>> mr. parmalee, you stated that the 10-k was the first time you learned of the off-balance-sheet come is that a correct statement? >> yes, sir. we did not have advanced notice. >> did you know about the

off-balance itm's? >> i learned about the off-balance sheet i.t. ends later on. the team was aware. i didn't learn about those until probably the october time frame. >> mr. cantor, did your company nobody off the balance sheets are tms? >> yes. so you did read the 10-k? >> i said just before been a kind of interesting, if you're getting a lot of money to read to you think would actually we did. i guess the reason i'm asking this is because honestly the off-balance-sheet thing bothers me to know them. in fact, that neither you couldn't possibly know. i guess let me ask very quick question, mr. cantor, mr. parmalee interdicted you know about it before, the off-balance-sheet? >> no. >> okay. so there's no way you could have done. which i understand that political off-balance-sheet. i get that. and the problem that i have is i understand, a lot of these

off-balance-sheet our tms is perfectly okay according to accounting rules, is -- him as a great? >> yes, sir. >> do you a great? >> i believe so. >> i guess let me ask a question. if accounting rules, the reason off balance sheets because for some reason these things are left to be counted as sales. which for all sense of purposes is an asset, and i don't understand when have these rtm it's basically a wash, why they're not recorded as it washed maybe even as a liability. in this particular case it turns out maybe they were a liability but so be it, at least a wash. if the accounting rules require them to be put on earlier statement that you think would have affected your ratings earlier, mr. parmalee? >> no, sir. we were unaware -- i'm struck everything after it was made public in may? we were unaware of the rtm portfolio. our analysts, read financial statements.

it's part of our procedures. they did in his case. they told me they did. we believe that all the information around the portfolio was factored into our ratings. recall, the portfolio itself was -- >> when you first learned of the multibillion-dollar off-balance-sheet risky investments, wouldn't change your opinion at all? >> it's not whether it was on the bouncy but what's in the investment itself and how must risk doesn't post. our evaluation of the risk was that again it was made up of five european sovereign bonds, those tended to be very highly rated european sovereigns, 80% of the exposure are roughly -- >> it didn't bother you at all that something -- someone had bothered to take about this? it didn't strike you as not good? >> we believe the transparency is a very good thing and we would push for more transparency in financial reporting, absolutely. >> but when you got the transparency you didn't change

your opinion? >> once we learned about it, you know, we factored in as was other information and belief our rating continue to be appropriate. i can comment a little on why we weren't so concerned relative to our rating if you would like to mr. cantor, if you had known about, if your firm had known about these off-balance-sheet rtms earlier would have affected your ratings? >> i'm not sure they were present much earlier than the disclosure, but -- >> according to all the test when we have they were present months before that. and growing. as a matter of fact, the previous panel said that. a few months, yes, but as i said, there are a number things to consider as the other panelists said. be inherited credit risks of those transactions was fairly modest, highly rated.

if we were talking about an italian rating agency we wouldn't even, you know, think twice. so happens they're holding other government securities. but the positions themselves were not importantly risky here however, the trading strategy that they represented that the firm was taking on very large proprietary that outside if its traditional business with a break from the strategy that we understood they -- >> let me just break into the. again, i'm a politician, and i understand fully well transparency is critical but i agree with you. i've had to tell you, if you walked into my office and you don't tell me something, that's not transparency and i will see the next any walk in my office, you will not be received quite as well as you were previously. >> i agree with you. if we had known that, well, in fact we felt that we learned

something new on october 21 that we did know before, and that's the firm had engaged in a proprietary bed that -- >> earlier you might it change your opinion earlier? >> if we knew something earlier it might change our opinion, sure. >> i guess i'm asking is if the accounting is required more transparency in this situation would it or could it have changed your opinion? >> i don't think the accounting rules would have been able to reveal to us the strategy that lay behind that particular position. i think that would have required conversations with management. i'm not sure strategy -- >> the same management that you now say didn't tell you that you're getting proprietary. so what would means with those kind of people helped? they would have to do something else. i guess i'm getting at is honestly, i think transparency is a critical thing in the entire marketplace. i think that's what it's all

about letting investors know. your ratings are in this case in my opinion, they can't let the world know this is a significant risky investment. i know you don't want to say that but that's what it tells everybody in america, and you know it. the fact that you're now telling if he knew more he would have change your opinion now raises questions about your opinion in the first place, to me. that's like saying wait a minute i was about to give you to discredit for actually being on top of this, or in front of it, and now i'm not so sure. one of you apparently didn't read the 10-k and now you tell me no matter how much information you told me, i thought it was perfectly fine. and you know something? that's not a good answer. and i guess we'll have to pursue this further later because i'm way over my time. thank you, mr. chairman. >> thank the gentleman. now the vice chairman of the committee, mr. fitzpatrick. >> thank you, mr. chairman. following a mr. capuano's question from and with the moody's and s&p representatives, can you discuss a little bit

your regime, how often, what you look for, what do you rely on? just talk to us about how you do it be make sure. be make either of your. >> i'm happy to take that. also following up in this case, we downgraded mf global about six months before this disclosure. at the time we point out the fact that we expected that from would be taking on more risk including more proprietary risk. so that was factored in. in terms of our surveillance policies, we surveil companies on an ongoing basis. anytime there's new information is put into the marketplace the analysts are responsible to know what that information is, tough follow-up questions if they're wanted and to act on it. so it's really sort of a regular daily surveillance based on activity in the marketplace. >> mr. cantor. >> we look at a lot of things on an ongoing basis, including the macroeconomic environment, the firm operates in, sectoral

environment as well. of course, we review the financial filing. we often meet with the firm in case of mf global i think we met with a from 15 times in two years, and review financial results and ask probing questions. >> you indicate you met with mf global 15 times in a couple years. is that specifically to refute the ratings? >> yes. i mean, there was a number of higher frequency of meetings there towards the end, but we were certainly meeting on a quarterly basis. >> so it sounds like both moody's and s&p stand by your ratings and methodologies? >> yes, sir. >> yes. >> mr. cantor, do you feel confident enough in this riddance to personally stand by them? >> yes. >> so as the chief credit officer and managing director would you at any given time say

that any given rating is as precise as it could be on the best and most up-to-date information available to your company? >> in some ideal world everything can be improved and we're always seeking to improve our processes, so one of the things i hope it is always improve the quality of our ratings over time. >> given the european sovereign debt holdings in mf global, that were disclosed since as early as may 2011, and realizing that the market did not respond but in retrospect knowing these toys would lead to a downgrade which indicated six months later, would you say that this was perhaps a surveillance failure? >> i don't believe so. i think we had laid out very clearly three, three areas of concern for the firm. we laid out a timeline, which we would be evaluate the

performance against those three benchmarks. when we learned that the firm was not meeting those criteria that we had laid out, we took immediate action to i think it's also important to recognize that while the firm's credit profile had deteriorated and was reflected in creating downgrades, bankruptcy of mf global appears to been caused by something very different from what we are talking about right now. it was caused by the missing funds. >> we heard from the previous panel that the october 31 meeting with moody's that the chief risk officer was there, sounded like a pro forma meeting with. didn't ask question, didn't say anything. is the kind of typical for the kind of you that would be going on at that point? >> well, i don't know what was discussed particularly at the mini. i have a copy of the presentation. all the issues that were critical for the rating action that was taken immediately after

were quite amply discussed. >> mr. parmley, do you feel confident enough in the ratings under from of mf global that you personally stand by them? >> yes, sir. effect at all relevant information into the ratings and that they were inappropriate opinion of the credit quality of the firm to make that's on an of? >> yes, sir. >> mr. gellert come you went to great lengths in your test want to chart the ratings that your company a sign to mf global, and you also include some description of your methodologies. do any of these ratings reflect the use of information not available to the nrsros like moody's and s&p and fitch? >> no. we generate all of our ratings based off of disclosed financials so we are not privy to any additional information and we have no contact with the management so we are not bouncing questions or ideas off of them. so it's all on publicly available information. >> thank you, chairman jack

mr. cantor, i just want to follow up on just one thing you just sit there deeply the reason that mf global went bankrupt is because of missing money? >> that's my understanding, that like many financial services companies, having liquidity strains they were seeking an acquisition partner, and they were close to reaching agreement along those lines which fell apart when the customer money was gone. >> mr. posey from florida. >> thank you, mr. chairman. just a few general accounting questions. if a company that your rating has a commodity account like, say, exxon mobil. exxonmobil, is the height of catcher treasury bills in a segregated customer accounts assume to have the full value? yes or no, each of you please.

