that's the kind of measure that will help inspire entrepreneurs, small businessmen and women to go ahead and invest and create more jobs. they need a signal from washington that there's not an adversary here that we believe any aspirational sense of america, we believe in small business entrepreneurs. >> good morning everyone. the american people have seen the same story now for 36 straight months. while there are flickers adel nouri connolly they are welcome. but the american people were promised by the president that an employment wouldn't exceed 8%. for 36 months of unemployment over 8%. as a matter of fact if you go back three years ago when the president asked us to vote for his stimulus bill, they actually said that unemployment at this point would be at 6%. and so while we welcome the positive news today, i think

that our point is very simple: we can do better. ..

[applause]

>> right now, a democrat's perspective from this more than religious warp journal. >> we welcome back this morning congressman financial services committee member and co-chair of the progresstive caucus in the house. we're going to talk about foreclosureses and the housing crisis and president obama's newly announced mortgage refinance program to start that i have a map of what your state looks like. give us a heads up on how housing is doing and what your thought how central it is to economic recovery. >> guest: i think housing, depressed prices in housing is causing the drag on our economy. if we could address housing our gdp growing would be a full percentage point higher. people are under water, all over the country, and that just means they owe more on the house than

the value of the house has retained. this is a big problem. they really can't sell the house, they can't move if they can't sell the house, and it's put people in a very difficult situation. of course, a lot of people's greatest asset is in their home, and if they're greatest asset is actually not an asset but a liability because its debt is greater than its val other, that is a tremendous challenge for people who might be trying to use their home as -- to refinance a business or even retire. so it's a real serious problem. it's also a problem for tenants, too because foreclosure doesn't only effect homeowners. it effects people who own rental property, and when they lose their rem property in foreclosure, the tenants are the last ones to know. and so i've taken action legislatively to try to help tenants who find themselves foreclosed even though they have made every sing rent payment required of them. >> host: the jobless numbers are

doing much better in minnesota. so you have more jobes than most of the other states. how is that not helping the housing market? >> because they're spotty. for example, some areas, people who have high education attainment, in a technical field, their unemployment rate may be as low as 3 or 4% in certain industries. but then you go to other neighborhoods and the unemployment rate may be 15%. so even though we have a good overall rate, on average, when you aggregate it, it hits certain neighborhoods harder than others, and in those neighborhoods, foreclosure is a serious issue. >> host: let's move to the president's plan. in the "state of the union" address he talked about his idea for the newest -- and it is about the third or fourth program since the crisis we have had to address the housing situation. >> guest: i'm glad he keeps trying. >> host: the proposal here is a understand it is to help people

take advantage of the very low mortgage rates. the government would help with closing costs. >> what do you think of the plan? >> guest: i think it's a good plan. i'm not sure it's going to solve the enormous problem out there before the foreclosures crisis is over we may see ten million people in foreclosure. but it is an additional tool, and i think it's important. i think it's responsible. he is using something called the financial crisis responsibility fee in order to pay for it, and i think it will help many home owners. people have to be current. people who are in trouble are not current on their mortgages and that would be an eligibility requirement. but i think, again, if you look at the total portfolio of things we're doing to keep people in their homes, this is one more tool, and i think it's positive. >> host: estimated costs for this program, depending upon how many people use it, are five to

ten billion dollars. where would the money come from? >> guest: the financial crisis responsibility fee would be the source of income. >> host: so banks pay for it? >> guest: the large banks pay for it, and i think this is enormously fair, given all the help the american taxpayer gave the large banks, where we literally saved them. so the least they can do, given that maybe of them are highly profitable now, is to help out home owners. some of these banks have been given the ceos and top executives exorbitant bonuses even at a time when we just bailed them out. so the least they can do is demonstrate a little patriotism and help ohm owner jazz two -- >> host: voice on the. this is president obama himself. we're going to his top what he has to say about the programs that have been implemented so far. >> i'll be honest. the programs that we put forward

haven't worked at the scale we hoped. not as many people have taken advantage of it as we wanted. mortgage rates are as low as they've been in half a century. and when that happens, usually home owners flock to refinance their mortgages. so a lot of people take advantage of and it save a lot of money. but this time too mean families haven't been able to take advantage of the low rates because falling prices locked them out of the market. they're under water. making it more difficult for them to refinance. then you have all the fees involved in refinancing, and a lot of people said, even though i'd like to be obviously cutting down my monthly payment, the banks just aren't being real encouraging. >> host: do you agree with the president's explanation why more people haven't utilized the programs employed so far. >> guest: yeah. i think that's a fair explanation. i also think he is right. the programmed that have been offered so far have not reached the number of people we wanted

them to. i think that we need a more aggressive program. and like i said, the president gives point -- gets points from me because he continues to triumph there's a lot more things to try. i think we need to make -- we need to get -- it would allow bankruptcy judges judges to rese mortgages when people go into bankruptcy judgment on a first home. we need other provisions to help, like extending my -- protect tenants from foreclosure bill which could be made important, and we need to invest in low-income housing much more. so but as i said, i'm a supporter of this program and the president's effort. i just think the president's right. we need to keep trying until we turn over. >> host: a question from twitter, why do leners foot-drag

when home buyers try to refinance. >> guest: it's a whole number of reasons. having to do with servicing contracts. whenever you see a mortgage on a bank's books and they own the morning it's easier for the remodification to occur. but with the rise of suretyization and these mortgage can back it secureds, these mortgages have been repackaged and sold all around and they're servicing contracts in which people derive fees from servicing these mortgages, and it's hard to negotiate with these people because they have to go back to investors and get approval and it takes quite a long time. so, it's bureaucracy. not government bureaucracy but private sector is going. >> host: another twitter question. representative, there is some talk on serius radio it's not the banks who will annoys but the taxpayers again. is this true? >> guest: i say no.

not unless the banks can somehow find a way for -- to pass it on to consumers. but this is going to be a fee on large banks, the financial crisis responsibility fee. it's a fair fee. it makes sense to do. it's not but the large banks giving back, and i think that particular claim is unfounded. >> host: one more from the other side of the aisle. candidate mitt romney on his prescription for the housing crisis. >> don't try and stop the foreclosure process. let it run its course and hit the bottom of investors to buy homes, put representers in them, fix the homes up. the obama administration has slow-walked the foreclosure process that long existed, and as a we still have a foreclosure overhead. >> host: your reaction. >> guest: he is absolutely wrong, and if we follow his advice, there bee a tremendous

amount of pain people would go through. we -- this foreclosure crisis may see ten million home owners going into foreclosure by the time it's all over. i think it's important for listener toes to realize, a foreclosure is daddy or mommy going to their child and saying, this isn't going to be your room anymore. we have to leave. we have to take all of our stuff and leave your room and we will maybe -- maybe we can move in with grandma. i don't know what's going to happen but we're going to do the best we can. he's saying doing that to ten million people and i think that's callous in the industry it fits right in with him wanting to bet $10,000 like it's ten cents and it's callous disregard for what people are going through. >> host: this is from a democrat. you're on the air. >> caller: good morning. i won't be singing to you today. >> host: thank you.

>> caller: the refinance almost impossible these days, through my own experience, because of the mortgage servicing companies. not necessarily the banks. the banks -- well, a bank is a bank and we all know where they stand. however, the mortgage servicing companies, specifically faxim out of texas and carolina, they're impossible to deal with. you check the computer, and get some of the feedback that people have on them, and every story is the same. send another document, send another document. and every excuse in the book. my favorite -- my personal favorite excuse of theirs is, that document must be in imaging now. that will take a week. and it's nonsense. and i thought they were bad, and they truly are, but then they'll trade you off to a company called aquin which i believe is a subsidiary of their own

corporation. they're based out of india. actually, florida is their base, but you can't talk to anybody there. the people that run aquins call center, very, very professional. they're in mumbai and they have the finest computer system in the world, and -- >> host: i want to jump in. i think we understand the direction of your story. you're frustration with working with the banks, reselling of your mortgages, delay in processing. your response. >> guest: i want to thank the caller. he obviously has researched this thing much more than other people. >> host: he is trying to do it. >> guest: yeah. sometimes when you run into a problem you become a good student of the problem, and he clearly has. i think he is right. as i mentioned earlier, the heart of the problem is in the servicing sector. the banks, is a already pointed out, if they own the mortgage, they retain the mortgage, you can usually get a modification,

but once you get to that servicing trap, it's an endless number of, they need another document, and so many people have ended up in the process of trying to remodified, get foreclosed upon and we've even gone public sometimes and then that gets their attention. but i think the caller is right in identifying the problem is being right there with the servicers. as i said earlier in the show. that is where a lot of the focus needs to be. >> host: back to twitter. what does he mean, unless the banks can find a way to charge consumers? there's no other way for the banks to pay this fee. >> guest: well, the banks have record profit. they retained a lot of money based on not only the fact they can borrow and then turn around and lend money at record low rates. they're charging exorbitant fees, everything from overdraft fees and everything like that. of course there are many other ways that banks make money and have retained it and have

actually quite a bit of profitability. a number of these banks. what the caller makes the mistake of understanding something called elasticity of demand. it's an economic concept and has to do with how able the bank or any firm is to pass on an expense they have acquired on to a customer, and if the customer will respond by not using the product or service, if there is a pass-through of an expense, then they can't pass it on, and if they can pass it on and the customer has to take, kind of like gasoline, then they can pat it on. but i think the caller needs to dive into economics a little bit more to understand exactly how firms handle increased expenditure and whether they eat it or can pass it on to the consumer and how it affects the bottom line. >> host: next call is from virginia.

jeremy, a republican there. you're on. >> caller: thanks for taking my call. thanks for c-span. i have a comment for the congressman. i was interested in the susan g. komen story and just wanted to say that susan g. komen is going to take that $700,000 and still spend it on breast cancer prevention. i don't think anyone should have a problem on that and shouldn't worry they're not giving it to planned parenthood. my comment for the congressman about mortgages. it's a little bit what you talked about with the investor properties. i happen to own a property and would like to refinance, but it's also very frustrating for me like the previous caller. because there's so much paperwork now that has to be done, and it is rather expensive. i've got -- everytime i need a piece of paper i have to pay 50 or 100 or $300 to get it done. and it is -- i'm lucky. i've got properties worth $175,000 and i need to refinance

to $100,000 of it. and the people want to be envious of me for that. i'm sorry. i just did the right think by making sure i got a property i could afford. but i think -- i'm not certain of this but i would wish that congress would just make sure that they're not throwing out the baby with the bath water, and in the desire to make sure that people aren't getting houses they shouldn't be getting or they can't food, they don't also make it really onerous and difficult for those of us that are doing the right things, have good credit scores, you know, purchased a piece of property they can afford, to in fact refinance, and help keep the economy going. >> host: thanks, jeremy. >> guest: jeremy, let me assure you, i don't think anyone envies you. i think if you are purchasing property and offering housing to people at a fair rental rate, a good quality housing, i think

that's offering a service. it helps you by making money, but it helps the community by offering people housing choices. so i want to disspell this idea that honest business people should be the target of someone's envy. they should not and i will stand for you in this situation. i also want to point out to you that the bureaucratic mess you're running into is private sector created. they don't want to refinance if at it not more profitable for them. you may have to be more diligent. they want you to pay more money for documents here and there. it's not the government doing this to you. this is a private sector thing. and i think we all should stand back and ask ourselves, how much of what we believe is ideology and how much is just basic fact. i think, jeremy, you should be able to refinance your property for a low are interest rate, particularly when they're at historic lows, and i don't see

any problem with that. and so based on what you told me, i think it is a myth that the government allowed people to get a mortgage that shouldn't get a mortgage. there is a fee that some mortgage originators would get if they steered people to a higher cost mortgage. that's not anything the government did. that's a private sector thing. and you should also know that when you're talking about no doc loans no stated income loans, loans with a prepayment penalties, this is also another private sector thing, and the fact is, it is the private label that was responsible for all these mortgages that ended up being repackaged and being actually offered as aaa but were

actually not creditworthy and full of nonperforming loans when the economy dips. i think it's important to bear in mind, this housing crisis wasn't created by the cra, it wasn't created by -- it wasn't even credited by fannie and freddie, although they di, as sir bait the problem. it was created in the private sector, unregulated nonbank helpeds so it's important for us to understand where the problem started and how it started and that we now have a responsibility to clean it up. >> host: the administration's plan for housing goes beyond the mortgage refinancing package. tis this is a contribute news story about it after a press briefing. in addition to the refinancing, the introduction of a home owner bill of rights designed to ensure bierers and lenders are playing by the same rule. private sale of foreclosed properties to.

