i perform numerous analyses, measuring the company's potential liquidity needs under various scenarios. my understanding is that my portfolio responsibility as cro was largely the same as my predecessor. there's been substantial discussion about mf global's participation in trent action involving sovereign debt. the company's european cybernet trading strategy this place when i joined the company in late january 2011 by mr. grossman. at that time the board had approved a sovereign limit of 4.75 million. after i joined ms mobile, they regularly analyzed the companies

offering positions. for the first several months for my tenure, based on analyses performed by the department, i believe the risk profile associated with the comp and a sovereign deposition in light of the events prevailing market conditions. among the many metrics, supporting the assassin or credit ratings, credit spreads, probability default among other things. in addition, the department under my direction in the last potential to quiddity needs associated under stress obligations and had received information from other departments at the company possessed adequate liquidity sources to address such potential. as the credit markets deteriorated in december 2011 i came to the view that would be prudent to the comp me to mitigate the increased risk associated with the cybernet

trading position and consider entering into hedging transactions for the company's exposure. in july 2011, i initiated several sessions of senior manager to express the next lawyers such as mitigation strategies. i also highlighted the increase and liquidity risk associated with this offer rtm and oral presentations to the board at the august 2011 game. in my view, the board and senior management for highly sophisticated. the strategy was then placed in they knew and understood how the rtm sorkin were well aware of the increased risk caused by weakening market conditions i've highlighted in my reports to the board. the best of my recollection, following my presentation august august 2011 board meeting, the board and senior management made them foreign business judgment

to see adding to the companies on divisions divisions of sovereign debt and to allow existing positions to office underlines the kyrgyz reached maturity, thereby reducing the company's exposure over time. it's my understanding none of the sovereign debt maturities underlying the rtm's has defaulted or been restructured and all of the securities in the rtm portfolio had that have reached maturity have to follow. i am of course aware and deeply saddened about the numerous press reports of the more than billion dollars customer fund missing. i have no personal knowledge of any missing funds for unreconciled customer accounts. while at mf global, i did not have responsibility for treasury functions such as fund fares and segregated customer fund. like everyone else, i am truly hopeful that all of the missing

customer funds will be located and promptly returned to their rightful owners. that concludes my statement and i look forward to being a south as they can. >> thank you. mr. stockman, in a march 2011 memo to the board, you highlighted some of the market risk associated with the firms, rpm trades, you identify liquidity risks that are associated with potential haircut from mf global counterparties. one scenario i think in that report requires that if that scenario were to play out that the company would have to come up with about 761 million additional dollars. are you familiar with this memo? >> yes, sir. >> do agree with the conclusions

that he reached in a memo about the market risk and liquidity risk associated with european rpm trades? >> yes, that's a fair representation of stress market conditions. >> and then i believe in october you produced a document, which is i think we called break the class scenarios and in this particular document, you said that forget scenario one and two. we are now in a different environment and so you outlined additional scenarios, where additional liquidity requirements would be needed based on some additional scenarios. is that correct? >> august documented? >> this is october. >> stress scenario potential of mf global. >> i see.

the scenarios referred to in the large memo by the sovereign risk and the class scenario they have some numerology and i'm not sure we are talking apples and oranges. >> did you prepare this document, the server document? >> sir, yeah, i did not prepare that document. that was the work product does a financial treasury group. a senior member of my staff assist the preparation of that document. and while i was at the company, actually did not see a final outcome of the document there that you're referring to. >> so you didn't see this

document? >> i did not see the final outcome of that document. >> so the stress scenarios that you are familiar with are ones that were done in august. is that correct? >> correct. >> you had a different scenario in your august memo then you had in your march memo. is that correct? >> agreed commissary. >> was the difference? >> the difference in moving from the march scenario to the august scenario whereas the market conditions have changed over time, my risk department and myself always try to keep pace with updating the market conditions and stress scenarios as the market conditions

changed. >> mr. chairman, could you pull the michael of the closer. >> i'm sorry. >> said the scenarios to refer to, one into a matter of fact we updated to incorporate more recent market conditions and apologies for the different numerology to basic point was that the dated scenarios were to capture some of the more recent work at volatility and so forth. >> and did you have greater concern about liquidity and market risk in august than you had in march? >> is a general matter, that's correct. >> did you express that to mr. corzine in the board? >> yes, sir. in a series of meetings i became more concerned in particular in july. >> and that's and that's an area that she did in august, did you still feel like the company had the ability to meet the liquidity needs should the scenarios layout?

>> i apologize. could you ask the question again? >> scenario three and four they cheated in august requires you spell out additional liquidity requirements should the scenarios layout. were you able to validate that if the scenarios to play out but there is sufficient liquidity to confirm to sustain the scenarios? >> i see what you're saying. sure, eventually these various discussions about other risk mitigation and particular increased liquidity scenarios were discussed and debated at the board, so i would have to sit just that it was information to senior management and board members and with the understanding that the scenarios could play out and liquidity would be