>> yes. >> only one that hasn't been? >> i don't know the answer to that. >> i'm sorry? >> i don't know the answer to that. >> we have a don't know for mr. parmley, a just fermented castor to shut a yes from mr. cantor. >> don't know, a yes and a believe it is yes. assets and about she can appreciate or falken tire, be sold or transferred, and we all agree to? >> let the record show you all agree. >> potentially they could also be stolen. do we all agree? >> yes, sir. >> let the record show that all the great. >> have any of you ever heard of them being quote a verizon? >> no, sir. >> no. >> okay, let the record show that all said no. how would you treat assets on a balance sheet if those assets had been stolen? or just to save time, is it

correct to assume that they wouldn't be counted because he would eventually need to be returned to the rightful owners? do you agree with that statement? >> i'm not sure i've ever faced that experience. >> i would put on the balance sheet as a row but there might be a contingent potential recovery. >> okay. we as we'll have never faced anything like that, but we would probably handle it very similarly. >> so mr. cantor, mr. gellert agree. mr. parmelee, you don't know. >> yes, sir. >> yes, sir, you don't know what you don't like they would. >> i don't know. >> in your dealings with mf global, was laurie ferber involved in your work, yes or no? >> no, sir. >> i'm not aware. >> and you didn't have any thing with mf global, okay. so all said no.

she's considered to be an expert on legal issues, related to commodity and derivatives trading. would you agree, mr. parmalee? >> i don't know about her background. >> you don't know who she is? >> i don't know specifically her background and expertise, i can't speak to that. >> okay. somebody in a position potential you feel than to have no expertise in those areas of? >> i would assume they would. >> okay. mr. cantor? >> i really don't know anything about her. >> do you know who she is? >> no, i don't. >> okay. mr. gellert? >> again, we have no contact with them. >> okay. let the record show nobody knows nothing. i just mr. cantor, in rating, inviting mf global you assume that the conduct their business in accordance with all the laws and regulations, and not that they would lose theirs -- use

their customers to create accounts for the own assumption, is that correct of? >> that's correct. >> did you assume that the cftc and cme were filling their responsibility to audit and verify the proper protection of those assets? >> that's correct be back would you all have done the same? >> yes, sir. >> yes. >> did you confirm with mf auditors pricewaterhousecoopers that they verified that controls and systems were in place to prevent theft fraud and unauthorized transfers? >> no, sir, we did not speak directly to the auditors but typically we would expect an audit, an auditor would be up to share information with those of a third party. they would have a confidential relationship with their client. >> we did recognize that they had signed the audit opinion so we did review. >> are enough to. >> again, we have no contact with advisers, auditors or bankers be that i assume you

relied on sec funds to complete your work. are you aware that some of the 2011 findings may have been backdated and otherwise adulterated? >> we did rely on sec filings. when you see backdated, i'm not aware do i said may have been. >> i had the same answer. no awareness. >> okay. and just following up on mr. capuano's comments, in moody's letter to congress stating that they did not learn about him have large rtm trades until october 31, i'm just wondering, you know, like everyone else just how that's possible? >> again, we were unaware of disclosures in the 10-k and we had read through the 10-k, so we were aware of their positions as

reported. what we became aware of on the 21st was the motivation of the position and how they were being managed. and at that point in time, that description of that type of activity changed our view on the firms risk appetite, which along with two other measures that we were tracking, earnings and leverage, led us to take the action we intended to take when we saw that weakening performance on those metrics. >> so, could anybody come close to properly assume that just perhaps it was an oversight? >> i don't understand what you are saying. we had talked about it in all our publications of taking a multi-quarter approach to evaluating along these dimensions, and upon executing along that plan we took the action that we had intended to. >> thank you, mr. chairman.

>> i now recognize the gentleman from new mexico. >> thank you, mr. chairman. mr. parmalee, the rating system, is that mathematical or is it objective, subjective but how do you come up with the rate of? >> the ratings incorporate both qualitative and quantitative aspects. >> which way is heavier? >> so, we take a look at the underlying business, make an assessment of the business and how risky that business is. and then we have says the financials. and based on how risky the business is, that drives our outlook on the financials. >> so i'm looking at your ratings for the firm from about

2008-2011 when they start having trouble. everybody kind of got it right thing. were your ratings higher or lower than your friends next to you? >> when we lowered our ratings in november 2010, that took you to a level that was lower than her two largest competitors. >> but what was up until 2010, bb, is that higher or lower? >> it went down to triple d. minus which was lower. two notches lower. >> okay. who is richard moore? >> i don't know richard moore personally. i didn't ask you if you know in person but i just asked you if you know him but i don't know his role. so you might know he was working for mr. corzine and is also on your board of directors? >> i didn't know that, sir. i didn't know that before the report came out?

>> you didn't know that, okay. is it ethical, this off-balance-sheet trading, have i questioned i think you're sitting here for mr. stockman, is that ethical? >> i think it's an accounting issue and what's important is it wasn't not the trade is off-balance sheet. what's important is understanding the risk that is in the trade but i do think as i said earlier -- >> you are saying it didn't matter that enron was trading on what, 27 of its 60 billion -- >> i think transparency is important. >> okay, was this from transparent? was in a transparent about its off-balance sheet stuffed? >> i think mf could've been more clear to the marketplace around speeders on just asking yes or no. with a transparent about off-balance-sheet stuff? >> they could've been more transparent than they were. >> with a transfer enough for you to know what was going on?

>> once they file their 10-k report in may, then we know about the off-balance-sheet exposure. before that we did not. >> it would have affected it if they had not been sneaky about it before lex if they hadn't been, if they been more transparent. mr. gellert, why aren't you always back there in 2000 when you begin to the when signed up, you took them down in 20 which is the equivalent of a ccc, craig? >> yes. >> what was your concern back then. >> a combination of drops in three primary, three of her six performance categories the sales performance was dropping dramatically. their profitability performance was dropping dramatically. and their leverage, so we saw significant warning signs across the board. we look at some of the numbers that i quoted in my opening statement, a dramatic change in that business over the past few years. >> mr. cantor, i would like your viewpoints on this ethical and non-ethical question, about

off-balance-sheet. >> i don't believe it is an ethical. >> can you speak more into the micro? >> i don't believe it is unethical to have off-balance-sheet reporting. >> so if i file, if i bought a claim with the federal election commission and declared my net worth to be different because i've got some off-balance-sheet stuff, you wouldn't think that is unethical? what you think the federal election commission would take issue with a five stuff on transcendent? >> i will comment on that but i believe this exposure was disclosed in the footnotes. it was pretty transparent. it's pretty transparent except that you all didn't have a clue. >> don't agree with that make you don't agree with that? you're telling me they were doing anything off-balance-sheet before you got the word. before they filed? >> you mean the months --

between quarters? >> they were moving stuff in and out so they could drive the leverage up and down. mr. corzine -- the firm -- what he's doing is selling or whatever the day before the filing period, all of that stuff you feel like it's normal everyday activity? >> moody's position on mf global was they had weakening earnings, had rising leverage, and it had a risk appetite that had potential to grow if the changing business strategy. at all three of those things were affecting risk. is taking on of european debt positions at that point in time itself was not a highly risky credit judgment, but the decision to maintain such positions on a proprietary basis essentially take a large site that, even though the risk themselves were modest, was not consistent with the stated

business strategy which was more minimalist in its risk intentions than had been described to us. i'm out of time, but if i could make a comment, i'm seeing with the downgrading goes way south and about a seven-day period. and you're wanting us to believe that performance of the company was transparent. that there was nothing will be obvious to anybody except mr. gellert who somehow came out of something out of his magic format that you will didn't see and you're wanting us to believe that. it stretches i believe capability. thank you very much, mr. chairman. >> thank the gentleman. ranking member is recognized. >> thank you, mr. chairman. mr. cantor, just for your information i would suggest you go back to the 10-k, not you but whoever was -- on page 76 and on page 17 proprietary activities. it very clearly reported him as a matter of fact, one of them is in bold, collateralized

originate in connection with proprietary activities expose our company to issue a default in liquidity risk. title of a subsection on page 17. they going to say later on that demand additional margin calls not readily have, so people who read it, i don't know if they need to be trained or something. mr. parmelee come your test when on page nine, you say we believe mf global's demise was driven by conference among market participants who questioned the firm's transparency. what transparency are you referring to? >> sir, we think the conference, the lack of confidence occur because of a number of issues. one, concern in transparency around the rtm portfolio around when european sovereigns were under pressure. certainly there was a lot that was board that was significant to their work credit downgrades that happen.

just the transparency part in transparency related to transparency around the details of our team or for the early on. >> you weren't concerned about when you learned about it in me when they had ever told you about it before, but now all of a sudden you got concerned and if we think the should of been more conspiracy about it. that wasn't the driver of our creditwatch action to the driver, we place -- >> used to hear their demise is because of the lack of transparency. and yet that lack of transparency which you admitted earlier was revealed to you in me. so he took it from me until, oh, actually the day they filed for bankruptcy to actually put them below investment grade. it took you almost six months for that lack of transparency to all of a sudden be a concerted. >> the series of events occurred, beginning in early september that we believe undermined confidence of -- >> i understand that. i get all that i know what happened in that time period, but you said is mostly the lack

of transparency. i happen to agree with you, but i guess my concern is that same lack of transparency which eventually fell hard when you finally acted, the same lack of transparency existed in me, and i guess once somebody lies to you, doesn't that tell you something about that person or that company, that maybe they might apply to you, you about something else or maybe they might continue to lie to you? and yet it took you six wants to react to it. >> it was published, about our concern, about transition of this coming towards being an investment banking model. we talked about the expectation for high-risk. >> but you didn't change the rating pic you didn't tell anybody in the public. >> yes, sir, in november. >> i don't know who i should be more upset with. the one who said i didn't catch in the first place but as soon as i figure it out that i put in the first place i got upset within a couple of days. both of those answers stink. both those answers stink. mr. gellert, relative to transparency would you agree or

disagree that the 10-k was pretty clear about proprietary action? >> i haven't personally read the 10-k for that language, but our system polls in these numbers and processes them probably but if there's transparency, if there's a question of transparency, to me it's relative to the shift in the business model. and if the business model has been, stated objective of management to change the business model i think it's incumbent upon anyone who has a relationship with management to ask the questions to be beyond the benefit of the doubt. >> is my problem. the enron thinking when anyone came along we came -- a major accounting firm went out of business because of that review of the books. women had a crisis in 2008, our major banks talk to us about off-balance-sheet investments. they call them special investment vehicles. siv. they all had and if they all didn't. and and about them.