a full year of forebearance provided by the major banks and fannie and freeie, and pursuing a joint investigation into mortgage and servicing abuses and reducing foreclosures, expanding the eligible for -- >> guest: all very good nice. i liked everything i heard. i did did want to highlight this issue of an investigation. i do believe that it's very important to investigate abuses in the mortgage market and how we got into this situation. the whole span of this crisis, there has been fraud there has been misrepresentation, there has been all kinds of what i believe is criminal conduct, and yet no one has really been held responsible for it. i think it's kind of time that be done. that requires an investigation. and so if i could take you back to the s & l crisis, there were over 1,000 justice department

lawyers going after abuses in that crisis, and now the justice department has 50 people going after this one. my question is, why aren't we providing the justice department with the resources it needs to get to the bottom of what is the worst financial crisis since the great depression, and, again, this goes back to some people's endless pursuit of cutting government. now that we need government, we're without the tools to get to the bottom of what is really a serious financial crisis that is dragging our economy down. >> host: on twitter, representative ellison, the problem was banks sold the mortgages so no incentive to write good ones. >> guest: the fact is -- i mean, his point is right. when mortgages were originated, original nateors would not look at that loan to see, is this a worthy loan or going to perform. they wanted to know, can i sell

this paper that can be securitized on the secondary market, and i think that, yes, we have risk retention rules, part of dodd-frank, that will help a proper underwriting of a loan and assessment of whether or not this loan is going to perform and the person can pay. i think we put -- plus, we've also taken out a lot of the incentives and the damaging things that required -- that allowed these bad mortgages to take place in the first place. things like prepay penalties, yield spread premiums, no stated income, all these things that are addressed in the financial reform bill and we'll be better off because of it. >> host: related to this, cra eventually pushed loans out of banks and into the market and instead of loan officers we got brokers. next is a call from pittsburgh,

kansas. >> caller: you're one of the finer voices in congress but we're in a worldwide depression, not just a recession. >> guest: i agree. >> caller: we need to look to the model of the last person who tried to save capitalism was franklin d. roosevelt, and he took significant actions, reduced mortgages and he was being pushed by a much more activist populace than we tournamently have. although the "occupy" movement sort of represents that sort of change. but i would personally like to see a tax worldwide put on speculation and many other, but we -- if wore going to say capitalism, we need to make grass stiff moves and save peoples' homes. >> guest: i just wish some of these free market fundamentalists would let us save capitalism. some of them are in the way. the fact of the matter is a

transaction tax makes sense for a number of reasons and i agree with the caller. i think that excessive churning, a lot of these computer generated trades that really nobody is thinking them through, just computer -- just a certain algorithm that is hit so buy or sell decisions are made in an instant. i think we would get a lot more thoughtful market if there were a transaction tax and then we could but that to good use. let's start by helping people remodify their mortgages. >> host: we had handearlier caller that commented on the susan g. komen -- on the washington post we hear there have been senior staff people have resigned over this. it seems to be picking up steam. what interests you about this? >> guest: i actually do take issue with the earlier caller. i respect his position that, you know, if they're doing basically the same thing they were doing

before, they withdrew their money from planned parenthood, what does it matter? well, the think that gets me it seems like their decision was made for political reasons. and i think that women's health shouldn't be a matter of partisan political bickering. we should fund women's health screenings, whether they be cervical cancer, mammograms, all these things are important, and to try to apply a political litmus test to planned parenthood and then make a found decision based on that i think is extremely unfortunate. so, it is going to be a big issue. i can tell you in my district in minnesota, my people are concerned about it. mayor bloomberg in newark said he would make up the funding gap. i just hope that women's health does not get politicized. there are literally millions of women all over the country who have benefited from help they received from planned

parenthood. no government money goes into abortions from planned parenthood, and i just think it's too bad that komen -- the susan g. komen foundation allowed them to get caught up in a politicizing what i think should be focused on health, not politics. >> host: mt. verben in new york is up next. you're on. >> caller: good morning. >> guest: good morning. >> caller: the problem i see is that the subprime mortgages were -- all you had to have at the time was a pulse. you didn't have to be -- prove you had money. didn't have to prove you had a job. we went to closing, had nothing, walked out with a house and money. >> guest: i agree. >> caller: then when we get in power, and because the president -- all you talked about for two years was healthcare. you have to buy healthcare. howow going to buy health healte

you ain't got a job? how can people uplift themselves, and the government doesn't have a way to make money other than to tax people. that's the only way. >> host: thanks. >> guest: richmond, let me tell you this. i wish that there was only one problem for us to deal with in congress. i wish we could only focus our attention on the housing crisis but we also have a healthcare crisis. we have 50 million people without any kind of healthcare at all. people going into bankruptcy because of medical debt. problems with the healthcare system. and we also had questions about national defense and civil rights and all kind of things. and, so, when you make the case that the government should not have focused on healthcare but should have focused on the subprime mortgage crisis, i guess it would be great if we had the reductionly of -- luxury

of dealing with one problem at a time but we don't. >> host: i have a question from dave in minneapolis who says i have owned a few homes in my life. i always had to pay mortgage insurance. who did that money go to and who did it protect? >> guest: good question. it went to the insurance company that charged it and who did it protect? i guess we'll have to -- that's a question we have to dig in. it should protect the person who is the insured, but i guess you're not asking me that because that's an obvious question. the deeper question is who did it really protect given the enormity of the foreclosure crisis, and that's one of the things i hope we can dig into and -- because there are people who charged mortgage insurance and didn't get the full benefit of that. who really got paid with senate and that's one of the things i hope we can dig into. >> oo as we close here, the president's proposals need to become legislation. what do you see --

>> guest: i'm an optimist by nature. i believe the democrats and republicans will get together and address the problems the american people are facing. which housing foreclosures is key among them. unfortunately this week we have dealt with trying to take away long-term car protections, telling cbo how to deal with jobs. unfortunately this week we haven't gotton to the heart of the problem but maybe next week we will, and i believe everyone in congress are there to do the right thing for their constituents. i'm going to keep on expecting that, and i they don't i'll be disappointed and i'll say something about it. but i'm ever hopeful.

>> giving us a lousy foreign policy, a lousy budget and a lousy recession. but what is happening is in the grass roots, people are beginning to realize the problem is too much government. we need more personal liberties. [applause] >> if you are prepared to do what it takes to make sure that we change direction, not just the presidency, but the congress, the bureaucracy, the judges, the policies, so that the entire system gets on the right track, so that america can give our children and

grandchildren a more prosperous, a safer and better future. this is how big the gap is. [inaudible conversations] >> this weekend, book tv and american history tv explore the history and literary culture of

beaumont where the texas oil industry got its start. saturday, beginning at noon eastern on book tv on c-span2, the challenges of running an independent book store. also bowmont author thompson on teddy roosevelt's year-long expedition to africa and europe, and january 11, 1901, the lucas gusher at spineltop hill helped usher in the petroleum age. and with the oil came the rough necks and with rough necks, vice, and in the dixie hotel, decades of gambling, prostitution, and other crime thrived until a crackdown. this weekend on c-span 2 and 3. >> we have more reaction to president obama's proposed mortgage refinancing plan, this

time from a house republican. this washington journal segment lasts 45 minutes. >> host: so meet congressman republican of arizona, member of the financial services committee. looking to continue our conversation about the recommend for the housing crisis in the country. arizona had been particularly hard hit. how is housing faring now. >> guest: arizona was walloped in the foreclosure. a lot of that was we overshot and a lot of investors that came in, and when houses stopped appreciatating, they were abandoned. a lot of bad loan products. i'm actually very optimistic. looking at the multiple listing service last weekend, we actually saw certain price categories, basically under $200,000, there was almost a shortage now of properties available, and this actually gets interesting into the policy

side of this. you have lenders, fannie mae, freddie mac, which have inventories. there's a need for those inventories to come to market and be sold because there seems to be a very active sort of first-time home buyer investor market in arizona, and everytime they buy one of the houses, they buy carpet and stripes you see some velocity in the market in the neighborhood that have been most hard hit. >> host: we're awaiting in six minutes for the unemployment numbers. how is arizona faring? >> guest: i think we're getting better. we have actually had success with businesses migrating into the state. some of that is because of policies we're seeing in california. we just picked up another bank moving operations into arizona. and we're working very hard to make arizona business-friendly. it's -- and it's nice. our congressional delegation working with the governor, we have run around with our signs

that arizona is open for business. >> host: so we invited you here for among other reasons reasonst the president's announcement of the refinancing plan for home owners who are under water, allowing them to access low rates in the market by playing the closing costs, which has a price tag which he proposed being paid for by fees to the bank. >> guest: the devil is in the details and we're still waiting for getting all the mechanical steps. remember, this is now, what, the third or fourth version of one of these proposals, whether it be harp or others, and they have not been particularly successful. one of my great concerns is, how do you take folks who are right there on the edge, truly struggling to make the payment, but because of their negative equities they almost have no access to refinance. what if there's someone who their loan isn't held by fannie mae or freddie mac but it's held

by a private label loan, so we do have populations out there that cannot be helped by a lot of these programs, and i wish we were doing a better job of doing everything sort of as once. >> host: what's the objective ultimately? there are some people who are happy housing prices are coming down because ultimately when they have jobs that makes housing much more affordable than it has been getting over the past year. so, really, what do you see is the goal? >> guest: the classic case. if you're on the buying side of lower prices, it makes you happy. if you're paying on a mortgage and now you wake up today and that loan is worth more than your house, and you have negative equity, it's devastating to your personal net worth. i will tell you, housing market in arizona is getting better. we're going to have years of sort of certain price categories grinding it out, and when we look back, i think we're going to look and see the way some of the mortgage moratoriums were done, the foreclosure

moratoriums were done, and some of the other government policies. we've taken what really was a three-year housing depression and policywise made it a six-year, with -- in our attempt to help actually slowed up the cleaning up of much of the excess inventory. >> host: what specifically? >> guest: a good example is we did some charting of when there would be -- a year and a half ago, foreclosure moratorium, saying we're not going to foreclosure on houses for the next 90 days. if you watch what would happen pricewise, actually prices went down even more because there was an anticipation that there's going to be another wave of inventory coming to the market. so, once again, our attempt from a government policy, political policy, to intervene in that fashion, made it actually worse for our citizens. >> can we show the clips from mitt romney in our last segment. the gist is he believes the market should play its oust.

we should let communities hit bottom and begin to build back up again. do you agree with that. >> guest: that needs to be the cornerstone. there are a number of things we can do policywise. we have actually worked on policies saying, should there be a mechanic where, itch someone decided they just can't make the payments but they'd like to finish raising their kids in that house, is there a way they can do a deed in lieu and lease back the property? is there a way where even though they're negative, they could step in and participate in today's interest rates? the devil is in the details, and here's something people forget. you may be making a payment, but there's someone on the other side receiving that payment. so, if you're the teacher's retirement fund, or your pension may be the one that is receiving the payment from that loan, and so we get -- you and i get to refinance and benefit, and we hope it's a good thing.

we hope that helps you stay in the house but the pensioneer is going to wake up tomorrow and they're interest rates are going down. so it's not that you created a new dollar in the economy. you just shifted the dollars. >> host: lots of people anxious to talk to you. begin with indiana. john, you're on. >> caller: i just wish all this republicans and the democrats would quit lying to the american people and blaming the banks for the housing problem that was everybody in congress that deregulated everything and let all the problems come here, and went for the epa and all these other policies they want to put in place we would have jobs in the united states. you could create jobs like a light switch. just start to make -- quit trying to tax the american people, the rich, the poor, and everybody.

let congress take the pay cuts do away with their healthcare and straighten this house. it's all you guys and your stupid policies that caused this problem. >> host: john, thanks very much. riled up there. >> guest: john had his caffeine this morning. the problem is he is actually partially right. a lot of the economic disaster is because of governmental policies, but as we have all learned it's more complicated. and we often have these discussions saying if you would do this or that to try to have folks get this head around the scale of the debt, the size of the problem, a good example, do you remember last summer the president would over and over do press conferences, and we need to stop these inventives to buy corporate jets. fine. if that were to actually cover about 15-18 seconds of borrowing a day. it was purely political theater and that's one of the great sins of washington, we engage in this

political feeder rhetoric and not good math. >> congressman has an mba from arizona state university. he was an arizona state representative and treasurer of maricopa county in 2004. next call from joe in independence. are you there? >> caller: hi. how are you. >> guest: morning, joe. >> caller: i just have a thanks for c-span and susan. >> guest: that's may be about to get too personal. >> caller: no, not at all. i would just like thor take more phone calls and less tweets because she can pick and choose on the tweets she would like to read and i'd like her to take more phone collogues okay. >> i'm listening. your question, sir. >> caller: that's it. you can see the bias when somebody picks and chooses the tweets to read, and as far as the congressmen go, i mean, come on. look at the situation this country is in.

really. real ly. >> guest: having been on c-span a handful of times in my life, they're very egalitarian of the tweets and the messages and the phone calls. it is random. and that's actually one of the joys of doing this. you never know what's about to come in on the call. >> host: i'm going to use a tweet from the dfw, asking representative, what are we doing to return homes to people who were illegally foreclosed on when their lender couldn't show legal tight toll -- tight toll the property? >> guest: you have to back up. within the mechanics of -- when the documents, the lenders did not have the documents -- there's actually litigation, also been whole new standards being set up for the services. you end up with a very interesting mechanics there on

the robo signing. was the debt owed? was the debtor actually making payments? so you start to get into the technical thing saying, the lender didn't actually have the paperwork properly lined up but, yes, the loans were delinquent, and the money was owed. what recourse does the person have? and a lot of that has been unwound around the country and there's much stricter, much more disciplined practices with the new servicing standards published out of fannie and freddie several months ago. >> host: our producer is telling us that the employment numbers are out. the u.s. economy added 243,000 jobs last month, and the unemployment rate has dropped to 8-point -- 8.3%. was 8-point 5. according to the bureau of labor statistics. drew have a reaction? >> guest: yeah. absolutely wonderful. but i always have this great concern. the number we like to track out

of our office is employment participation. how many of our friends, neighbors, are actually in the work force? it's a great concern to me that so many of our very productive workers have basically quit, and that starts to create a shadow in those unemployment numbers saying, yes, we may by tracking down but a lot of that is because people have given up. >> host: next up, maine, paul, democratic you're on the air. >> caller: i want to say that i'm encouraged by the employment numbers but that's not why i called. i wanted to share with you that when we bought our first nome the late 70s, interest rates were rising, and i'm just wondering if used like to comment on how the federal reserve keeps flattening rates and this gives no one motivation to buy a home. i can recall there was a race to buy homes because interest rates were rising before the next guy bought it, and also locked in rates. we fought hard to lock in our

rate when we paid a mortgage of 8%. so it's not interest rates that are necessarily encouraging people to buy homes. >> guest: i'm confused. what year was that? >> 1978. >> host: 8% was actually -- sounds pretty low for back then. i remember it being double digit. >> guest: i bought my very first house in late 1980. i was very young, and i think at that time i was paying 12-14% interest. but in many ways what you saw was bad public policy and bad economic policy because the rise interesting rates because of that inflationary cycle we ran out and bought, and in many ways it perpetuated the cycle and you saw what happened by the late 80s when we went through another brutal cycle with the resolution trust corporation. my great fear is we're in a cycle right now where we're living on artificially low interest rates. so very little incentive to

save. and some of this is because of the federal reserve policies pod also what's going on in the middle east and europe. massive amounts of capital has moved into the sovereign debt market. when will this change? when will we start to see those dollars migrate back to europe? and how much trouble will we be in when interest rates start to go bark to normal? are we almost creating a bubble on the reverse side now where it makes sense to go into debt because interest rates are so low, they start to migrate back up, and all of a sudden we hit the low there. so artificial -- money is price. and one of the concerns is when you have artificially low interest rates and maybe -- you end up paying a price for it and often the price is inflation.