accept them. and now i'm being told, or am i being told him that it's a to have off-balance-sheet significant investment, significantly risky investments off the balance sheet. are you telling me that's okay for your rating, mr. parmelee, that it's perfectly acceptable to you? >> as i said if you're equating off-balance-sheet for lack of transparency i agree fully the need to be transparent to, that ought to be more transmitted around these action. >> mr. cantor, would you agree it's perfectly okay to have off-balance-sheet rtm or any other investment you're not told of a? >> i think would be helpful to these type of transactions on balance sheet but i think as my panelists said there is already transparency, the information is in the footnote as you identified, so whether that's on the balance sheet or not, the information is transparent. it takes more work speeded so you just basically blew it? >> again, you can have a lot of

debt on him assets under balance sheet. you need to interpret what are those assets, what are the risks and those assets. >> so your interpretation was completely utterly wrong because you're telling that you had enough information to make a judgment, fine, okay. so your judgment was wrong here and again, it wasn't the only thing that was important to the ratings. but one thing that was important to the rating is whether the positions that the principal positions the firm was taking on represented a significant increase in risk appetite or whether it was -- >> so successfully leveraged 6 billion-dollar bet that was off the books is fine by you? >> again, it's not so much -- >> i've got to do, that really runs, here's my problem. i came to think prepared to give the guys credit. sorry for right about being investment-grade but pretty close. your ratings are not that good. but what your time at the

hearing, you just turned around back to where i started, which is i'm not so sure i can trust you guys anymore. you think it's okay to have off-balance-sheet things that nobody reports. mr. gellert, do you think it's okay or do you want more information? >> i think we can always use a lot more transparency and we ended doing a lot of pro forma sensitivity modeling for our clients when they run to run scenarios, stress testing, things that are off-balance-sheet in i guess i'm walking what you're thinking the major credit agencies think it's perfectly okay to have massive risky investments that are off the books and if they don't know about. that it's okay for you to tell the public hears our ratings. that's an incredible statement to say, and i've got to do, i walk away significant, i thought today was the day we're going to kiss and make up some of our past differences of opinion, but i guess it's not. i yield back. >> thank the gentleman. so i want to go back to some of the basics of the rating model that you use for mf global.

would you put this company been in the same category as goldman sachs? in other words, are you looking at various pieces and aspects of this business, in other words, they would be in the same business category? >> we rate them a general methodology, security industry methodology. so they are broadly embraced by sector ops, but they are close to. >> so basically the same parameters that you look at goldman sachs he would look at -- >> the starting point, yes. >> when we think about risk, we know that there's some comparisons in the type of risk that they take. for goldman sachs, goldman sachs is a bank holding to prevent we bought our bank methodology to goldman sachs. we released new methodology for rating banks in 2011. >> i think what i'm going with

this is, you know, they were trying to emulate, be a goldman sachs model. so i wonder if you are looking at them as their old business, old business model of broker-dealer, primarily in commodities, or were you looking at them in the sense that this is a company that is broadening their activity, giving proprietary trading, and we need to look at him differently? because it doesn't appear that you are doing this. >> so, one important difference as a bank holding company, goldman sachs has access to the discount window and other sorts of liquidity that mf would not affect. there are some comparisons. under our bank methodology we break out the components of the rating, and our stand-alone credit rating on goldman sachs is triple b+ of that would've been two notches above work mf global was. so there's some similarity there. but i think you heard risk

manager say that he was concerned that this expansion of business was probably really stretched their capital. and so both of your firms had this company, you know, rated basically just inside the rope for investment-grade. didn't it concern you when you look at that 10-k and say okay, this is a company that is maybe marginally capitalized because got to be one of the factors is to use capital, and now they are expanding risk of their company. you know, isn't that kind, bring a dulcimer? >> importantly we did think about that. we did talk about that in our public document. when we downgraded the company, it was in many parts because of the reasons that you point out. we have pointed, after eight months he enjoyed the firm and

embarking on a strategy, we are concerned about the incremental risk that they would be taking on. we noted that in our november release when we downgraded them to the triple b- level. so that was months before the rtm of portfolio. was made public and the 10-k filing. >> and so, my final question is, did you, after you read the 10-k, ask mf global for detailed on their off-balance-sheet activity? >> i didn't personally, sir, and i'm not aware if they asked that question directed? >> did moody's ask -- you say you now testified you all did readers. did you ask them for details on that off-balance-sheet activity? >> no, we did not. >> okay. i think that's, it looks like i've run out of questioners. if that's okay with the

witnesses. we appreciate you coming. you know, i think one of things you probably hear from colleagues is that we are concerned about every aspect of this but certainly there's a responsibility, we believe in the rating community to make sure that if people are going to continue to have confidence in the system, that we feel like, and the public more importantly feels like the appropriate amount of due diligence is being done on your part, and i think today we have some concerns about that. so we thank the witnesses for being here. we remind all members that you have 30 days to -- i have to get my script to make sure -- all members have additional questions for the panel, can send it to. without objection, the hearing record will remain open for 30 days to submit questions to these witnesses.

and place the responses in the record. with that this hearing is adjourned. [inaudible conversations] >> c-span sure to the white house political coverage takes you to the candidate events been at my leadership cut taxes 19 times, and cast over 800 vetoes.

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latest, "after america" is a new times best seller. he is a frequent guest host on rush limbaugh's radio show. live sunday on in depth your chance to call, e-mail and tweet with your questions. live at noon eastern on book tv on c-span2. >> yesterday, the house oversight committee questioned attorney general eric holder about fast and furious. this was a gun trafficking investigation by the bureau of alcohol, tobacco, firearms and explosives, which allowed thousands of weapons into mexico. this part of the attorney general's testimony is an hour and 45 minutes. >> the committee will come to order. please close the outside doors. the oversight committee mission

statement is that we exist to secure to fundamental groups -- principles. first, americans have a right to know that the money washington takes from them is well spent. and second, americans deserve an efficient, effective government that works for them. our duty on oversight and government reform committee is to protect these rights. our solemn responsibility is to hold government accountable to taxpayers because taxpayers have a right to know what they get from the government. our job is to work tirelessly in partnership with citizen watchdogs to deliver the facts to the american people and bring genuine reform to the bureaucracy. i will not recognize myself for an opening statement. today, we are joined by the attorney general of the united states over a matter that this committee has invested more than

a year in research. in november of 2009, fast and furious opens. in the summer of 2009, dea meets with the atf and gives them info on fast and furious charges, info that could have well have ended the operation. on january 6, 2010, fast and furious becomes in fact a joint exercise. on march 15, 2010, the first federal wiretaps are issued in this case. december 15, 2010, december 15, 2010, brian terry is murdered with weapons found at the scene again from fast and furious. on january 27, senator grassley first asked department of justice about fast and furious,

and within days we were given a false statement of facts deny that guns were ever allowed. within days of that, we begin to know that fast and furious was going to be difficult. i was more or less ground that it is your go. today is groundhog day again. this committee has lost its patience to wait longer. we will not wait until next groundhog day to get answers for the american people for brian terry, and for others. on march 3, 2011, john dobson goes public. agent dobson is here today. he, too, deserves to have this nightmare of uncertainty of having a temperate assignment of not being allowed to do the job for which he has dedicated his career, put behind them.

on october 11, after months and months and months of this committee trying to get further voluntary cooperation, we issued subpoenas for documents. .. >> than most of the documents we've received through discovery. the minority can say what they want and issue the opinions they want, the memos they want, they

have been absent from this, and i'm disappointed for that. this is a legitimate requirement of this committee to get to the bottom of it and to get genuine change so this cannot happen again. and i repeat, the genuine change, the safeguards, the protections that a were not there, apparently, before so this cannot happen again. mr. attorney general, as we go through questioning, my question will be when is the primary investigative committee of congress, of the u.s. house, going to be allowed to have the same access that your own self-appointed, essentially, self-appointed general has in the ig, if you will, the 12,000 people of the inspector general's office throughout the government are important, and we expect them to be respected, and we expect them to receive information. but the 70 men and women that work for the majority and the 30 or so that work for the minority

are a very small fraction of that. we ask very little of government by comparison to what the internal controls historically and always will ask for. our budget is less than one-twentieth of what the inspector general's office is. we're not an agency that can ask for vast amounts of documents. we have asked you for documents, and if you lock at -- look at the totality, we have asked for very little. we deserve those answers in at least as timely a fashion as your own ig gets. it is our opinion that we haven't gotten that, that the need for overmanaging and redacting and careful looking by teams of lawyers have gotten in the way of the legitimate speed with which we should get that. we're going to ask you many things today. hopefully, you came prepared to know a great deal about fast and furious. the important things that i'm

going to ask today are what can you do to bring this to a close, what can you do before the ig completes her investigation to allow the american people to see change that tells them this is no longer going on, and it won't go on in the future in lastly, before i recognize the ranking member this is this the majority of this committee's belief that it is this reckless behavior at atf, failure to push harder and inform more by the dea and fbi. a u.s. attorney who clearly didn't do his job in a way that anyone should be proud of. we now have a justice department official who has taken the fifth. we've moved up a ways, and all of those people should be ashamed that brian terry is dead because they didn't do as good a job as they should. kenneth nelson has said that

publicly and privately, that he bears a great deal of that blame. the point here today is we want to know how justice will oversee every local operation, every state, every one of the very agencies that are either under your authority or in a joint task force become under your authority, how you'll insure for the american people that this will not happen again, or at least the systems are in place to give us the confidence that it is much more unlikely to happen. those are the items that i come here today, asked you to come here today, and i appreciate your being here voluntarily to answer. it's the committee's respondent to ask. i hope we will get the answers and the commitments today that we ask for. i recognize the ranking member for his opening statement. >> thank you very much, mr. chairman. i want to welcome the attorney general today. mr. chairman, when the committee started this investigation

almost a year ago, you and i made pledges to the family of agent brian terry to find out what led to the release of hundreds of firearms to criminal networks on both sides of the border. we pledged to follow the facts wherever they may lead and provide the public with answers. mr. chairman, i want to acknowledge your efforts here. and over the past year we devoted incredible amounts of time, money and energy to investigating this issue. we intervowed 22 witnesses -- interviewed 22 witnesses including senior officials at the department of justice and atf. we also reviewed thousands of pages of documents, and we held four full committee hearings on this very topic. because of our extensive work, we have had concrete results. the committee has exposed a five-year, five-year pattern of

gun walking operations run by the phoenix division of atf and the arizona u.s. attorney's office. more importantly, we have put a stop to it. this is significant, this is a significant accomplishment, and i commend you for it. in addition, we can now explain to the public how this series of reckless operations originated and evolved over the past five years. i ask unanimous consent to place into the record a report i sent to members earlier this week. >> without objection, so ordered. >> thank you, mr. chairman. this 95-page report called fatally flawed five year of gun walking in arizona, provides a detailed and comprehensive account of what we learned in our investigation. it documents how suspects in 2006 and 2007 trafficked more than 450 firearms during

operation wide receiver as atf agents who knew they had probable cause chose not to make arrests in order to build bigger cases. as one field agent said at the time, and i quote, we want it all, end of quote. it documents the hernandez case in 2007 in which suspects purchased 200 firearms at atf, as atf failed repeatedly to coordinate interdiction with mexican officials. despite alerting then-attorney general mukasey about these field operations, they continued. it documents the madrano case in 2008 this which atf agents watched in realtime as suspects who were part of a trafficking ring that bought more than 100 firearms packed weapons into the backseat of a car and drove them across the border.

it documents operation fast and furious during which the same atf special agent in charge of the phoenix field division in all three previous operations -- [inaudible] in order from the deputy director of atf to shut down the operation. as the agent stated, and i quote, i don't like headquarters driving our cases, end of quote. instead, field agents continued to encourage gun dealers to sell firearms to suspects for months. there are several things that our investigation did not find. we found no evidence that agents or prosecutors in arizona acted in bad faith. they sincerely wanted to put away gun traffickers and higher-level targets. in pursuit of that goal, however, they lost sight of predictable collateral damage of letting guns walk. in addition, contrary to many

unsubstantiated allegations the committee obtained no evidence indicating that the attorney general authorized gun walking. none of the 22 witnesses we interviewed claim to have spoken with the attorney general about the tactics used in operation fast and furious before this controversy broke. mr. chairman, although you deserve credit for exposing these operations over the last five years, we part ways in what we should do next. you now appear intent on escalating controversy and promoting unsubstantiated allegations in this campaign that looks more like an election year witch hunt than an even-handed investigation. this is the sixth time, the sixth time the attorney general has testified on these issues. in contrast, you've never once called the former head of the atf to testify at a public

hearing even though atf was the agency responsible for these reckless programs. and although attorney general holder has answered questions repeatedly, you've refused to even interview former attorney general mukasey. when i was just starting as a lawyer some 30 some years ago, the senior partner in the law firm said to me, said, young man, you have to take the facts as you find them. you cannot manufacture them. now that we have the facts, i hope that we can put aside the politics and the rhetoric and focus on concrete reforms to insure that this never, ever, never, ever happens again. with that, i yield back. >> i thank the gentleman. now ask unanimous consent the majority memo and related materials be entered in the record. without objection, so ordered.

i'll now recognize myself for five minutes. oh, i'm sorry. i'm a little off on that. [laughter] i was, you know, to be honest, i just thought i'd respond to a few of your things, but that'll wait. mr. attorney general, we're pleased to have you here as the highest ranking law official in the land. we appreciate your commitment to the time both here and in the senate that you've given. contrary to the ranking member, i believe that today will be one of the first times in which you are fully briefed and prepared to answer in detail questions exclusively about fast and furious, and i would caution both sides of the aisle to stick to the subject. we are not, and i repeat, we are not the judiciary committee. the attorney general is not here to answer a plethora of questions we may have ant the conduct of -- about the conduct of his office. he is not here to generally tell us about law enforcement. i will assert the gavel if someone goes on a broad

expedition beyond fast and furious, and as the ranking member said, related activities including wide receiver and others. i think respect for the attorney general's time and the legitimate portion of the jurisdiction that our committee has taken requires that i ask all of you to, please, stick to that particularly since the attorney general's time is valuable. mr. attorney general, pursuant to the rules of the committee, i would ask that you rise and take the oath. attorney general, do you solemnly swear or affirm the testimony you're about to give will be the truth, the whole truth -- >> i do. >> let the record represent an affirmative answer. thank you, mr. attorney generalment -- general. in order to allow time for discussion, the committee like all committees will tell you to stay within five minutes. i, in fact, have no intention of

picking up the gavel as long as you present what you have here today. i would ask that to the greatest extent possible that you realize that your opening state in its written form is completely in the record and that you, certainly, have our permission to include material not in the record in order to further delineate your prepared testimony today. and with that, attorney general, you're recognized. >> thank you. i'm here today because i understand and appreciate the importance of congressional oversight and because i'm committed to insuring the highest standards of integrity and professionalism at the united states department of justice. that's precisely what i pledged to do exactly three years ago tomorrow when i was sworn in as attorney general, and it is exactly what i have done over the last three years. my dedication to the department's mission is shared by an extraordinary group of colleagues, over 117,000 employees who each day in offices all around the world work tirelessly to protect the american people from a range of

urgent and unprecedented threats from global terrorism and financial fraud, violet crime -- violent crime, human trafficking, civil rights abuses and more. over the last three years, we've made a number of significant improvements including policy and personnel changes that address many of the concerns that are the subject of this hearing today. today i'd like to discuss some of these improvements in specific terms and outline the steps that we have taken to insure that the flawed tactics in operation fast and furious, and in earlier operations under the prior administration, are never used again. now, in some of my comments today if they sound familiar, it is because this marks the sixth time that i've answered questions about this operation before a congressional committee in the last year. let me start, however, with something that cannot be said enough. allowing funs to walk -- guns to walk whether in this administration or the prior one is wholly unacceptable. i've been consistent about this, i've said this from day one.

the tactic of not interdicting weapons despite having the legal authority to do so appears to have been adopted in a misguided effort to stem the alarming number of illegal firearms that are trafficked each year from the united states to mexico. now, to be sure stopping this dangerous flow of weapons is a laudable and critical goal. but attempting to achieve it by using such inappropriate tactics is neither acceptable, nor excusable. and that's why when i learned early last year about the allegations raised by atf agents involved with fast and furious, i took action. in addition to requesting an inspector general investigation last february, i ordered that a directive be sent prohibiting the use of such tactics. there have also been important personnel changes in the department and vital reforms reflecting the lessons that we have learned from operation fast and furious having implemented. today, i want to reaffirm my commitment to insuring these flawed tactics are never used

again, and i reiterate my willingness to work with congress generally and this committee more specifically to address the national security crisis along our southwest border that has taken far too many lives. congress has legitimately sought answers to questions about law enforcement operations, wide receiver and fast and furious. and my colleagues and i at the department of justice have worked diligently to provide those answers. in addition to my frequent testimony before congress, i have answered and am continuing to answer questions that have been submitted for the record during previous hearings. the department has also responded to more than three dozen letters from members of congress and facilitated numerous witness interviews. we've also submitted or made available for review some 6,400 pages of documents to congressional investigators. this has been a significant undertaking for justice department employees, and our efforts in this regard remain ongoing. we've also provided congress with virtually unprecedented

access to internal, deliberative documents to show how inaccurate information was initially conveyed in the letter sent to senator grassley on february 4, 2011. these documents show that department officials relied on information provided by supervisors from the relevant components in the best position to know the facts. we now know that some of the information they provided was, in fact, inaccurate. we also understand that in subsequent interviews with congressional investigators, these supervisors stated they did not know at the time that the information that they provided was inaccurate. in producing internal communications regarding the drafting of the february 4th letter, the department made a rare, limited exception to longstanding executive branch policy. this decision reflected unusual circumstances and allowed us to respond in the most comprehensive way possible to congressional concerns where the department itself concluded that information in the letter was inaccurate.