>> host: next up, a call from georgia, an independent. you're on the air. >> caller: good morning. actually i'm a libertarian i want to correct the record. i was listening to representative ellison and it's great to see a congressman who actually understands the concept of the elasticity of demand. he tried to portray the general sis of the housing bubble as being created by the private sector when that is 180-degrees the reverse. the low interest rates promulgated by the federal reserve and coupled with encouragement by government, democrats and'mans to increase housing purchases by people who shouldn't have been buying houses in the first place, led to the market to respond to that and the market will respond the market. if it's government created or naturally created be the free market at it going to respond. so i'm not going to apologize

die apologize for some of the things they did. the subprime things were terrible and the creation of these subprime mortgages and what the rating agency did to help promote those was all bad. the general sis of this was government. it was not the private sector. and that's the point that needs to be brought out. it was totally wrong to promulgate an act like that. thank you. >> guest: look, i'm actually leaning towards your conclusions. government policy often creates incentives and disincentives and if you look at policies going back -- actually for the lost 30-40 years but particularly in the last decade, where there was encouragement to pursue the american dream and make homes affordable and make -- and have lenders sort of put aside part of their loop portfolio and have that offered out to folks that would have much more difficulty paying those loans; there's no

question government policy promoted and blew up much of the housing bubble. but we actually see that with government policy in many things. certain things in the farming world and corn-based ethanol and many others where if you look at government policy, maybe with good intentions that we create artificial demand and therefore, when you do that, you're going to hit a bubble. >> host: here's more details from the bureau of labor statistics. total nonfarm payroll rose by 243,000 in january. private sector employment grew by 257,000 with the largest employment gains in professional business services, leisure, and hospitality and manufacturing. government employment was little changed over the month. >> guest: it and would be interesting to take a look at the breakout on the manufacturing numbers, and see what categories and how much of that is export manufacturing. >> host: i believe auto industry

is -- yep -- well -- >> guest: it's a little earl to get all the tabs on it. >> host: employment and retail trade continue to trend up. job gains in department stores, permanent care stores and automobile dealers who are up 7,000. >> guest: terrific. >> host: it's not manufacturing but the retail side. massachusetts, republican, you're on. >> host: are you there? >> caller: yes, i am. i just wanted to bring up -- i'll make my call very short and very quick, but there are several -- i've been a mortgage banker for 30 years so seen two or three different ups and downs of the cycle over that period of time. the government programs that are currently in place are referred to a due5 plus and an open access, one for freddie mac and one for fannie mae. the big problems we have are the current guidelines on the programs and i will just give you a couple quick examples and then you can, i guess, react to it. one of the first is there's a

fico score requirement on both programs, usually a minimum fico score of 720. which means that if anyone has had any type of late payment in the last year or so they won't qualify for that. in addition to that, you're not even allowed to be eligible for that program unless your mortgage existed prior to march of 2009. meaning that anyone who has taken a mortgage within the last three years is ineligible for the program. in addition to that, if during that time anyone had taken out a first or a second mortgage, they're only allowed to refinance the first mortgage. in other words, they're not able to consolidate the two loans together. and one last program that is an issue is the fha program. there is a streamline fha program that has been put in place to allow fha borrowers to

refinance along with reduced documentation but instead of being able to transfer the existing private mortgage insurance policy they got a couple years ago that only cost them roughly a half of a percent, when they do renew that, they're now being charged almost triple that or 1.15% of the new fha policy which makes its difficult for them to qualify under the guidelines that require a certain reduction in the loan interest. >> host: can i jump in there? >> guest: this is actually a discussion we had in our office literally every day, and our office in arizona has a couple people that literally their life is spent in helping folks do everything from short sales, deal with refinancing, who have to navigate through these rules. if you -- you're making the argument why often the government sponsored programs become mazes.

let's touch on one or two things. understand what's going on at fha. fha has had an explosion of its market share. fha is supposed to be holding 2% hard capital to deal with loan losses. fha program is substantially a loan guarantee system. today they hold .24%. so less than one quarter of one% in hard capital. so, our great fear is, if there's a blip during the housing market of fha loans, all of a sudden now fha is going to require a bailout. so we're walking the razor's edge on a couple of these programs. the ultimate solution is we desperately need a private market to once again be up and running, and out of our office we have been spending months trying to put together what would the rules look like and what are the flexibilities and the mechanics and the visibility that -- someone giving the home

loan would need for the market to look. it's been a fascinating experience because you learn -- as soon as you think you have it down, there's one more issue you haven't thought of. >> host: next is a call from albany georgia, a democrat there you're on. >> caller: thank you congressman. i have a question for you. you kind of touched on it before, and it was concerning turning the properties that are about to be foreclosed into rental properties. and i think that's the way to go to take some of these house off the market, and filling in the blank that you could have would be that you offer the people a long-term lease, and the lease would expire, you say, in five years, or when the property value is equal to what it onlily start -- originally started out

to be. then the people have to option to either sell the house or they could get a mortgage again once more on the house. so i was wondering what you thought about that? >> guest: you should be here in congress. you're talk bath proposal that we're working on variant of that. there's one right now i have great enthusiasm for but we don't know the details. it would be for fannie and freddie to take much of their inventory -- we believe they hold 200,000 single family home around the country that have already been foreclosed on, and let face it, government isn't a particularly good property manager. and the discussion of, how do we sell these houses? we get these back in the hands of the community? and tear actually having discussions should they sell them in larger blocks with a restriction of at least for the next year, homes need to be rented, and part of the mechanics is when that happens, assuming the rules to be -- the

house has to be liveable, fixed up, cleaned up, need a new roof? so, that -- so the other thing is, if someone is going to get foreclosed on, and it's just going to happen and we don't have a mechanics to fix that, should they be able to say, look, here's the deed so we're going to save you the foreclosure expenses, we would like to stay in the home, we'd like to raise our kids, stay in the church we -- the neighborhood is the same. but with that here's the rules we'll operate under. the devil is in the details. we tried to make it look how does the income stream take care of the investor side. you don't want to create the moral hazard of causing a cascade of folks saying i'm not going to pay my payment so i can stay in any house with a lower price. so we've been trying to put it together.

>> host: presidential politics. the nevada caucuses are this weekend. we'll have the candidate speeches on the network after the results are declareds night....

added a seat. there's been redistricting and people are wondering whether or not you might face an incumbent >> guest: we hope not but it's always topsy-turvy. arizona has a redistricting commission that if you look of the work product they produce with anything but independence and there's still a chance the legislature from the court action or lining and and so sort of chongging to venture hosam stand. right now there's all the different districts and ben is actually a friend of mine since the freshman from similar areas but we've now been put into separate districts but as we see in many parts of the country there's often a decision saying i'm willing to pick up and move in the different starts in the office and what is the new district is new to us who knows what is going to look like a month from now.

>> host: how do you prepare? >> guest: basically we try to organize and try to have everyone understand there's parts of this we don't control and you accept it as it comes. >> host: if you end up facing what will that be like for you? >> guest: i actually think he will be very interesting race because they are there more ideologically and i really carvin to the mechanics of the great detail which if you are a policy wonk is good choice. >> host: we are talking about politics. if you haven't seen it yet, roseanne barr, just a comedian and the political story has announced her candidacy for president in the green party. the green party nominee will be selected at the convention in baltimore in july. next up is -- [laughter] >> guest: you've got to admit you have to love american

politics because if anything it is entertaining. >> host: los angeles, tom independent for david. >> caller: good morning. representative, a realtor and in addition to that i've been able reader for the california association of realtors. i'm also an expert witness certified by the superior court. one of the things the people in washington don't seem to tell people is when a bank and gives a loan, that loan is structured to be resold. structured to to be resold to fannie mae or freddie mac. they are the ones that set the criteria. if there is a deficiency that is where it lies. it's not the bank. number two, we have a mortgage based economy, and those mortgages were sold, they were

like gold. there were a lot of problems and dishonest dealing that caused part of the problem. number three, i have access to the multiple listing service. i have thousands of listings. there are so many short sales you cannot believe. when we pulled the information from the title company we get the last three, four or five-year sales and you will see people who've bought property, refinanced, bought property, refinanced, they were bailing those people out. when you make a contract, you say that they are going to do something. you are responsible for your actions. i understand people lose their jobs that's something we can't do anything about, but we shouldn't be bailing people out. there is a restoration trust --

>> guest: the resolution trust corporation. and i shall also tell you i've personally been the real estate business for 30 plus years. my specialty has varied over the years. when you speak of issac jolie -- one day this might be a bit geeky but it's worth an entire show is to talk through the process of what happens when you take out your home loan. what loans are actually filled by a lender which is a tiny percentage. before the real estate collapse we actually had a very healthy private label market that would collect the loans and mortgages depending upon the parts of the country and package them into bonds and sell them. today what's happened is fannie mae and freddie mac and fha now represents in the high 90% of all loan aggregations and bonds

and it's actually very unhealthy because you end up with a government where you are insuring your neighbors loan or instead there is private insurance and other ways to the mortgage insurance. we also have to deal with policy issues we've to put 10% down and pick up the loan and promise the investor who may be a pension fund or someone else that that is the deal on your home loan should you be allowed to take that 10% of equity of. okay. you have to get the permission. then what happens you have no equity left in the home would does that mean to the value of the bond this is a multilayer bit of financial work that affects every homeowner. post we have about seven minutes left to be the one to get your reaction as a member of the financial services committee.

the of the story in "the new york times" this morning the fcc is avoiding tough sanctions for large banks. saddling fraud cases nearly 350 waivers of penalties for wall street over a decade. here's what they say. even as the security and exchange commission has stepped up its investigation of wall street in the last decade, the agency has repeatedly allowed the biggest firms to avoid punishment specifically meant to the price cases. an analysis of "the new york times" on >> guest: i've seen the article but i haven't seen the details behind it. my understanding is some of this may be an investigation that happened last year of an action that happened almost a decade

ago you are in an interesting position. desperately wanting the banks to start doing more lending, more velocity in the economy. at the same time, it is if the sec were to be maximizing the sanctions, japan effect would that be for the economy? if a lender or any organization spoke in the law or has done and maliciously they need to be penalized, they need to be punished for it is something where they also brought the information to the regulator is that look, we fixed the way. they are no longer sending to the expanding you have to take into consideration. but sometimes we find top line stories like that that details when you break down what's gone on don't really hold up the headline. >> host: congressman schweikert is with us until the top of the hour. with us now is for or in georgia. a republican. good morning, george, you are on. >> caller: i have to agree with the last caller.