documents we produce have answered the question of how that letter came to be drafted and put to rest questions of any intentional effort to mislead. all of our communications to congress should be accurate, and that is the standard that i expect the department to meet. at my direction the deputy attorney general has instituted new procedures to increase safeguards in this area. as i testified in a previous hearing, the department does not intend to produce additional deliberative materials. i want to emphasize deliberative materials about the response to congressional oversight or media requests that postdate the commencement of congressional review. this decision is consistent with the longstanding approach taken by the department under both democratic and republican administrations and reflects concerns for the constitutionality separation of powers. robust, internal communications

would be chilled and the executive branch's response to requests thereby repeated if they were disclosed to congress. for both branches this would be an undesirable outcome. the appropriate functioning of the separation of powers requires that executive branch officials have the ability to communicate confidentially as they discuss how to respond to inquiries from congress. now, i want to note that the separation of powers concerns are particularly acute here because the committee has sought information about open criminal investigations and prosecutions. this has required department officials how to accommodate congressional oversight but also insuring that critical ongoing law enforcement decision making is never compromised and is free from even the appearance of political influence. such candid internal deliberations are necessary to preserve the inagainst, the integrity and the effectiveness of the department's law enforcement activities and would be chilled by disclosure to congress of such materials.

just as we have worked to accommodate the committee's legitimate oversight needs, i trust that the committee will equally recognize the executive branch's constitutional interests and will work with us to avoid further conflict on this matter. i know the committee is also keenly interested in the policy changes that the department has undertaken in the wake of operation fast and furious. the atf which is now under the leadership of acting director todd jones has implement inned a number of key reforms and critical oversight procedures to prevent such a flawed operation from occurring again. these reforms are numerous and include a number of things. i'm also pleased to report that under the leadership of the department's criminal division we have bolstered crime-fighting capacity on both sides of the u.s./mexico border, and we have done this by doing a number of important things as well. this is an important start, but we have to do a lot more, and no one knows this better than the members of our nation's law enforcement community including -- and i want to

emphasize this -- including the atf agents who testified before this committee last summer. not only did these brave agents bring the inappropriate and misguided tactics of operation fast and furious to light, they also sounded the ea lance armstrong for -- alarm for more effective laws. these courageous agents explained that atf's ability to stem the flow of guns from the united states into mexico suffers from a lack of effective enforcement tools. unfortunately, in 2011 a majority of house members including all the members of the majority on this committee voted to keep law enforcement in the dark. individuals purchased multiple semiautomatic rifles, shotguns and long guns like ark k -- ak-47s in gun shops along our southwest border states. in this new year, i hope we can work together to provide law enforcement agents with the tools they say they desperately need and that they have requested to protect our citizens and to insure their own safety. indeed, incidents of violence

against law enforcement officers are approaching the highest level that we've seen in nearly two decades even though violent crime is down overall. that is simply unacceptable, and the justice department is committed to turning back this rising tide and to protecting those who serve on the front lines. we've designed and implemented a comprehensive new training initiative to provide law enforcement leaders with information be, analysis and tools they need to respond to a range of threats. let me be clear, nothing is more important than insuring the safety of the brave law enforcement professionals who put their lives at risk for us each and every day, but we can't make the progress we need and that the law enforcement partners that we have deserve without your assistance and without your leadership. as i said before, i'm determined to insure that our shared concerns about these flawed law enforcement operations lead to more than worn-out washington gotcha games and cynical finger pointing. the department of justice stands ready to work with you not only

to correct the mistakes of the past, but also to strengthen our law enforcement capacity in the future. thank you. >> i thank the gentleman. before i begin my questioning, mr. attorney general, would you agree to release to us legal opinions on the constitutionality of the material that you have thus far refused to supply the committee? >> to the extent that there are legal opinions, i will look at them, and to the extent that they can be provided, i have no objection to that. i don't know if these are olc opinions that olc would have an objection. but to the extent that i can, i will make those available to you. >> okay. i'll begin my questioning, i guess, by following up. mr. attorney general, you have the executive branch has executive privilege. it's narrow, it's well defined, there's case law. if you do not find a legitimate basis to deny us the material we've asked for, we will seek the remedies necessary to

compel. having said that, i appreciate your being here today, and i don't want to waste any of yours or my time on this at this point. let's go through a couple of items here. first of all, it is reported through discovery that we have received that mr. monty wilkinson may have informed you of agent terry's murder in a timely fashion, is that true? >> he may have. i know the murder occurred december 14th. i heard about it, i think, probably within 24 hours. i don't know if it came from monty wilkinson or some other member of my staff, but i knew about the murder within 24 hours of its occurrence. >> when you were informed about that within 24 hours, did anyone inform you or allude to the fact that the weapons found at the scene were from fast and furious? >> no. i didn't know about operation fast and furious until the beginning parts of 2011 after i received that letter from

senator grassley, i guess, at the end of january and then that was about operation gun runner. of i actually learned about the fast and furious operation in february of that year. >> would you -- >> 2011. >> would you make available to us through whatever records you can find the name of the person who informed you so that we can ascertain why that individual would not or did not tell you what was widely known almost immediately that, in fact, law enforcement allowed weapons walked, basically, that these were fast and furious weapons, the e-mails that we've received through whistleblowers show us extensively that law enforcement was aware and concerned about it. we would like to know why someone with kept that from you. >> i'm not sure anybody kept it from me. i mean, i found out about it, as i said, i think, in january, february of 2011, and i'm not even sure how i found out about it. it might have been through a letter i received from senator grassley on february 9th. i'm not sure if it was contain

inside there. there were certainly media reports about it in february. again, i'm not sure exactly how i found out about the term fast and furious. >> would it be fair from your own knowledge to say that neither lanny breuer as head of the criminal division nor jason weinstein did anything to stop the program after they learned of what it was about? >> stop the program -- >> fast and furious. prior to brian terry's death. >> yeah. i mean, they both admitted that they were aware of operation wide receiver and never connected the techniques that were used in wide receiver to operation fast and furious, and as a result did not take any action in that regard. and both have admitted that that was a mistake. >> let's go through this, i think in my limited time i want to make sure we do deal with wide receiver versus fast and furious. as of today do your law enforcement authorities such as

the atf have the ability to see a straw purchase and rather than arrest them at the door with no evidence, follow them to the next location? >> see them? >> in other words, do, does law enforcement have the ability to follow suspected gun traffickers with the weapons in their car from location to location? >> to keep them under constant surveillance? >> yes. >> they certainly have that capacity. >> okay. so as far as we've been reported, every piece of evidence shows that in gun walker, i mean, sorry, wide receiver, every effort was made -- unsuccessfully in many cases which is one of the things that concerns us -- to follow the weapons. to your knowledge, was there ever an order under wide receiver to abandon following the weapons and let them walk? >> well, i say, you know, during the early -- as i've seen more on wide receiver as we have provided -- >> yeah, but i -- a yes or no

would be a good start, mr. attorney general. do you know of any time in which people were ordered to peel off and let the guns walk under wide receiver? >> i am not sure about whether they were ordered to or not, but i do know that in the early phases of the investigation observations were made of people buying guns and decisions made not to surveil them after those purchases were made. and as a result, 100, 400, i'm not sure exactly what the number is, of guns walked. and there were complaints about the fact that guns were walking in operation wide receiver. >> since it was never allowed to simply let known straw buyers, known guns fall into illicit criminals' hands, have you taken any action to fire anyone or discipline anyone from operation wide receiver? >> operation wide receiver occurred in the prior administration. i don't think that -- >> we're not talking about political appointees, we're talking about people who would transcend the decision.

have you, to your knowledge, disciplined anyone from wide receiver? >> no, i have not. >> have you disciplined anyone from fast and furious? >> no, i have not as yet. as yet. there have been personnel changes made, um, at atf. we, obviously, have a new u.s. attorney in arizona. we have made personnel switches at atf, people have been moved out of positions. um, i'm certainly going to wait and see what i get from the inspector general report that we have from the majority. i don't know if minority is going to -- i don't know if majority is going to produce a report, and i will be taking all that into consideration in addition to all these things that i'm able to find out on my own and make personnel changes as i think they are appropriate. >> my time has expired. i will say that i don't think the minority report is going to do you a whole lot of good since it seems to say more or less nothing happened. with that, i'd recognize the author of the minority report, mr. cummings, for his round of questions.

>> thank you very much, mr. chairman, and i respectfully disagree with what you just said. our staff worked very hard on that report, and by the way, it is based upon the evidence that the majority presented, that the majority presented. you all heard the same evidence that we heard. and we, basically, looked at the facts and presented them. mr. attorney general, i want to thank you again, and i'm sorry my colleagues on the other side of the aisle have made completely unsubstantiated allegations against dedicated and hard working fbi agents, dea officials and others. and i want to thank all of them for what they do every day to protect the american public. we face a real challenge today. i have to ignore the political sideshow and keep my focus on the very real problems that led to these flawed operations. as our report explains, we have no evidence that you approved gun walking.