our government should not be bailing out people that are losing their homes. my own little personal look simple. no properties were moving in the city at all. i had a property and when i worked in the bank that tried to refinance purchase they told me my house wasn't worth of the amount of money that i paid for but the guy down the street but his property for 50,000 less than people would pay for their homes. immediately the joost that foreclosure property and they said well, all the property on this lot are only worth $148,000. the guy down the street just sold his for that much so your home can't be worth 225,000. >> host: but me bring you to your point. why do you believe then there

shouldn't be assistance for people in that situation? >> caller: there are two things. one, people have already lost their homes. second this system is set up a responsible and when people get in over their head in large amount of debt and can't pay their bills it is an easy loss. >> host: let's get your response. >> guest: a quick example but gets a little geeky if there is one fluctuation on your street and that is the one off real-estate transaction, that should not have been used as your appraisal value. and hopefully your lender that you are working with the to the opportunity to appeal that or gave you the opportunity to find other market appraisals. i used to share the state board of equalization which is to basically be the appraisal evaluation court in arizona. >> host: different question as we close out here. i'm not going to use a clip appears the headline from the

street. eric holder yesterday before a darrell issa's committee. holder house republican star over fashion theorist this is a town in arizona. so are you -- do you agree with the criticism of the justice to prevent? >> guest: if you have to agree with the criticism of the justice department. when you understand -- and this is in our backyard and arizona. so we take it a little bit more personally. and when you hear the story and the heartbreak of brian terrie losing his life but they are not popping up on both sides of the border. we've already had our federal attorney in arizona resigned over this. we now are hearing stories that folks who've been involved from arizona need to take the fifth amendment and that is because of the possible incrimination. it's amazing that we are a year into these types of hearings and still document some happening. how could you not be frustrated

with this? >> host: the last call for you. kansas city. patrick, a democrat. you are on the air. >> caller:, this man, the problem is investors can't buy these homes, and regular people cannot buy homes that are in fair condition. if you guys resolve that problem all of these homes would disappear off the market in no time. if this is a simple solution i don't know why people are over thinking it but you need to release the investor. when i say that i mean allow them to borrow money from the banks or release the average citizen to buy a house that is for clothes on because the house is going to need repairs. an average person cannot make repairs on the home. >> guest: your name is patrick, right? >> caller: that is correct. >> guest: patrick, you hit the nail right on the head. the value for this velocity in the market when on buy a house, you buy a house we've run down

to a local home improvement store, we buy things, we fix it and leave fifth that have already been foreclosed on. we didn't even sell those folks are going to use them and the velocity of folks it's a great irony is actually a couple of neighborhoods and arizona that have been incredibly hard hit by the foreclosure -- >> we will leave the segment to hear from the u.s. air force secretary michael donnelly and the chief of staff general norton schwartz speaking with republicans about how the pentagon's budget proposal will affect airports. >> we will turn it over to the secretary for remarks and then is your questions for about 30

minutes. secretary? >> thanks. good afternoon and thanks for joining us. i wanted to take a few minutes here to outline the air force priorities and choices that we have made in response to the new strategic guidance, and also in response to the air force piece of the budget control act. and the work has been done over the last several months and chairman mt's leadership with a lot of dirt and put as well from the president along the way. as you may know, we issued a white paper on wednesday which summarized, so that is available to you. and there's also a longer paper that's been published today that describes the four structure changes made in more detail. we have made some hard choices

to closely with the new strategic guidance in our fy 13 budget submission. our decision for the air force was the we were better off and the dutch course of action for us is to become smaller in order to predict high-quality ready force that will continue to modernize and grow more cable in the future. as we had to balance for structure, readiness, modernization and certainly support for air men in that mix, and the was the balancing the we did, the choices the we've made. we've taken along the way a number of steps to protect the distinctive capabilities that the air force brings to the table, consistent with the strategic guidance we receive some capabilities that join the coalition and partners have come to depend upon from the air force spare to the two air and

space control in particular, global intelligence surveillance and reconnaissance, global mobility strike and all by effective recognition of the growing importance of cyber. we've also protect along the way so bomber force, the remotely piloted aircraft. plans are now set at 65 caps with the capability to surged 85. we have resized or mobility forces to match up with the changes in the overall size of the joint force. we've projected space and we've protected cyber capabilities and also nuclear forces along the way. the president has noted that there is a possibility in the potential for being able to

fulfill our nuclear deterrent mission at smaller numbers, but those issues are still pending at the white house so we have made no changes in the nuclear forces. we will of the president decide the way forward in that area leader. our force structure changes include the reduction of 286 aircraft over the future years stevens plan including 123 fighters, 133 mobility aircraft, for 30 of ksr platforms. our smaller force structure has led us into favor divesting fleets, smaller fleets that involved the specialized training sustainment for costly and in some cases sustainment. we are changing and emphasizing the military role and

capabilities that would provide for the operational flexibility across the spectrum of the conflict. and for those remaining forces for the additional emphasis on the common configuration for the remaining fleets which will again give us operational flexibility. all of those structure changes yield the reduction of the 9,900 personnel that's 3900 active duty and the 5100 guard personnel and 900 reserved. we've carefully balanced our reserve component changes to make sure that we can meet the demanding and sustainable tempos that are part of the strategic environment going forward. so we can meet the search capabilities and the strategic guidance. we can also meet the sustained

operations at a deployment rate but will not overstress the active force, will not overstress the reserve components as we go forward. we are fully committed to our total force capability. we can't do what we do without our guard and reserve and active components all working together. so we will get smaller together. but as we get smaller, we will get more integrated together to and the number of associations between the active and reserve components will go up from about 100 to 115, and we expect that number to go higher as we get into fy 14 and beyond. in the context of the structure changes, there are multiple units affected and just about every state will be affected by

the aircraft and or the manpower adjustments that go with these changes. in a number of cases we've taken mitigating action by remission in units from aircraft to the remotely piloted aircraft missions for example. we've moved some aircraft from the active forces into the guard or reserve and in some cases the unit size will increase in the reserve component as well. but in general, we are getting smaller comes to these litigations will not cover all of the units at all locations. >> our intention is to protect their readiness at the force level. we are still working through the negative effects of over a decade sustained high operational tempo and that is the impact on the force in terms

of the aging equipment, lost training opportunities and the stress on our personnel. so we are still working through those issues. we put the fund is where we think they are necessary in the programs of course and the weapons systems sustainment. this bares watching and going forward we are committed and all the service secretaries jeeves leadership is committed not to allow the forced to go all of. we are slowing the modernization, but we are protecting programs but are critical to the future air force capabilities and you've heard the deputy secretary address some of those. we protected the long-range strike family of systems and in particular the bomber program. obviously the tanker program would follow on gps and other programs as well.

as part of the management decision, the f35 program we've determined that we are not ready to ramp up to the full rate productions and depress the rate of procurement in a few years while we work through the concurrence the issues still present in that program but we remain fully committed as the deputy is outlined all through variants. this is a must do for the armed forces to the it's the future of the fighting force not only for the air force, navy and marine corps also what 12 other international partners as well. we continue to support our airmen in this endeavor. and i won't go into detail on the personnel adjustments the devotee and vice chairman have already covered those matters

adequately at the dod level. but we do rely on the ability to retain a high quality force and this is extremely important to the air force and because the technical nature of the work that the airmen did we need an experienced forced to do what we did. we need to remember they are the ones to bring all of this together for us and make it all happen for our air force and for the nation's defense. so, tough choices in the middle of this this is hard but manageable. this increased risk as the chief can better articulate than me but this is manageable and provided further reductions i think the deputy has been articulate and of the secretary as well that further reductions

beyond what the department is facing currently in the $487 billion from the previously planned levels would cause us to have to go back and revisit and wouldn't be able to execute the new strategic guidance levels lower than our velte program. so, with that, let me open up for questions. >> you mentioned this is going to affect all 50 states. are you worried about putting resistance in congress and the guard reserve, state government, and if so, what are you all going to do about it? >> we will certainly work through those issues and with each of the effective delegations. the chief and by among with other service secretaries and chiefs. but the air force team has been speaking to congressional staff today and we will be talking with effective delegations in

the weeks ahead. today general mckinley and the director of the air national guard, general why it or breaching the general, plans, so we are being as transparent as we can in all the changes that we have made. our guard and reserve partners have been in trouble to this work and we identified and worked through the remission of units affected by these changes. >> i have a question for both of you in terms of the slowdown and how it will affect the at 35. i noticed that you said you are going to be working on a detailed plan that you are not -- you haven't determined the production yet. does that mean that you are coming off of the targeted

number that you were planning for them? >> first, the key thing is we have committed to the surface life extension on about 350 of the f-16. some structures in their early airplanes and the more extensive structure in the avionics improvements on a more modern airplanes. and things will populate both the active duty and the reserve and the guard components, and the issue with respect to the f35 is that obviously the plans are not delivering as quickly as we originally anticipated thus the requirement to posture the related forest to make sure that we retain the capabilities we need until the f-35 delivers the numbers. with respect to the question of, you know, total inventory, that

is 1763 is the program of record. please recall that by 2017 we will probably have a delivery of around 160 or 170 f-35s so that call as well into the future. >> general schwartz, when you talk about how the air force plans to turn 10,000 airmen in fiscal 2013 that is obviously causing a lot of consternation among the readers. i know we are very early in this process, but we owe them an answer as to how these cuts will be made. so i pose the question to you and the secretary how do you plan on putting 10,000 people next year and do you expect involuntary separation measures to be taken? >> i don't think that we will need the involuntary separation measures.

we are in very decent shape now in terms of our active duty force arrangement. we will see what happens. but right now, we don't anticipate risks to the nature of your question. on the the guard side, there are significant reductions involved here and we will be asking congress for legislative authority for force management tools like those that we use for the active duty to help the guard work through shading underway that is in sight of the air national guard as part of this process. >> good afternoon, gentlemen. every time the air force has faced difficult choices like this, you lacked and i know you've seen and heard all the

arguments. as you look at the operational need for the close air support, can you explain to us how you're going to bridge this and perhaps tell us why you are not going to have to 18 months if some other situation pops up you're not going to have to rule them out again and moved folks back in? spec with a 102 a-10 and there will still be 46 left in the inventory and please, recall we are doing the close air support with the b-52, with b-1 and certainly with the f-16 and f-35s. and the ac130 gunship. the bottom line is as remarkable their plan as the a ten, it isn't the only machine that does close air support and in the united states army and the united states marine corps in our own battlefield can rely on

having plenty of close air support provided by the united states air force. >> i'm sorry, they are allowing you to get around this? >> certainly precision guided munitions of all varieties both gps guided and otherwise to enable that without a doubt. >> i want to follow up on that question in regards to close air support. the a-10, you mentioned the b-2 one come a-10 is the most cost-effective measure in which the air force can provide as well as one of the most effective just generally. can you talk about why you did choose the a-10 to go along with that verses the b-2 which is so much more expensive for the air force to employ. >> the question is how many rules and a weapons system

fulfil depending upon what even sure devotees unfold and what contingencies we might face. and as you get to a smaller force, one of the imperatives in our view was to maintain versatility, and in order to do so, that implied if you have airplanes with a narrow range of kiddo these to -- capabilities that you defer to the capability, then that is what we've done to be and i emphasize again we are not talking about eliminating the a-10 capability. there will still be over well over 200 aircraft in the inventory. protecting the force can you elaborate that means? does that mean -- how big of a force to you ambition -- when will that be started?

>> they are in this year and in the 13 proposals there is a reduction in the structure. there was minor reductions in 12 but not in 13. there's a recognition in the strategy that has to make the shift from the focus on the gulf area in iraq and afghanistan through the more maritime focused asia-pacific requirement that a long-range strike in particular becomes increasingly important and so the department can to the conclusion that it was best to retain the existing bomber force structure and emphasize the new program, one component of which is the bomber command use all i think a very compelling commitment to that capability knowing that we

intend to fulfil and deliver in the mid-20s. >> general, if i could just a quick follow-up, and i'm guessing that you will be able to help us with this but to andrea's creston can we get a number associated with the cost to get those f-15s operating to the number of years that you expect the? and then on a larger scale i interviewed a the generally couple of years ago about the aircraft production and he had said back then that they were going from low to moderate risk to moderate risk of accomplishing certain missions such as attacking the aerospace and incursions' in the u.s. aerospace and the air support which we discussed. how the risk scenario changed of the increasing the risk from just two years ago or can you put a little definition of what that means? >> right. i think the bottom line is that

there is some additional risk relative to the 250 aircraft that we retired in 2010. there are also adjustments in the structure that allow you to make some of those reductions. but i think the bottom line is again we've done is responded to the new strategy with what two years ago was the to the hour footprint -- qdr footprint, this is a different construct and a different set of requirements. so what we are doing is not without risk, but i would characterize it as appropriate risk. >> if i could add just to build so there is some sort of a broad sense for this is the strategy shift a little bit towards asia

pacific. the chief mentioned the long distances which favor long-range aircraft bombers, long-range strike capabilities to be protected and inside of the fighter force structure going forward the need for the aircraft as we go forward, so all of these things mix together in helping shape the decisions we made about which kind of aircraft skin is still moderate risk for higher than moderate? >> it is marginally higher than that was when we talked to the estimate of the requirements also changed a bit in the strategy process in the strategic guidance. >> we will go here and then come back. >> with the short term reduction number does that mean -- additionally are the u.s. went

beginning the f-35s anytime soon? >> we have six airplanes as we speak and we will undertake a decision to start flying the appropriate authorities in the air force it will make that call based on a number of factors including the status of the test program, the reliability of the platform and salon.com the plan will be to start flying, not training that start flying test qualified aviators initially to do what we call local area orientation, local area operations, and we will build to a threshold which will allow the training leadership in the air force to declare ready to train with others and test qualified aviators. with respect to the f-35, again,

the situation is that we are managing, currency on this program, and we will bring -- we are eager to bring the f-35 on board when they are ready coming and clearly the management part in this is hitting the sweet spot which allows you to acquire airplanes but not so many that you have to go back and modify them because of what you learn in subsequent tests. right here, sir. >> on the fleet program in particular you'll discover the cancellation of the camp program and its replacement with the more on a limited that great. can you describe what capability he would be getting up in that new program and how that will affect the smaller?