we have no evidence that you knew about it. the same can probably be said of former attorney general mukasey. i assume that if either of you actually heard about, that gun walking was taking place, you would have put a stop to it. as i review this report from my staff, however, i get a little upset. first, i get upset that this happened. hundreds of weapons went to criminal network on both sides of the border because agents did not arrest suspects when they could have. i also get upset that in this went on for so long. we identified four different operations in phoenix over five years across two administrations involving hundreds of weapons. and these weapons put law enforcement agents in danger. in your written statement, you noted that 177 officers lost their lives in the line of duty last year, and 70 of those

deaths involved firearms. as the country's chief law enforcement officer, what is your reaction to the fact that these operations continued for so long? >> well, it bothers me a great deal when one sees the death toll that we have seen in mexico, 40, 50,000 people have been killed over the last five years, 64,000 guns traced from the united states into mexico -- and that's traced which means probably substantial numbers of guns have gone from the united states into mexico. and the concern i have is that with these guns going into mexico and cartel activities that reach into the united states, at some point these guns will be trained on law enforcement officers. though we have seen a historic drop in the crime rate to 40 and 50-year lows, we have seen a rise over the last two years in the number of police officers, federal enforcement agents who have been killed. i've been to far too many funerals, talked to far too many widows about the death of brave

people who have died in service to their country, and we have to do something about it. we have to. >> director william hoover, an experienced atf officer, became concerned in 2010 about the number of weapons involved in fast and furious. he told us he did not know about gun walking, but he ordered an exit strategy based on his overall concerns. he told a phoenix office to end this operation within 90 days and bring indictments. but they didn't do it. they did not like atf headquarters running their cases, and they continued for months to encourage gun deal ors to -- dealers to sell to straw purchasers without arrest. during his interview mr. hoover also told us he never told anyone at the department of justice about his general concerns with the operation or his order for an exit strategy. in our interviews with justice department officials confirm that. so i have two questions.

e understand that -- i understand that field agents don't like bureaucrats in washington looking over their shoulder. but how can a field office effectively ignore the directors of atf headquarters in this way and, second, what specific reforms are now in place or should we consider to insure better coordination and oversight? >> well, there is a tension between the field and headquarters. i have been in the field, i have been in headquarters. and, you know, depending on where i sit, i think greater wisdom exists in that place. um, we have to come up with ways in which we make clear what the policies are. after i heard about gun walking -- i don't know about, you know, attorney general mukasey -- but after i heard about gun walking i was very firm. i had a directive sent out to the field that indicated those kinds of techniques were simply unacceptable, were not to be used by the department of

justice. now, todd jones, the acting director at atf, has instituted a number of reforms. and i want to say the report you have put out contains at the back a number of suggestions with regard to reform, and i think a substantial number of those have been instituted, um, by todd. um, among them coming up with ways we insure that the trafficking of guns, the gun walking does not occur, that more levels of review have to occur. and i think also significant given the fact that agent dodson's here is we have to have ways in which at atf people who have concerns about atf operations have a greater ability, don't have concerns for their careers about surfacing things within atf so that people, the leadership at atf and, ultimately, back at headquarters can take correct, necessary correct i have actions -- corrective actions. but i would salute the minority report for the management and be policy changes that are included in that report. >> thank you. i see my time is up. >> thank you. we now go to the former chairman

of the full committee, mr. burton, for five minutes. >> nice seeing you again. >> it's been a while. >> yeah, it sure has. you know, it's very interesting, mr. attorney general, for six years i remember when you were with janet reno and the deputy attorney general, and we fought to get documents. and we had a difficult time. you've said here today that there's certain documents that you will not give us because of the separation of powers. now, we've been down that road before, and we got them. but we had to threaten that we would have a contempt citation in congress. this is not just during the reno administration, but during gonzales as well. and we got the documents. so i think you're hiding behind something here that will not stand up. so you ought to give us the documents. now, we received 6,000 documents

with redactions, and i know that's an old, old school policy, you know, send 'em up here and cross out everything of relevance and let us try to figure out what it is. and you dump 'em on us on friday night so that the staff here can't do anything with them unless they stay over the weekend and work 10, 12, 14 hours. i've within down that -- i've been down that road too. now, there's 93,000 documents that you're not giving this committee. and you're saying, well, the separation of powers prohibits you from doing that. that's baloney. and be i worked with you for six years -- well, i wouldn't say with you. i've worked for six years when you were the deputy attorney general. so why don't you give us those documents? the conclusion that i come to is there's some things in there that's being hidden that you don't want us to see. i don't know if it involves you or some other atf agents or some other members of the justice department. but this committee is the oversight committee, and we have

every right under the constitution to check on what you're doing. we're supposed to oversee the executive branch, and you are part of that branch. so for you to deny this committee anything like that is just dead wrong, and i don't think you're going to find any way that you can do it, and i would urge the chairman to move a contempt citation against you if you don't give 'em to us. now, let me just ask you a couple of questions. why won't you let patrick cunningham, the head of the criminal division in phoenix, and emery hurley come -- a line prosecutor -- why won't you let them come and talk to the committee? if you can't let them do it publicly, you ought to let them do it in a private setting. why won't you let them do that? >> well, a couple things. just for the record, i was only deputy attorney general for four years. >> okay, four years.

[laughter] >> seemed like longer than that. >> would the gentleman yield? >> be happy to yield. >> since mr. cunningham has now taken the fifth, i would say none of us have that direct authority. but to add to the gentleman's question, would you make all testimony and information on mr. cunningham immediately available to us unredacted so we may evaluate to a great extent what you know about why he took the fifth? go ahead. i yield back. >> well, in terms of making available, um, i'm not sure where you get the number of 93,000 documents. the redactions that have occurred are only because there are things that are either not relevant or are protected by grand jury secrecy rules, court orders that have sealed material. we have provided to this committee material that is relevant and only redacted that which is necessary, and there's a key that tells you why something was redacted.

with regard to the two people you've talked about, um, hurley, mr. hurley is a line prosecutor, and we never make line prosecutors, um, available. that is every attorney general that i know has followed that policy. mr. cunningham no longer works in the justice department, so i don't have the ability to compel him, um, to testify. he left the justice department, i think, this past monday or -- >> you asked him to leave, i guess, didn't you? >> no. >> oh, you didn't? >> no. >> he left on his own after he took the fifth amendment? >> he had planned to leave well before he invoked his fifth amendment privilege to take a job this privacy practice, or a company. >> as i understand it, the ig has 80,000 documents, and you've given us 6,000, so whether we're talking about 93 or 80,000, this committee has asked for those and has not gotten them, and it appears as though we're being stonewalled, and there's something that's being hidden. let me ask you another question. have you apologized personally to the whistleblowers who were,

in effect, called liars by those within your own agency when we now know they were telling the truth and that we wouldn't know any of this today if they hadn't come forward? and i'm talking about people like john dodson who's here today and -- have you apologized to them personally? >> i've not apologized personally. i've spoken to mr. dodson when the chairman was kind enough to bring him by, gave him my telephone call and told him to -- >> give you a call? >> give me a call. >> why don't you call and apologize? you're the attorney general of the united states, and you're in charge of these people, and they were, in effect, called liars, and they were telling the truth. i think as the head of that agency it should be your responsibility to say, hey, guys, i'm sorry you were called liars when you did tell the truth. >> i'm not aware of them being called liars. we've tried to treat them with respect. i don't think any adverse action's been taken against any

of the people who testified against this committee. to the extent there are concerns mr. dodson has, i'd be more than glad to talk to him about it. he's had a meeting with the acting director of atf, and i think he's expressed whatever his thoughts were. if that's not been sufficient, as i said, i'm more than glad to have a consideration -- conversation with him. >> i wish you'd call him. >> the gentleman's time has expired. did you want to answer the question now that he has left under this cloud? >> i wouldn't say it was a cloud -- >> taking the my beth is not under a cloud? >> there are a variety of reasons for taking the fifth. there was a statement by this committee that he had acted inappropriately. i don't know why he invoked the fifth amendment, his fifth amendment privilege. that is certainly his right as an american citizen. we have provided already 153 documents with regard to mr. cunningham that entails about 387 pages of material.

we'll continue to look at that material, and to the extent that there is information that is relevant, we'll provide it to the committee. >> i thank you. we now recognize the other former chairman of the committee, mr. towns, for five minutes. >> thank you very much, mr. chairman. this committee has not obtained one shred of evidence that would contradict your testimony, mr. attorney general. not up one witness, not one document, not one e-mail. and still some continue to suggest that you did personally authorize gun walking and the tactics in operation fast and furious. i hope this will be the last time you have to answer this question. did you, mr. attorney general, ever authorize gun walking? be. >> um, i did not, and i'll say it that way. i'm from new york, and i would say it in a different way, but

i'm going to have great respect for this committee and simply say i did not. >> i'm from new york, so i would understand your answer. [laughter] and, of course, my colleague next to me would also. did you ever authorize the controversial tactics employed in operation fast and furious, the noninterdiction of illegal firearms in order to build a bigger case? >> not only did i not authorize those tactics, when i found out about them, i told the field and everybody in the united states department of justice that those tactics had to stop, that they were not acceptable and that gun walking was to stop. that was what my reaction to my finding out about the use of that technique. >> to your knowledge, did deputy attorney general general gary grindler or assistant attorney general lanny breuer ever authorize gun walking or the tactics employed in if and

furious? be. >> to my knowledge, they did not. >> let me ask this. if you had been asked to approve gun walking, what would you have done or said? >> no. simple. you know, there are questions that you have in public corruption cases when you're trying to decide are you going to let the money walk. there are questions that you have in narcotics cases are you going to let the drugs walk so that you can make a case. and you are -- you have spirited conversations about that, and i can understand how there can be differing opinions. the notion that you would let guns walk in a firearms case is, for me, absurd. absurd. and it was the reason why i said it cannot happen. why we stopped it. it is not doj policy, and anybody who does it now is breaking a direct directive from the attorney general of the united states. >> so if you had been asked or told by atf or the united states

attorney's office about the tactics in operation fast and furious, how would you have acted or responded? >> in the same way that i did, um, i think in early march of 2011, by telling everybody in the justice department don't do this. it's unacceptable, it's stupid, it's dangerous and not something that this department of justice can ever do. >> you know, i want to thank you for coming up and, of course, thank you for your testimony. i think it is pretty clear that the attempts to tarnish your reputation with these substantiated allegations is pure politics and definitely has a political flavor. and that is unfortunate. so on that note, i will yield back. >> i thank the gentleman. we now go to the gentleman from north carolina, mr. mchenry, for five minutes. >> thank you, mr. chairman. thank you, attorney general holder, for being here.