>> part of this -- the reality is that the and program was to revamp the cockpit and introduce automation and communications and navigation equipment and so on and so forth. in a different era it was an attractive approach, but in a more austere era and now knowing that many of our european partners have pursued less ambitious, but sufficient cockpit modifications, this simply became an affordability issue for us and so we will pursue a modification that does what is absolutely needed with this communication and navigation such that we can comply with the international civil aviation organization requirements.

>> i want to ask about the penetrator secretary leon panetta acknowledged there are shortcomings with this program. i'm curious if you could elaborate on those concerns and tell us if you have the conventional firepower to strike iran's facility if needed. >> i'm certainly not going to speculate on a hypothetical instance. and again, i don't think it should be a surprise that we seek to have in our what in inventory capability to defeat hard and very deeply hardened targets. >> can you tell why you need 85 million more in this program? >> there are f-35 for example, the a 120. over time we have approved it for several versions, c5, c7,

8120 and so on. this is true even where we did improvement on the guidance kit overtime. this is what i would call again achieving the right level of capability such that you can use weapons like this for others where either technologies become available or techniques to improve the reliability for example. so the bottom line is this is not unlike any other weapon in our inventory. >> you are not willing to upgrade in iraq? >> i don't think i am, you know, to put it bluntly. >> chairman dempsey has talked about having the force in such a way that they can rebuild a fairly quickly. could both of you please talk

about how you would rebuild the air force or expand? >> a couple areas where we were putting additional focus and talked about the importance of the total force going forward. as we go forward, again, we are going to get smaller across all three. we need to get more closely integrated command to be more ready for the contingencies out in front of us. i think that libya is an excellent example in terms of readiness and in terms of how quickly requirements for the air force capabilities can emerge. we didn't have months to prepare for us and we really didn't have weeks to prepare for that. was more like days and hours. we were bringing the total force together quickly to produce combat capability over libya within hours, and then to generate that capability with our nato partners and sustain

that for nine months. you can't do that if you are not ready. succumb smaller to us in this is the strategic context means we have to be either more integrated and more ready by the force, said the association that we are developing and continue to push forward between the active and reserve component forces is an extremely important part of making sure that we can access and the total use of the total force. >> just a second if i can add one thing with your permission. in a major capital intensive organization like the air force or the navy, that typically takes a while to deliver the capitol. it is important to have modernization programs in training that one could expand you needed to to serve the

notion of reversible the and that is what the tanker is for and the half 35 is for and the long-range strike promise for. >> the army and the marines have talked about about getting back to doing what they do best. how have these budget reductions affected what he planned to do in terms of the balance between demand and the unmanned systems in the air force? >> frankly we didn't get this issue of the balance. but focused in the area for example on making sure with the 65 cap goal that we established our ability to surge to 85. our goal in the isr area have been to consolidate the gains that we've made over the past ten years or so, not necessarily

just by adding more airplanes, but by filling out the training, the education, the sustainment, the can occasion system that goes with this capability to make sure it will be full and robust going forward as the budget start to come down so that is an example where we set the structure and then more focused on filling out all of the details of the capability to make sure it is healthy going forward. >> we are not going back to the 2001 isr footprint. the bottom line is if you want to know what we are good that, we're good at a year and space control, global isr, global mobility and global strike and we will continue to be good at that in the future.

>> gentlemen, thank you. the world's leading economy would be a communist dictatorship. that is in five years' time. think about that. if they are right, the guy that you let next november will be the last president of the united states to preside over the world's leading economy.

>> by 2020 at least have all energy that may be used will come from them on fossil fuel sources. >> we are too dependent on either potentially more volatile places on earth to get. we are susceptible to the supply shocks coming and even if we got them we are susceptible to the shop. when libya, and the libya situation started and the price of oil went up $40 a barrel that

was almost a billion dollar additional bill for the u.s. navy. a billion dollars coming into the only place we got to go get that money is operations of training, so the ships steamed less, the planes fly less, we train our sailors and marines less. >> more with the 75th navy secretary ray naviw sunday c-span2 nd. for those that are not aware of the parliamentarian those around here, he sort of like an umpire in the ballgame calling balls and strikes. shouldn't surprise anybody to hear that we haven't always agreed on those calls, but it's not an easy job to be an umpire for 100 senators. it isn't easy to keep up with 200 years of precedents. >> is the only problem to parliamentarian to be hired by both democrats and republicans.

he started the change in the senate control four times by five different majority leader's. one cannot be ineffective parliamentarian without being fair minded and judicious. he also brings to the job the willingness to hear both sides of the argument and consider every side of the issue to the stomach after joining the senate parliamentarian's office in 1977 and serving nearly 20 years as the senate parliamentarian, speed has retired. he touched his role in the senate. >> there's some kind of a lawyer client relationship that says you want to tell senator b would senator a is up to? >> all of the communications that come into my office are held in confidence. >> in answer to your question, yes, we do have two sides coming to us often simultaneously, and requires a certain amount of juggling on our part to tell senator a as much as senator a has asked us and to tell senator

b as much as he has asked of us without violating any confidence. >> watch the entire interview on line along with other programs about this and that parliamentarians all archived and searchable at the c-span video library. national intelligence director james clapper warned of an increasing risk of cyber attacks yesterday of the house intelligence committee hearing. the nation's top intelligence officials including cia director david petraeus and fbi director robert mueller testified on threats to u.s. national security. this is the second hearing by intelligence officials in a week. they testified before the senate intelligence committee on tuesday. this is about two hours >> call the committee to order, and as the committee we will come to order. i want to thank our guests and witnesses today. first let me thank you for your service to the country and i hope you'll pass on the

committee's thanks to the men and women who serve and to a real work as we said in the intelligence business. please, pass along our admiration, respect and support and a great thanks for what has been a very good year intelligence business for the united states of america and our national security also went to thank all of you since we started this hearing the very fact that we've established i think a very professional working relationship with the community has the very valuable results for the national security posture we had the reauthorization bills, lots of great oversight. we've been professional even when we have disagreed, and i think that at the end of the day that dialogue has been important for the community to move forward and that classified realm. so i think that americans get to see publicly you all here today, but there's that classified work that really makes a difference

for the national security posture, and i think we can both safe from my ranking member and myself we appreciate all of your cooperation in the work we've been able to do. i want to thank the ranking member, my fellow democrats for making this committee a bipartisan effort on national security, and i think that is certainly refreshing and we hope is duplicated around this town. i'm going to get a little bit off statement. i thought the senate hearing was instructive. i thought it was certainly highlighted some issues that deserve our attention, and i just want to cover three issues quickly and turn it over to my ranking member to read on cyber, and i heard some of the comments made in the senate hearing on cyber and they're seems to be a little bit of finger-pointing. we are fighting to front war on cyber and it is happening today. blanka countries like china have increased economic espionage as a part of a national security framework and are waging an

unprecedented economic assault on the united states companies and their intellectual property, and that second and i believe growing threat of a large cyber disruption or attack is on its way because of the exponential capabilities that are growing with countries like china russia was good before and getting better, other countries like iran and others are investing heavily in their cyber capabilities relatively cheap investment and in a big bank for the buck if they are successful. i argued in the classified briefings that we've had discussions with all of you and your counterparts in the working part of those agencies that a cyberattack is on its way. we will suffer a catastrophic cyberattack. the clock is ticking and winding down. i have to say that we have admired this problem for a very

long time. we've made movies about this problem for a while now. we have think tanks across the problem and try to study more and i saw that some of the plane was coming on to the community and i will take exception to that. i think that you'll get in the resources there you have and the authority of today have done a phenomenal job on what is the hardest problem of writing i've ever seen because it's complicated and difficult and the target set is large and growing so i do believe our problem here is, yet to see it, the united states congress. there are some 30 bills, cyber bills out there. we have looked, studied and understood the problem. there are lots of approaches. but at the end of the day, we must act. congress must act. this is the only committee that produced a bipartisan product that is very narrowly focused

and has huge collision support that we believe takes a small step toward least allow that sheet to be covered. i don't know if it is currently covering .mil and .gov and i hope we can find it in ourselves to understand the risk that we take by not taking action and get something done so that next year we can brag about the work that you've done to keep american networks safe. on the reconciliation i want to talk about that in my questions, but i want to commend the administration for keeping the congress will be informed. they didn't do so well on the advice and counsel part of this particular event. in a bipartisan way some very strong conversations about opposition to the path forward they were taking on the reconciliation with the taliban. i think generally the comments were that we were going to legitimize mons the actors that we've been trying to

delegitimize with the afghan people for the last ten years, and it sends a horrible message to the people that have been with the united states and afghanistan limit, entrepreneur some people who believe that democracy would bring a better day in afghanistan. normal afghans don't want to any longer fear and be intimidated in their daily lives. it crosses a pretty dangerous line and a policy change in the united states that i find very disturbing. it sends a horrible message to the world .mil factors that soldiers from prisoners come citizens are now to be treated like commodities. i think it is a horrible precedent and one that this administration strongly reconsiders. lastly, iran, the iran nuclear bomb triggers a nuclear arms race across the middle east. i think of that there is no doubt. kuran .mil irrational leadership

has clearly and simply does not have peaceful intentions. it is clearly a state sponsor of terrorism. it is doing so in a breathtaking pace. iran has systematically involved according to a report based on the department of defense statistics culled as many or at least as the verdict on their hands just in iraq alone as many as 600 u.s. soldiers through proxy's what reintroducing weapons systems that are very, very lethal. sponsored two of the world's most dangerous terrorist organizations, hezbollah and hamas. they are bankrolling the syrian president's regime even with its violent upswing of late. following north korea's's leader, they actively sought to subvert the iaea obligations. iran continues to threaten to choke off the world energy

supply by closing the street on the navy's dangerous tactics in the persian gulf put our sailors at risk. in october of this year, and this is what i find so shocking, the armenian operatives plan to set off a bomb in the washington, d.c. restaurant and assassinate the saudi ambassadors to the united states and killed countless american citizens and thought it was worth the risk. most concerning is i think how disjointed our policy on the middle east is. i had a very senior arab intelligence official tell me recently that if i could make him king for a day what would you ask of the united states? and his quote was sir coming to could please tell me what your middle east policy is. it makes you pause given the nature and the danger of the world that is certainly evolving in the middle east and gistel

series the consequences are for our national security. and we've of fleshed out a little bit out today in our questions. i want to congratulate congress for its bipartisan bills pushing the administration for sanctions, the second round i think is having a devastating impact. something that i hope we can also explore today. we are given the customer knowing. we know that. we worked well with the intelligence community last year and a bipartisan way down over a billion dollars in savings through efficiencies without attacking mission. we think we gave at the office when it comes to intelligence given the world threats and what faces the united states of america and we hope to work with you again to say that maybe we can find some efficiencies but we also ought to make sure we make the right investments in our intelligence community to give policymakers and opportunities to respond versus react. i want to thank you again for being here today.

i look forward to having discussions on those issues and many more coming and i look forward to hearing responses from all of the members' questions and with that i'm going to turn it over to our ranking member mr. ruppersberger. iaea before, mr. chairman and a lot to think tanks the panel. on the intelligence committee i see the four of you as stricter petraeus, director clapper and director mueller, i think your leadership in the intelligence community is as good as i have seen it with a couple of other of your members general alexander and members in this committee and we look forward to have an open meeting. we know that there are many things that are classified that we can't talk about to protect our country, but i think it's important for the public to understand as much as they can we can inform them on what's going on and why intelligence is so important. the landscape is changed since the last world wide hearing we had a year ago. 2011 was an important year for the intelligence community. from the heroic kicked out of a

summit in london to the arab spring and the change of leadership in korea, north korea. all of these events dramatically impact our national security. ..

>> last year, we passed not just one but two intelligence authorization act for fy 2011 and fy 2012. overwhelming bipartisan majorities. we had close to 400 votes in favor of each bill. in this area of partisan politics those numbers are pretty impressive. last year marked the 10th anniversary of september 11 attacks, when close to 3000 innocent americans lost their lives. on that fateful day we learned the intelligence community was not sharing critical information that may have been able to prevent the tragedy and the icy was not working together as well as it could. we spent the last 10 years trying to change that. the rate that eliminate al qaeda leader osama bin laden proves we have, a long way. it is clear the most monumental intelligence achievement in recent memory and was a result of far-reaching teamwork. our intelligence professionals work together across different agencies pulling together hundreds of pieces of information. they were methodical and

persistent, and utilize every resource, ghetto and authority they had. they figure out where osama bin laden was hiding, and they brought him to justice. but the threat from foreign terrorist as was homegrown violent extremists still exist, and we cannot let our guard and. we must work together with our international allies, while also staying vigilant as we stop those who want to hurt is here at home. intelligence community must continue to work hard to collect, analyze and share information about the threats we face on our own soil as well as around the globe. no one could've predicted the street vendors setting himself on fire in tunisia could have sparked massive protests across the middle east and north africa ushering in the turbulent arab spring. the leaders of egypt, tunisia and libya are no longer in power. these countries are tempting to embrace democratic ideals but the future is still uncertain.

the committee continues to focus on that part of the world which is proven to be a perpetual hotspot. we must also continue to keep up with events in yemen where al qaeda and the arabian peninsula is to plotting to kill americans, and disrupt our way of life. even with the death of anwar al-awlaki, a charismatic al qaeda leader who inspired people to murder americans with hate filled media messages, we still have more work to do. our intelligence community must have global reach, remain agile and have the capability to address a variety of ever-changing threats, including iran. iran is a definite threat to world peace. iran is going to great a nuclear weapon that could destabilize the entire region and threaten american national security. iran has become more brazen in their recent actions against our nation. without any regard for american casualties crosses the line of state-sponsored terrorism. that is why iran cannot be trusted, it should not be allowed to create a nuclear

weapons or a nuclear-capable iran threatens our safety as well as the safety of israel and the rest of the middle east. the united states and the rest of the work must prevent iran from creating a nuclear weapon. i agree with secretary of defense leon panetta when he talks about iran, his quote was, there are no options that are off the table as it relates to iran. in addition north korea with its new year later, kim jong-un, threatens to share the ballistic capabilities, with iran, syria or further complicating the situation and threatening stability in the region. intelligence community must keep close watch on this potential volatile situation. at the same time china and russia are joining iran with aggressive economic espionage in bleeding america of its vital intellectual property another using technology as a weapon. a review released by the national counterintelligence center last year-i doubt china and russia are using cyber hackers to steal valuable american ingenuity from the safety of our own soil.

cyber attacks or try to capture america's cutting-edge research and develop an information to harness our competitive edge in the future. some are calling it a cyber cold war. $300 billion of intellectual property stolen from american companies every year according to the u.s. cybercommand. every day, u.s. websites and our nation's networks are threatened by foreign governments and criminal groups trying to steal our money, seize our valuable data, disrupt our services or even shut them down affecting millions of americans. we know the threat is real because websites have already been -- the nasdaq has been hacked. cyberporn cyberporn of those threaten key sectors of u.s. and global economy. with the white house and congress understand the cyber backbone of our critical infrastructure must be protected. we have a long way to go. this is not the time when american economy can afford more instability. now is the time to act as it relates to cybersecurity. the intelligence community passed a bipartisan cyber

legislation in the summer by a vote in our committee of 17-1. the cyber intelligence sharing and protection act which is the bill, gives authority to share cyberthreat intelligence now where malicious code and other cyber signatures with industry. companies can use this classified information to protect their cyber networks and the networks other clients from cyber threats and trying to defeat, disrupt, distort or otherwise disable. this allows the private sector to benefit from the expertise of the intelligence community all on a voluntary basis. the legislation will allow companies to power our homes, provide clean water and manage our other critical infrastructure information, to protect themselves from cyber shot. the bill which is also important text privacy and civil liberties. i applaud my site, congressman thompson, congresswoman schakowsky, and congress been shipped for working with those

in dealing with issues of privacy and civil liberty. another critical component to our national security is spaced. in 2011, the department of defense and the director of national intelligence published the first joint national security space strategy. it was a good start but we need better definition as to the way ahead at how it leverages our commercial industry. the technology and expertise protected by the space industry drives innovation in many critical areas, but because of trade restrictions such as i tour, image rolution restriction, we're losing our competitive edge on a daily basis. when it comes to launch our systems are reliable, to expensive because they're so competition. as a result, a united states cannot effectively get satellite in space because launch costs are too hot and schedules are unpredictable. commercial in which is a critical component of our national security. we must support this commercial

industry to promote both policies and funding to help it compete domestically and internationally. current resolution restrictions prevent our commercial imagery industry from selling its best product. today, france is marketing imagery at a half meter. as result countries like china are purchasing branches of entry to have a perfect view of u.s. muttered and strategic forces worldwide. i cannot emphasize enough that u.s. companies must be allowed to compete in a free market. this competition will promote innovation and our space industry. finally, i want to address the resources challenges that we face and the impact on national security and efforts of our intelligence community. the president has stated he wants to curb entry and defense spending without impacting the mission, intelligence authorization act for fy 2011 and 2012 did that. we will soon have the opportunity to review the president's budget request for fiscal year 2013. in his tight budget environment we're committed to continuing to give our intelligence professionals the resources, capabilities that they need to keep our country safe.

our nation deserves no less. i look forward to hearing from you all, and again, thank you for coming before us today to educate our public on issues of intelligence. thank you, and i yield back. >> thank you, mr. ruppersberger. i will turn over two, director clapper. >> thank you, chairman rogers, ranking member ruppersberger and distinguish those of the committee for inviting us to present the 2012 worldwide threat assessment. and let me say to both of you that i completely agree with your characterization about your leadership, and the manner in which we are working together. we all, we all appreciate that and specifically to ranking member ruppersberger's comments that you've more than lived up to your initial commitment to make this a bipartisan and as a partnership. acknowledging the fact that we, as you allude, we're not always going to agree. i'm joined today by distinguish

intelligence community colleagues to my right, cia director david petraeus, and to his right, lieutenant general ronald burgess and to my left fbi director bob mueller. these remarks and our statement for the record reflect the collective insights of the extraordinary men and women of the estates intelligence community whom it is our privilege and honor to lead. and again, we are most appreciative of your acknowledgment of the work, sometimes in a very hazardous conditions that are done by the men and women of the community and around the world. we will attempt to cover the full scope of worldwide threats in these brief oral remarks aren't like to highlight some of the issues that we identified for the coming year. some of which you've already done for us. never has there been in my almost 49 year career in intelligence, in fact today is

the 51st anniversary of my enlistment in the marine corps, february 1961. anyway, the time is spent in intelligence, i don't recall a more complex and interdependent array of challenges than we face today. capabilities, technologies, know-how, to medications and environmental forces are not confined by borders and can trigger a transnational destruction with astonishing speed, as we've seen in the past year. never before has the intelligence committee been called upon to match such complexity on so many issues and such a resource constrained environment. we are writing to the challenge by continue to integrate the intelligence community, taking advantage of new technologies, implementing new efficiencies, and as i was, simply working hard. but candidly maintain the world's premier intelligence enterprise in the face of shrinking budgets, be a challenge. we will be accepting and managing risk, more so than we've had to do in the last

decade. and when i say we, i mean both the legislative and the executive. we would begin are a threat assessment i did last year with the goal of terrorism and proliferation. the next two or three years is a critical transmission face for the terrorist threat, particularly for al qaeda and like-minded groups. with osama bin laden's death, the global jihadists movement lost its most iconic and inspirational leader. the new al qaeda commander is less charismatic than the death or capture a prominent al qaeda figures has shrunk the group's top leadership later. however, even with its degraded capability and its focus on smaller, simpler plots, al qaeda still remains a threat. as long as we sustain the pressure on it, we judge that core al qaeda will be largely symbolic importance to the global jihadists movement. but regional affiliates, to a lesser extent small cells and individuals, will drive the

agenda. proliferation, that is efforts to develop, acquire or spread weapons of mass destruction is also a major goal of strategic threat. among nationstates, iran's technical advances, particularly in uranium enrichment, strengthen our assessment that iran is more than capable of producing enough highly enriched uranium for weapons if this book leaders, specifically the supreme leader, choose to do so. north korea's export of ballistic missiles and associated materials for several countries, including iran and syria, as you alluded in your opening remarks, illustrate the reach of the north's proliferation activities. we don't expect kim jong-un, north korea's new young leader, to change jon jones basic policy of attending to export most of its weapons systems. i would note that in this year's statement for the record we elevate our discussion of cyber threats to follow terrorism and proliferation. and perhaps a little bit of coal

to newcastle, just a from that site if there is one of the most challenging ones we face for the reasons you describe. we foresee a cyber environment in which emerging technologies are developed and implemented for security responses can be put in place. among state actors were particularly concerned about entities within china and russia conducting into u.s. computer networks and stealing u.s. data. in a growing role that nonstate actors are playing in cyberspace is a great example that easy access to potentially disrupt know-how and technology by such groups. two of our greatest strategic fiber challenges are, first, definitive real-time attribution of cyber attacks. that is, knowing who carried out such attacks and where the perpetrators are located. and secondly managing the enormous vulnerability to the i.t. supply chain for u.s. networks. briefly looking geographically

around the world, in afghanistan during the past year or talibans lost some ground but that was mainly in places where the international security system forces or isaf are concentrated. talibans here leaders continue to enjoy safe haven in pakistan. isaf's efforts to partner with afghan national security force is are encouraging but corruption in the government challenges continue to threaten the afghan forces operational effectiveness. most provinces have established basic government structures but they struggle to provide a central service. the isaf and the support of afghanistan's neighbors army notably in particular pakistan, will reign essential to sustained the gains that have been achieved. and although there is broad international focus support for the afghan government there are doubts many couples, particularly in europe, about how to fund afghanistan initiatives after 2014. in iraq, violence is high profile attacks continue.

prime minister maliki's recent aggressive moves against sunni political leaders have heightened political tensions, but for now the sunnis continue to be the political process as the best venue to pursue change. elsewhere across the east and north africa, those pushing for change are confronting ruling elite, secretary, ethnic and tribal divisions, lack of experience, democracy, stalled economic development, military security force resistance and regional power initiatives. these are fluid political environments that offer openings for extremists to participate more assertively in political life. states where authority -- authoritarian leaders have been toppled such as tunisia, egypt and libya have to reconstruct or construct their political systems through complex negotiations among competing factions. in syria, regime and transitions and social divisions are prolonged internal struggles. and could potentially turn domestic of peoples into

regional crises. in yemen, although political transition is underway, the security situation continues to be marred by violence and frightening vision of the country as a real possibility. as the ancient roman historian once observed, the best day after a bad temper is the first. after that, i would add things every problematic. intelligence community is also paying close attention to development across the african gonna, throughout the western amateur, europe and across asia. they are too few issues are self-contained. virtually every region has a bearing on our key concerns, terrorism, proliferation, cybersecurity instability. and throughout the globe whenever there are environmental stresses on water, food and natural resources as was health threats, economic crises and organized crime, we see ripple effects around the world and it impacts on u.s. interests. amidst these extremely challenges, it's important to remind this is in which body and

the american people that of all our work, the u.s. intelligence community strives to exhibit by american values. carry out our missions with respect for the rule of wall and the protection of civil liberties and privacy. that pledge leads me to the crucial recommendation to you on our highest legislative priority this year that requires the support of this committee and both houses of congress. i refer specifically to the foreign intelligence surveillance act amendment act, or faa, which is set to expire at the end of 2012. title vii allows the intelligence community collect vital information about international terrorists and other important targets overseas. this law authorizes the balance of non-us persons located overseas or foreign intelligence important meaning have a connection to our information about threats such as terrorism or proliferation. it provides a comprehensive oversight by all three branches of government to protect the

privacy and civil liberties of u.s. persons. department of justice and my office conduct extensive oversight reviews of these activities and we report to congress on implementation and compliance twice a year. intelligence collection on advice, vital to protect the nation against international terrorism and other threats. we are always considering whether changes that could be made to improve the law but our first priority is real and physician of these authorities in their current form. we look forward to working with you to ensure the speedy enactment of legislation reauthorizing so there can be no interruption our ability to use these authorities to protect the american people. so i'll end this brief statement where i began, fiscal environment we face as a nation and in our intelligence community will require careful identification of management of the challenges, the intelligence community focuses on and the risks we must mutually assume. with that, we thank you and the

members of this committee for your dedication to the safety of our nation, your support for our men and women of the intelligence community, and for your attention today. my colleagues and i look forward to your questions and our discussion. >> thank you, director. and congratulations on your 51st anniversary of your enlistment. and i but boot camp looks pretty good, according to write about now. >> it does. >> the ranking member and i have agreed to allow members to go to the questions, and with that in mind alternative mr. fortenber mr. fortenberry. >> thank you, chairman. director clapper, i want to start with afghanistan. has the intelligence community produced and agreed upon written assessment of what the afghanistan security forces capabilities will be in 2013? >> sir, i guess the most current such rendering would have been

addressed in the national intelligence estimate that we recently published. >> well, i noticed in your statement, you said that there has been some loss of the taliban insurgency in areas where we have troops, but it remains resilient and capable of challenging u.s. international goals. i also noted that there was articles in the british press yesterday. they said was some sort of military, u.s. military report. i don't know if it was or not, but it says that the taliban strength and morale are largely in tact, and talks about significant number of defections to the talibans. and so i'm concerned about the announcement that was made yesterday that we are going to end all combat role in 2013 and just be in a supporting role. general petraeus, you have

obviously the most recent direct involvement there. maybe we ought to start by just asking the question, is there a good reason for us to be in afghanistan with military forces who are fighting and dying? and if so, what is that reason? >> i would ask general petraeus to speak to that. >> there is indeed, we went there for an important reason. were still there for very important reason, and that is to ensure that afghanistan does not become a sanctuary once again for al qaeda or other extremists so they can do what they did prior to 9/11, which is to plan the 9/11 attacks on that sell. i'm i want to clarify a couple points as well that you've touched on here briefly. before doing that though i actually would like to address the committee as a whole, the chairmen and ranking member, and thank you as well for your recognition and personnel to the intelligence community who have indeed as you noted been part of

some very important progress against extremists and others. to thank you for your support of those men and women, and a whole fried after the fashions of the materially of course in the two authorization bills coming in to note that we in turn have worked very hard to keep the committee and sissy and the congress fully and currently informed and we will strive to do that i appreciate about my time -- with respect to first of all the u.s. report, that is report on annually by the u.s. element, special operations element, and it encapsulates interrogations of detainees. it is interesting because you should have almost doubled top of this a warning that is on a case on top of human intelligence that says this individual may have sought to influence as was to inform. needless to say, these are individuals who have been captured in some cases knew there was some risk of that. and we think in fact some cases