listening to the answer you had from the former chairman, it seems to me when you see that folks did not follow policy, did not follow your directives and we're here 13 months after you found out that an agent was murdered for policies that you did not support, and we find out you've not fired a single individual. we find out that you have not rebuked any staff members. heck, you haven't even put a letter in people's personnel files saying that they, on their watch, acted and an agent was murdered. that is absolutely absurd from this side of the dais. and so i ask you why have you not taken steps? >> well -- >> to make sure this doesn't

happen again? >> well, i have taken steps. certainly, with regard to -- >> you told people that you're mad, you're upset. that, to me, is silly. you've not taken action, you've not fired anybody, you haven't changed policy because it's clear you didn't enforce a policy before. you didn't even know, you're saying you didn't even know about it. so it strikes me as incompetence in terms of management. >> well, i'm not sure you understand how the justice department works. i didn't express the fact that i was mad or that i thought it was silly. i issued a directive that said the attorney general of the united states that says this policy, this technique is inappropriate and should not be followed. where, we're still in the process of trying to determine, the inspector general's trying to determine where this policy originated. we know that it started probably in the atf office in phoenix, it was approved by u.s. attorney's office in phoenix. now, exactly who the people were who actually approved the technique were still in the

process of trying to work through. but that's not all that i've done. i've made personnel changes with regard to leadership positions. we have moved people around. we have instituted a series of, um, of policies now that i think are designed to make sure that that doesn't happen again. um, the -- >> so an agent was murdered, and your action is to move people around. that seems to me to simply inconvenience people, not to rid them of federal employment. >> well, to the extent that we find out who precisely was involved in this or who gave that order, i can assure you that unless there is some truly compelling circumstance, that person, those people will be removed from federal service. but that's not all we've done with regard to the murder. we're in the process of investigating, um, that murder, and the people who are responsible for it will be held accountable, and i expect that you'll hear something about that relatively soon. >> relatively soon. thirteen months later. >> no. you will hear -- well, these matters -- >> it's 13 months after the fact, sir.

that's what i'm saying. at what point are you going to take action? >> as soon as we are in a position to make arrests and hold people accountable, put them in a court of law and try them with maximum charges. these are not cases -- >> is that likely this year? >> i think that's likely this year. >> is it likely in the next six months? >> yes, i think it's likely in the next six months. >> could you see that happening this quarter? >> when does this quarter end? i don't know. >> march 31st. >> possible. >> possible. okay. thirteen months later we have possibility of somebody actually being punished for an agent being killed. this is absolutely absurd. mr. chairman, i yield the balance of my time. >> no, no, no, it's not absurd. it takes time to build a case that you're going to be able to take before a jury with a high standard of proof, convict somebody, hold them accountable. you don't want to go into court and put yourself on a time limit and at three months say let's take whatever we've got and get

into court because some critics are going to say we're not acting fast enough, end up up losing the case, and then the people responsible for this heinous act are not held accountable. we go into courts when we think we have cases that are ready to go. i'm not putting any pressure on people in that regard other than to do it as quickly they can, but to do it as thoroughly as they can so we bring the best possible case we can. >> i thank the gentleman for yielding and quickly following up -- no, it isn't. mr. lanny breuer is not going to be criminally indicted or anything else, but when mr. mchenry was asking about holding people accountable, he was really asking about people who work for you. is your management style a hands-off, or is it a hands-on? do you want to know what's going on, or do you want others to handle it and brief you at a relatively high level? >> i think i've got a hands-on style. >> okay. well, if you've got a hands-on style, have you read any of or

been fully briefed on the wiretaps including the march 10th wiretap in this case? >> these wiretaps are very voluminous, i have not read them. >> okay. well, kenneth nelson told us, and this has been publicly reported, that, n., he was sick to his stomach when he discovered it. this was approved by lanny breuer's office. indications are that your chief deputy knew about this. i mean, it comes through criminal division at some point. the question is, will you or isn't it a appropriate that you know about these wiretaps so that you could know what former acting atf director knew which was these wiretaps are reasonably believed to be sufficient in what they disclosed that many parts of this operation should have stopped, should have stopped sooner and that people were saying that at dea and other places and that the office of criminal division, lanny breuer's division, if you will, knew or should have known that that's the kind of thing mr. mchenry was asking about,

is holding people accountable whether they're career professionals or political appointees. are you prepared to do any of that prior to the attorney general's final report? because you haven't done any so far as far as we can tell. >> i think you mean the inspector general's report. >> i'm sorry. inspector general's report. i'm sorry, mr. general, i keep confusing the two generals. but, yes, i notice the difference which seems to execute the delay. >> you packed a lot into that question. i think, first off, no indication that my former deputy was aware of the tactics employed in this matter until everybody, i think, became aware of them which was january, february of last year. um, the information -- i'm not at all, i'm not at this point aware that any of those tactics were contained in oi -- any of the wiretap applications. to the extent those wiretap applications have been shared, that is in direct violation of

court orders. and if i find, if i find that somebody in the united states department of justice has shared the contents of a wiretap application, that will be something that will have to be looked at. there is a wide variety of things, information that we can share, but i'm not going to go against sealing orders by a court with regard to a wiretap application, and anybody who reads that material or submits that material for people to examine does so at their peril. >> i appreciate that. for the record, members of congress are not covered by that prohibition. members of congress are not in any way under that order. in fact, if we receive the information from whistleblowers, just like the press, it is, in fact, legitimate for us to know it and to act on it in our investigation. we are not covered by that federal court order. your law enforcement people related are. before i yield, did you want to respond after you got a note on that? >> with all due respect, mr. chairman, i think that direction

that you just said about the media and congress and court orders is really incorrect, and i think you act at your peril if you think that's the truth. >> well, certainly, we would say that the release of information from our testimony of kenneth nelson that appears to be leaked to your people also would be inappropriate, but we'll get to that at another time. we recognize the gentle lady from new york, ms. maloney. >> thank you. i'd like to respond to my good friend and colleague, mr. mchenry's, statement that the ag had not responded to agent terry's death. he responded immediately and has expressed his concern for the other agents that are being killed at a higher rate than ever in our history. >> in the gentlelady would yield -- >> no, i will not yield. i will not yield. and not only did he do that, he immediately took swift action to stop gun walking which did not happen in the prior administration and established reforms to prevent this type of

flawed operation from ever happening again. he further called for, and we could all help him do this particularly the republican majority, to confirm a permanent atf director. that would help more than anything. he also called for a federal firearms trafficking statute. he called for appropriate funding for the atf to do its job and increased penalties for straw purchasing. so these are some of the concrete actions that he's taken in response to that tragic death. and once again today this investigation continues on its vast and curious mission to fix the symptoms rather than the cause of so much deadly gun violence on the southern border. and this committee has, unfortunately, refused time and again to examine the serious,

underlying problems that so heavily contributed to a series of ill-conceived, fatally-flawed programs such as fast and furious. and as this committee well knows and everyone should know in america, fast and furious was not the first, but the fourth investigation to use gun walking as a tactic to go after bigger fish. and the gun walking strategy dates back to 2006, the prior administration. and just to underscore how vast and curious this investigation is, let's review that is in the sixth occasion, mr. attorney general, that you have been before congress on this issue? >> it's the sixth time i've testified about fast and furious. >> this is the sixth time he has testified on fast and furious. and he handed out a list of what his responsibilities are which i would like him to be able to do, and i want to add to that one

that i'm grateful for, and that is implementing the 9/11 health and compensation bill which your whole unit is doing such a brilliant job. thank you so much. we appreciate it. also over 6,400 papers and ongoing ig review. all of this is taking place. but in your testimony today i appreciated your really tribute to the courageous agents that work in the atf, and you spoke about the whistleblowers and how courageous they are. and i wanted to point out the testimony of special agent peter facelli who called the current lays against gun trafficking absolutely toothless. and he went on to testify that there was no enforcement, and he went on and said all kinds of things. do you agree that there's no enforcement, that law

enforcement doesn't really have the tools to do the job to crack down on gun trafficking? >> i really agree with the agent. there's clearly a need, i believe, for a federal firearms trafficking statute. we need increased penalties for straw purchasers who engage in that kind of inappropriate activity, and i think we'd like to work with congress so that we can put in place these measures that would ultimately help atf and the federal government be more effective in the fight we all say we want to have, which is to stop the flow of guns into mexico. >> okay. at the -- after that hearing with special agent facelli, i worked with ranking member cummings and also with congressman towns and congresswoman norton, and we drafted a bill which is to crack down on illegal trafficking conduct, not law-abiding gun ownsers, but would go after those illegal activities. and we should get busy working on helping to give them the tools. we know that we do things that are far more helpful than going

on a politically-motivated fishing trip which i feel this is what we're doing today. and the real agenda of this investigation does not aid or honor those who risk their lives every day working to keep americans safe from gun violence. and i must say that this is getting out of hand. the ag's testimony that over 60,000 guns, i believe you said, have been traced in mexico that are directly tied to having been gotten there from america, and i must say that one chilling example was a ad that the al-qaeda put on their web site saying go to america, get guns, it's so easy to do. get your guns for your illegal activities. so i want to congratulate you for your vision and be -- and