they have a message. it is very interesting to contrast that with their messages to each other prior to their capture. we have insights into that as well. and in many cases they are frankly apprehensive, i think would be an understatement, because they have indeed been targeted quite effectively by isaf and by not increasingly afghan special operations forces. what they did say is not all that different frankly from what we have observed in other documents, which is that there has been progress against the taliban, but indeed the progress as always remains fragile and reversible. and the enemy is in the resilient as well. that was also in the nie, which was for post 2014 by the way, and again, postulated that the risks and so forth of various scenarios the neck excuse the interruption, but my time is renting. i get, the question i've got is

this announcement yesterday. you just said in ie is out of 2014, and yet you have dealt with tribal leaders in afghanistan. so if you ask, i announced we were going to end combat roles and we're going to be gone by 2014, enjoy tribal leader in afghanistan, what effect does that have on you about what side you're going to support? >> thanks congressman. first let me say i think the quote announcement, the conversation that secretary panetta had with some press on his plane was more than a bit over analyze, shall we say. the policy adopted by the leaders of the coalition, of the isaf coalition with afghan president karzai at the lisbon summit, the latter part of over a year, 50 month or so ago, was that by the end of 2014, isaf will have transitioned all security tasks to afghan forces. to do that, we embarked on a

policy of transition progressively over time. in fact, the first transitioned that the security tasks of leadership of security tasks from isaf to afghan forces took place in july 2011 when i still i compstat pictures of subs and transitioning to kidnap and what secretary panetta was discussing was indeed the progressive transition. if you're going to have a completed totally by the end of 2014, obviously somewhere in 2013 you have had to initiate that in all of the different locations. so that you can complete the remaining task. that was what he was talking about. in fact, our u.s. army brigades that go in there will actually have an augmentation to enable them to perform more and more and more that combat enabling role rather than the combat leadership over to have what are called security forces by three teams to augment them. and again, the idea is that we gradually stop leaving combat,

it's in a successive series of transitions that take place as result of the whole process between afghan and isaf leadership and again, i think, as i stated up front on this one, his comments have been more than over analyze. >> mr. thompson? >> thank you, mr. chairman. and thank you all for your service to our country, and please pass that on to the brave men and women who work in the intelligence community under all of you. it's very much appreciated. i have a couple of questions. general petraeus, the iranian plot uncovered last year to assassinate the saudi arabian ambassador here in the united states, what is in bold and iran to move in that direction? and the uss iran's willingness

to sponsor future attacks here in the united states? >> well, that plot i think the only way to characterize that is to say that that was really quite reckless. it was a case in which, of course, someone was going to recruit a hitman basically to come here to washington, to the café milano of all places, to assassinate the saudi and ambassador to deny safe. it reflected the degree of recklessness that was probably more pronounced and we've seen in the past, although it is important to note that the various revolutionary guard corps goods corp. proxy, hezbollah, hamas, some of the organizations in iraq, have indeed also been active in a variety applause. some of which have been interrupted. in fact, there's been a public statement about that out of thailand of course, a plot that was disrupted there. and so we have seen argued a bit

more of that in recent years than in the past. hard to account for that shift in thinking that might lead them to the. i would hope that the interruption, the destruction of this plot and when the legal case comes out and so forth, we will give pause to the quds force as they contemplate further such activities. >> i might add in terms of possible explanation for this, of course the iranian narrative has been, however they talked himself into the present era spring represents an advancement, if you will, for them, opportunities for them to extend their reach. and there's that fact and the fact that they may also feel somewhat under siege. and so we seen this general -- >> from the sanctions? >> well, sanction and in general the international pressure that has been placed on iran by

virtue of their nuclear activities. >> and general clutter, do you see any indication that this sort of activity will raise its ugly head again? >> well, it will. i mean, this is again a part of a general campaign, either through their proxies as director patrice indicated, and the proxies, notably hezbollah is as aggressive as they ever have been in the last decade or so. so expect they will see more of this bit and i think is a general commentator, even as we are not quite as preoccupied with al qaeda, that this is going to morph to other forms of such a nonstate activity. we would have to be vigilant about. both here and elsewhere in the world. >> thank you but i think we all know that we can continue to grow our budget and our workforce in the manner we did after 9/11, director clapper.

you stated that we need to find efficiencies and savings. in earlier this year you indicated that you have a way ahead in doing this by this last decent. and i'm interested to know what actions you've taken to try and identify and find some of those savings, what we can expect to save. and if you can point to any successful intelligence community wide efforts in regard to enterprise licenses that have allowed us to capture economies of scale and improve our cost agencies abilities? >> i think next week we will be rolling out the intelligence, national into this program but as part of a larger budget, and of course we'll have subsequent hearings on budget.

i will just say here at the outset we have worked hard as a corporate body i think to lay out a roadmap for how we can reduce and achieve efficiencies. i think the big idea frankly for the intelligence community is this notion of going to the cloud and with attention, attention to security, identity management, et cetera. and having a single i.t. enterprise, a subject we talked about for years in the intelligence community, and now i think we are -- with the technology, the wherewithal and the leadership to do it. most important to this is director patrice's commitment to join into this intelligence enterprise. i think potentially there are huge savings here, particularly in the i.t. every. so looking to the future, that's

as i say is the big idea. looking ahead. >> thank you. my time has expired. >> thank you, mr. chairman. [inaudible] what's happening with iran and south america. and what they are doing coming year, in mexico in particular. relative to us. so lieutenant general burgess, i just want to ask you, i know over the past few years the defense department has worked with homeland security -- excuse me. on the southwestern border -- sorry. and i understand that you all want to terminate those operations coming up. and i greatly sent a letter to you and to the office of management and budget, you know, just asking if you would we look that simply because of what's happening, not just with mexico and the drug cartels but with iran.

and you know we've all been talking about it this morning, and it does concern me, you know. when you look, and begins its been mentioned over and over, but the attack, the plotting by the quds force relative to the saudi ambassador and what kind of access they have here into the united states, across the southern border. it just seems like by continuing the operations of being on that border, it's going to listen that threat in the sense that we have a better chance of stopping something. and so, you know, i also have the question of what are they going to do. and i know it's been answered previously, relative to what they're going to do here in the united states, you know, continue plodding, et cetera. but it just seems to me like this is an important issue, and i just wondered why if you just give me some insight into why this is happening and if anything is going to take its place? >> first, i would agree very

much so that it is an important issue. and we are in consultation with the director of national intelligence because defense intelligence agencies role in terms of how we do some of these missions along the border, as we provide some research and development technology that would look at providing. we come up with a capability. once we have a capability, then who best inside the intelligence community along our border should own that capability? so i understand you have submitted a letter, and we are in current discussion on that now. >> well you know, we look back at what's happening in egypt with the muslim brotherhood, and you know, how things are changing over there. i know general clark, you and i have discussed this many, many times. and you know, this isn't a good situation, and i just don't want to see the same thing developing here in the united states because it's very obvious what their intent is relative to what

they intend to do to us over the long term. so i mean, that's really a major issue with me. and anything that you can get back to me on that i would appreciate very much. the other question i had was on russia's involvement in syria. what they been doing over the years, where they are right now and how they are really not being up front with us, how they continued to supply them, et cetera said it. so i this reset policy with russia but what's really happening with that? >> the russians have been very protective i guess i would say of the assad regime, as they have particularly with respect to potentially u.n. security council resolution. and i think that stems frankly from a long time and profitable client relationships, which they very much want to preserve. and so i think that's what that's about it and just a general aversion, when they have a chance to be a supportive in

the world forum. >> well, you know, where does it stand relative to what we're doing with russia? not just with syria but the whole situation with russia? are we doing anything to make any progress within? is it working? i know they seem to be very obvious in everything they do. >> well, the historic said -- storks could be seen as a positive, but in truth it wasn't done for altruistic reasons but it was done for pragmatic budgetary reasons. but that's an area where the interest converged so we agree. i think it's well-known that the russians are paranoid about this defense and the implications that has. and to use the right -- they over analyze that and that's a

profound threat to their status as a national power. so where agreements converge, to be agreeing and cases where they don't. >> thank you all for what you do. you've heard it many times. we do appreciate you. >> well, i was going, thanks. another example actually of cooperative endeavor is northern education network that supplies afghanistan through the north. transits one of the ways of that transits russians were but it's very important, especially as pakistan has closed the nato ground lines of communication that went to pakistan. in this case of course it's not in russia's interest to see afghanistan fall to the taliban again, or to see the illegal narcotics industry, or extremism penetrate further north into the central asian states than it already has. so that's an area in which they have been co-opted.

there's some commercial interest as well but there's a huge security interest for us to be engaged in this. >> thank you, mr. chairman. gentlemen, i want to thank you for your testimony, extraordinary work you are doing on behalf of the country, and i hope that you express our appreciation to them when the intelligence community who do the job, a thankless job in many ways day in and day out. we're greatly in their debt. i want to personal associate myself with comments of the chairmen and ranking member who talked a lot about cybersecurity here today. and it's appropriate we we are focusing on one of the most series threats facing the country today. i spent a lot of time on this issue, and i, like the chairman i believe a catastrophic cyber attack is coming to this country. and we can bet -- better to prepare. time is running out. i appreciate the work that you're attempting to do in this

area, given the constraints that you have. perhaps not having the proper authorities. and we have to give up our efforts every way possible. i do want to focus right now on the issue of cyber espionage because that is something that's happening right now to the tune of hundreds of billions of dollars a year that we are losing to foreign adversaries that are stealing our intellectual property, particularly those that would affect our national security. in october 2011, the national counterintelligence executive indicated that china and russia are responsible for extensive illicit intrusions into u.s. cybernetwork's and theft of u.s. intellectual property. so my question is, what do you recommend to further protect against cyber enabled espionage theft? and in your opinion what legislative changes are needed to facilitate better protections

against cyber enabled espionage? >> well, first, i agree with, i think we all do agree with your characterization. i think general alexander has characterized what's going on here, particularly with the chinese, probably the greatest pillaging of wealth in the history. if you total up the value of the intellectual property that has been stolen. so it does obviously point out the need for a rational and comprehensive cyber protection policy for the whole country, which does account for new consideration for civil liberties and privacy. i personally like to get into specific about things to try to envision what could be scaled up, and i have always touted what former deputy secretary of defense bill lynn did in leading

the defense and to showcase pilot, which has evolved into i think a great model, particularly the intelligence community role should be in all this, which is to provide threat information and advice on the larger infrastructure beyond that of the governed. and i believe that kind of approach is what is workable. there are all kinds, the chairman and ranking alluded to the many bills, 30 or 50 or so in the congress. there is one proposed by the administration. and it was kind of a similar session here this week with the senate on the subject and i think the white house was trying to raise a similar session here in the house. there are some profound policy issues, who's in charge of

issues that we in the intelligence community i don't think can prognosticate or recommend, but the way we are set up now to react and respond, both foreign and domestic, marks a team effort across the intelligence community, department of defense, department of justice, fbi is a huge player. no, and department of homeland security. but it's clear from all that we have said, and i hope that the predictions about a massive attack to become a self fulfilling prophecy. but clearly, everyone's attention is alluded to this and we do need to do something. but as far as what to do i would choose command the defense industrial base pilot as a good model and it connotes the organizing principle i think of the importance of a partnership between the government and all

the private sectors. this cannot be done all by the government all by it's self. >> my time is almost up but i think you for your thoughts. i'm very pleased that this committee passed the bill, the chairman and ranking member and all of us worked on, on information sharing side, does talk to importance of the new pilot program and hopefully that will be the greatest success. i think we have our greatest strength on information sharing side, and hopefully this bill will move its way to congress soon. and i greatly appreciate the time and effort, the focus that this committee has faced. has put into this issue. thank the chairman and ranking member for their collaborative work on this. i have other questions but i will submit to the record i am concerned about issues, particularly to cyber but i will submit those for the record. i yield back. thank you. >> thank you. >> thank you, mr. chairman.

i had a couple things real quick that have been asked and then get to something broader. with respect to afghanistan, has the ic changed or amended their analysis as to the capacity of the cars i government to control their country over the last couple of months that would've given rise, and i know david, you said over and less what leon said yesterday but that's a startling statement. has i.c. changed their assessment of afghanistan and the capability over the last several months, and if so, why? >> again look, with respect, congressman, i think is a startling overanalysis, not necessary a startling statement but if you go back and read what he said speed is okay, so -- >> if i could, this is exactly in line with the policy that we started back in the summer of 2011, transitioning leadership of combat operations from isaf to afghan forces -- >> let me just say this. [talking over each other] i understand, david. it's shifted to leon.

he said would have all troops out. >> he did not say that. he said all troops out, i think, withdraw forces by the end of 2014. the president has stated during security relationship that would indicate something that would continue beyond that, as has the leaders of other major issues which just signed agreement with president karzai pic so at this stage the ic assessment has not america change from within over the last several months speak what no. >> with respect to iran, the leadership there, given it appears to be they have nothing to lose at this stage as they move down this list, or down this path with sanctions and others, can you give us some sense as to what impact serious collapse and a change of regime there would have on iran and their intentions? >> sir, i'm i respect we take issue with the notion that they have nothing to lose her i think they have a lot to lose.