mission of wanting to give law enforcement the tools to get the job done, to have a federal statute banning gun trafficking. >> would the gentlelady yield? >> with increased penalties. yes, i most certainly will. >> i join with you in believing that andrew texas raver who i believe is the 2010, november 2010 designate should, in fact, be given an up or down vote, should, in fact, be given an opportunity to be confirmed. i would note that he wasn't put up, no one was put up for the first two years of the obama administration, and that's sad that they didn't have somebody in the queue earlier. i thank the gentlelady for yielding. >> i want to thank the chairman for supporting the confirmation, and you certainly can help us make that happen. >> we'll do what we can. >> i appreciate that. >> thank the gentlelady. we now recognize the gentleman from utah, mr. chaffetz, for five minutes. >> thank you, mr. chairman. thank you, mr. attorney general. i had an opportunity to ask you

questions on december 8 of 2011, i'd asked you if you had spoken to president clinton -- president obama, secretary clinton or secretary knoll low. you said -- napolitano. you said you had not spoken to any of those three about fast and furious. is that still true today? >> with regard to secretary napolitano, yes. secretary clinton, yes. and the -- >> i'm sorry. secretary clinton, you have spoken with her about fast and furious? >> no, i'm saying -- i should say, no. secretary napolitano, no. secretary clinton, no. and i've had passing conversations with the president just about the fact of my testifying in connection with fast and furious. >> on wednesday, february 16th, you issued a press release along with secretary napolitano saying that you had met together. this is on the heels of jaime zapata, he had just been kill inside mexico. there were questions as to whether or not there were ties to fast and furious. you say you didn't have any interaction with janet napolitano about fast and

furious. my question is about secretary clipton. what sort of -- clinton. what sort of interaction did you have with the state department? >> i'm not sure. at lower levels, if there was interaction between the justice department and the state department, i know i've not interacted with secretary clinton with regard to fast and furious. >> i was questioning whether or not you had actually had some interaction or if fast and furious came up. you said, and i quote, you have to understand something about the way washington works. explain that to me and the interaction that your department or agency has had with the state department. >> well, one of the things that i was saying, i was trying to say and i think i got cut off was that when people know that i'm going to be the subject of these kinds of hearings, you know, six times and all that, nobody necessarily wants to get involved in these kinds of things or get dragged into it and then have some interaction, conversation that i have with them be made more than it is.

and i understand. when people don't necessarily want to talk to me about fast and furious knowing that at lower levels -- >> well, you know they're withholding information from you. >> no, they're not. >> you just said they're not going to provide you the information because they don't want to drag you into it. >> i said they didn't want to have conversations with me. >> isn't that withholding information? if you can't tell the boss what's really going on, you're going to be o live crouse to -- oblivious to what's going on. >> we're talking about cabinet-level people. and i'm talking about the people that work under them are certainly providing information to the justice department so that we have access to whatever information -- >> and is the justice department providing that information to, say, the state department or homeland security? that's -- you may think we're not having face to face discussions, which troubles me. i don't care whether you're democrat or republican, the idea that you're not being informed and not having conversation because you're afraid of coming to congress is troublesome at least. >> i'm not afraid to come to

congress. i've been here six times. >> i know. but if you're not being informed so you purposely can claim ignorance, that is a problem. is there an expectation on your part that there's interaction between these departments and agencies? >> there's not only an expectation, i note that, in fact, there is that type of interaction because with regards to the death of agent terry, i know that dhs is working with the pbi -- fbi. >> what about the state department? >> state, you know, doesn't have as direct a role. obviously, we interact with our counterparts in mexico, and we talk to the state department, um, and inform them of contacts that i have. in fact, i'll be speaking to the attorney general from the mexico in the latter part of -- i guess, early this afternoon. >> paragraph five of your testimony today, you talk about the national security crisis along the border. i guess my concern, mr. attorney general, is you have an expectation that there's interaction between department of justice and state department, correct? >> oh, there certainly is. through the merida initiative if

nothing else and through other ways in which our law enforcement components talk to one another -- >> then why is -- i'm sorry. my time is so short. >> would the gentleman suspend the clock? do you have a point of order? >> mr. chairman, i think that if he asks a question, he should have an opportunity to answer it. i'm trying to follow it, but the point is that without him being able to respond, i mean, what are we really doing? >> the gentleman's point is valid, and i appreciate that both under your leadership and, hopefully, under mine we make sure that all witnesses get the answer. >> mr. chairman -- >> wait a second. >> -- one additional minute for the gentleman. >> without objection, so ordered. mr. attorney general, at the end of any round of questioning within a reasonable period of time by yourself if you feel you have been unable to answer a question, and i'd like you to be succinct, you can conclude -- we will give you the additional time at the end so you may answer. i do respect the fact that a

member may want to go on to a next question, so you may have to wait until the end to sort of revise and extend briefly. with that, i mean no disrespect. the gentleman was fully within his rights, but i wanted to make that clear because the past chairmen and my policy are to make sure people get full answers even if it's not during the fife minutes. >> mr. chairman. i would ask without the starting of the clock again, if he wants to fully answer that, in concern to mr. towns, i just want to be able to do the follow-up question. >> the gentleman is absolutely right. gentleman will continue. >> if you want to answer that question, continue -- >> i'm not sure where i was. >> the interaction between the department of justice and state department. >> right -- >> fast and furious. that's the concern here. >> right. we work on a number of things with the state d., there is the merida initiative which is really the umbrella way in which

we operate in mexico in a law enforcement way, so there is a lot of contact at lower levels and not so lower levels. i know our deputy attorney general speaks a great deal with his counterpart at the state department. >> my question, mr. attorney general, is the testimony from october 27th of this year that secretary clinton gave over in the senate where she said, quote, i can tell you that based on information apart from the state department that would deal with this kind of issue, we have no record of any request for coordination, we have no record of any kind of notice or heads up. how is it that the secretary of state is saying we've never been involved in any way, shape or form in fast and furious, and you're testifying that it's happening on a regular, a regular basis? >> well, you've got to put this in the appropriate context. what i'm saying is that there -- we interact with them in a number of ways. now, fast and furious might not be a primary thing we are talking about with the state department. we are certainly working more closely with dhs when it comes to fast and furious. but those kinds of things are discussed.

it might not be, you know, a primary thing that exists between a topic of conversation between state -- >> and i guess that's the concern, mr. attorney general. we have 1500 weapons, we've got 300 dead people in mexico, we've got a dead u.s. agent. we've had untold number of hearings and discussions and press reports, and yet you have people at the highest levels of government saying we've got to remain ignorant because we're going to have to testify, and they don't want to get me involved, and at the same time your telling me you're interacting with the state department on a regular basis, and the secretary of the state department is saying it isn't happening. if we're going to make sure this never happens again, we have to soft these challenges, and i have no confidence -- >> the gentleman's time has expired. >> i'm not sure about the context in which that remark was made by secretary clinton, but i can tell you that when it comes to issue of violence in mexico, the problem of guns going to

mexico, we are joined with our partners -- >> mr. chairman? mr. chairman? could i read the question? can i read the question -- >> does the gentleman want the question read back? >> no, can i just -- >> no, the question that secretary clinton got. you asked a legitimate question -- >> the gentleman will suspend. if you'll make that question available to the attorney general's staff so they can brief him, we will return to that out of order to get an answer, but i think in fairness we've given sufficient time. if you'll make it available to staff, we'll make sure we get to it before the end of the hearing. with that, we go to the gentlelady from the district of columbia, ms. norton, for five minutes. >> thank you, mr. chairman. mr. chairman, i don't know if conversations with the secretary of state, with secretary clinton or secretary napolitano are of major importance here, but i do know this, that after calling the attorney general of the

united states six times before the congress, i think the public would have expected that we would have begun to talk about remedy by this time, and yet there has been no remedy to give the justice department the tools it needs to prosecute straw purchasers or gun trafficking. but here we go again for the sixth hearing. mr. attorney general, i want to commend you for the changes you have made, the multiple changes you have made while this matter was unfolding and the facts were coming forward recognizing full well that until you get the inspector general's report, particularly considering that this is the justice department to proceed without due process, would be fairly unseemly. you have to understand that when there's an issue like this and it was very important because of

the death of an agent, there is an incentive for a committee if it can get hold of a highly-placed government official to call him as much as you can because with him comes the press and the public. my concern, i must say, for the attorney general today who has foreign and domestic matters of great moment on his plate, that at least the remedy come out, and we certainly haven't seen anything even approaching that. i'd like to go through the five years of gun walking because they all get -- [laughter] they all get merged. we have three years of gun walking or so-called gun walking in the bush administration, five years total, two in this administration beginning with the arizona u.s. attorney paul charleston. and we haven't had the opportunity to have him before us, but the problem emerged out

of his office and with warnings, apparently, in his office at that time that there were real issues that the atf -- at least its legal counsel -- raised issues including what he called moral association objections. -- moral objections. now, mr. charleston we do know even though we haven't had the opportunity to speak with him was brief and continued to allow hundreds of guns to walk across the border to mexico. the notorious hernandez case arose during the bush administration when these, the effort of coordination failed, and yet the gun walking continued. now we come to this administration. um, when you became attorney