and i think as the pressure, international pressure ratchets up as the session, particularly the ones that are in a process of being implemented, take hold, they have a lot to lose. i think the economy is already paying, is already seeing the effects of that, would be devaluation of the real, and also high unemployment rates, the draining of their banking reserves, the difficulty they have conducting international financial transactions. so they are already paying the price. it is also causing, we understand, there is debate and dissension within the iranian leadership hierarchy. there's a question as we discussed yesterday, another hearing, about the extent to which the iranian leadership, notably the supreme leader himself, just how connected he

is with reality, what kind of information he is getting. i think there are growing signs of dissent among the iranian populace, because of the impacts that all of this is having on their quality of life. >> and syria? >> syria of course passionate one reason why, one reason the iranians have expended a great deal of time, energy, resources and people on trying to prop up a sod is because of having access to that territory, also as another client. so they're very concerned about keeping assad in power. >> further in your conversation you talked about as resources shrink across the system that we will have to accept risks. how are you going to communicate with decision-makers?

risks that we're going to have to take because we don't allocate resources to those risks, and can you give us some sort of sense how you're going to approach this idea that we as a community are not going to have the resources that we might otherwise enjoyed? >> well, as we always have when we have gone through these cyclical patterns of expansion, which we've done the last 10 years, every year we have gotten, intelligence community has got more money, more people. we went through this in the '90s after the fall of the wall. we were to take reduction which frankly we didn't manage very well. and so for one, we're going to try to profit from that experience and not to neglect things that we did then. try to preserve and protect first our most important resource, the intelligence community which is are people. and those resources and capabilities that provide us

global capability so we can react and respond anywhere in the world. we don't covers the earth like sherman with its think that there are some things we will pay less attention to countless critical problems. and one, you know, we're not going to do more with less and all these other clichés. we would just simply have less capability. so, in a closed environment will certainly be able to discuss that more it would have our budget relations. and certainly will advise the white house and certainly you, where we maybe taking this risk. >> i appreciate your comments i would be derelict in my duty if i did mention the fact across that issue is the idea that your financial statements other organizations are not auditable at this point in time at a better information, better i.t. systems and better general controls would allow all of us have a better sense as to where

those monies are going or not going. >> you are right. that gives me an opening to thank you and intelligence authorization act, revision for the funds balances treasury which is crucial to audit ability in the intelligence community. we will be discussing with you in fy '13 budget as well some funding that we will need for financial management. >> thank you. i appreciate. we got some pushback on the department of defense for that. i appreciate your comments. thank you, mr. chairman. >> michigan ask the? >> -- ms. schakowsky. >> thank you, mr. chairman. i think that open hearing are very important for the public to hear some reports on the intelligence community. so i thank you for coming. there have been recent media reports that indicate that the nypd, new york police department, is biased and misleading materials to train officers on islam. and last year i asked you, director mueller, about a

similar situation in the fbi. i have a couple of questions. but also director petraeus, press reports have discussed ties between the nypd and the cia, and i'll have a couple questions on that as well. but director mueller, since our last discussion about this, what steps have been taken to standardize training in the fbi of situations like this don't occur? and was the review of fbi training we discussed completed? when will we see a copy of this review of? >> congresswoman, as we discussed before, and you were unaware last summer, we had indications that there were problems in terms of our training in this area. and we developed a two-step process to respond to the first was to look for our materials and put together a panel of experts from within the fbi but also outside the fbi. to look at that, our training

materials, and to identify the best practices when it comes to training in this arena. so that any training in the future will be done according to guidelines this panel have put together. secondly, we undertook a review of the training that had been done since september 11, the last 10 years, and looked through the tears and determined those materials that were inappropriate in some way, and to make certain that they did not show up in training in the future but to assure that any training that had been done pursuant to that was rectified. we've got to approximate 160,000 pages of materials, used for training in the bureau. over the last 10 years. far less than 1% of those materials has any inappropriate, inappropriate material in it. we also have been disclosing these training materials over a

substantial period of time in response to foia requests. the review that you mentioned is going into its ending stages, and my expectation is the next few weeks or months we should be completing that review, and at which point in time we will again review and your staff as to what we have found, and what we anticipate doing in the future. >> thank you. thank you for your attention to the issue. appreciate it. doctor petraeus, i'm wondering if you're officers have had any involvement in the nypd training on islam? and in addition the press is reported the assignment of the cia officer detailed to the nypd is being curtailed in early april. and i'm wondering what that individual was doing there, and if that report is correct? >> well, thanks very much. on the first question, i need to

get back to you on the record on that to be sure that i have the absolute precise answer on it. on the other issue, what i would say is, would brief the committee before, the ig has looked into the provision of agency personnel in the wake of 9/11 to provide liaison with new york's finest, given how, how new york has been such a prominent target of extremists. the ig determined that there was no violation of law or executive order, and as you mentioned, for what it's worth, the final agency who has been there on a fellowship over the course of the past year will rotate back in complete his tour this spring. and will assure the liaison between the inner agency and new york's finest through another mechanism that regnery and i have established. >> and director clapper, you are quoted, actually not quotes

around it but it says on article that you thought the arrangement looks bad and will be addressed. i wonder if you wanted speed is what i specifically said at the time, the last time we open hearing on this, i just thought it was a bad optic. that's not to say, the cia ig in his investigation which i have read found no illegality. the other concern i would have is just the president in a resource constrained environment of other police departments asking for similar support from the national intelligence program. and so in this era of austerity we're entering from that standpoint, too, i thought it was something we had a hard time sustaining. >> thank you. yield back. if i could follow up on the. i think it is very reasonable in the wake of something like the 9/11 attacks, for all of the intelligence, law enforcement agencies, to try to grab how

they can help the city that was the object of that attack. and has continued to be the object of that attack. and so again i shouldn't imply by my statements that this is something that was untoward. in fact, as i mentioned the ig found no violation in law or executive order. but what we have determined is still an efficient and effective way to assure that there is the kind of liaison that is necessary. and it goes on all around our country. but without the provision of somebody actually enforcing it enacted is controversy about the demographics unit at the nypd. however, and the relationship and appropriateness of their activities regarding the muslim community. i just wanted to make sure that we are paying attention to all these civil liberty issues. >> understand fully, thanks. >> thanks. >> it's good to know publicly the agency has been exceptionally good. we have been briefed on the report twice, and the ig was

made available to the committee to talk about the report. >> the director was good when the report came out to make sure that we're access. we're all concerned about it. i thought i was handled exceptionally well. and again, the ig had the opportunity to come to the committee and talk about the investigation. mr. king? >> thank you, mr. chairman. let me just say for the record first, nypd is a truly outstanding job in fighting counterterrorism. they have over 1000 police officers dedicated to this. there has been a number of attacks against new york, 14 up and stop because of the cooperation with the fbi, although local police agencies in new york. i believe it has been excellent helpful and beneficial to extremely irresponsible by the press to be, some the allegations that me. just a few our like to put her in the record "the associated press" general petraeus last august 23 quote, cia help nypd was covertly in muslim areas. they need city police department

is targeting ethnic community in many ways would run afoul of civil liberties, track by the federal government associated press investigation is found. these operations benefited from unprecedented help from the cia, partnership that is blurred the line between foreign and domestic spying. we have genuine 27, associated press, inspector general completed an investigation into the relationship between the cia and nypd and the article showed the police collaborated that the federal spy agency set up operations to scrutinize muslim community and have helped programs that have angered muslim communities to we have members of congress sitting around your colleague letter asking attorney general to carry out an investigation saying we are deeply troubled by ap press reports that the new york police department to help with the cia has been collecting information on the muslim community in new york city and surrounding areas. this will be a violation of civil rights and trigger a number of federal laws.

they call on the attorney general saying that the nypd with the cooperation of cia is engaged in efforts to collect information on the muslim community in new york city and other jurisdictions. recently "the new york times" says the cia and nypd haven't and usual and highly troubling relationship. i think it's disgraceful the media has carried out these false reports were a number of reasons. ..

the cia is an independent individual. he is the only person in the agency beyond the director who is not confirmed by the senate. >> there is no violation of the national security act. you also concluded iaea did he also concluded there was no exhibit border by the cia of the nypd? >> that's correct. >> is there evidence at all that the cia carried out or engaged any spying or type of surveillance or clandestine activity on its own or with the nypd? >> no. >> how was it that the nypd in any way violated or reduced its relationships with the cia? >> no. >> i think it's important to be made known again and again because this is a problem with the community and is selling politicians in new york and other places to track the nypd which they can handle themselves and makes it very difficult for

them to carry out the job 50 people in my district alone line with the nypd is doing and there's always room for legitimate purposes. there's been friction the nypd and the fbi that is a legitimate friction that is involving the law enforcement agencies. a spreading around lies and spreading clandestine activity and also acting as if this is something unusual. it's disgraceful and i know the report is on the pulitzer prize and "the new york times" is engaged in the nypd. but i think we should realize these are real threats, ongoing threats, and as far as i can tell i would hope the cia does nothing little to diminish the level of support for the nypd. >> i went to new york, congressman, to see things for myself, and for what it's worth, met with the commissioner, met with other law enforcement personnel. my impression is there is a very

good and very productive and very proper relationship between the various law enforcement agencies that include the fbi by the way, and also with elements of the intelligence community that appropriately provided in a proper way products of their intelligence collection and analysis. >> i think it's important that this be on the record level that's been out here and the ap for instance when they wrote the story about what they disclosed on a spying in new york called on the f-35 announced the fact or reported the fact that the council on the america islamic relations was also calling for an investigation never mentioning it all they refer to them as a muslim american civil rights organization, never ever mentioning it was aimed as an unindicted co-conspirator in the case in the country and the fbi caught off but years of this the kind of bias discrimination i think we as a committee should

stand up and speak out against and this committee can line up with those doing the job and not allied himself with cheap press reports. i yield back. >> thank you. mr. schiff? >> thank you, gentlemen, for your service to the country. general petraeus, i have three questions. my chief concern about afghanistan is a safe haven and pakistan and my questions are these. first, do you anticipate any change in the status of the sanctuary defined in pakistan, and second, if we can't expect this to be much of a change in that safe haven for the taliban insurgency, can we reasonably expect the afghan forces will be able to defend against insurgency that enjoys the safe haven once we draw our troops? and finally, should afghan special forces be allowed to take the fight to the enemy leadership in pakistan?

and this sense of immunity from risk the senior taliban leadership initially in pakistan? >> well first of all there is no question that there are elements in pakistan that have enjoyed sanctuary and the cause major problems for afghanistan and the afghan coalition forces will that are seeking to provide security to enable the development of the new afghanistan. having said that there is also no question that the pakistani partners have confronted a number of the extremist organizations foremost among those al qaeda and that cooperation does continue in various forms of but also the taliban, pakistan and number of its affiliates. now admittedly the organization is focused mostly on destabilizing pakistan, but not

entirely. thus cause problems for afghanistan as well. but when it comes to the haqqani network and the afghan taliban, there is no question that more needs to be done. there is an important case recently where a very significant in protest explosive device expert and builder has been detained here in pakistan. again that is a very significant step. there are a couple other developments recently but i think we should be cautious in what we anticipate in terms of the ability of our pakistani partners and in some cases a willingness to go after again the haqqani network in the federally administered trouble areas. the affiliate's some of these others but again the felt that they will go in and go after them is probably overly

optimistic. if no change, the prospect of the afghan security forces can continue the defense has in the past. i think the will depend on the amount of assistance that is provided and the character of that assistance if you will. are there any dollars in addition to just money or equipment or various traditional forms of security assistance. we have obviously nearly three years before the end of 2014 to develop that kind of look at what that will consist of noting again on not just president obama but the leaders of the other major coalition countries of the nato forces in afghanistan have all pledged continued support in the varying forms for afghanistan beyond the end of 2014. with respect, should the afghan forces be allowed to go? while i think there's obviously a question for afghanistan but i think they probably have

sufficient fights on their hands without invading the us leal of another country even as significant as is the threat is posed by some of these safe havens across the board. >> i wasn't suggesting so much a safe haven invasion as whether they should be able to carry targeted actions against leadership figures in the haqqani network for example. >> well, look, this is probably one that is best continued in a closed session i think to flush all of the different issues that are at play and i would ask that we probably do that. thank you, mr. sherman. >> thank you, mr. chairman. i find it rather ironic that two years ago the intelligence community was chastised for being stovepiped come for stovepiping, withholding information back, and just to expand on what mr. king live was pointing out, that your we have

the various intelligence agencies who are trying to work to prevent terrorist attacks in the future, the very thing they were criticized for ten years ago went 9/11 occurred. now they are being criticized for actually doing with the congress and the american public asked them to do which was to work as closely as you can to protect civil liberties but make sure we are sharing information across the board. and as it relates to the folks i represent, i hope folks are focusing within the intelligence community on the activity of these drug cartels who are now operating in mexico and other parts of south america who are also operating in california and parts of the west and i assume all over the country. every day innocent americans are being killed in this country

because of foreign drug cartels and other criminal activity, and so my only request of all of you in the intelligence community is that you please look for ways to cooperate and share information with the folks that i represent and the various sheriffs and the d.a. and folks that can be helpful if the need information on these cartels or other extremists or of the constituents need help i hope that you are hearing from at least some of us on this committee who do not want you to take this incident that occurred in new york or the false press reports that are out there and somehow think that the congress is now asking you and the american public is now asking you to go ahead and start stovepiping again and not share information with all local law enforcement folks who are on the ground.

>> if i made little use a couple things and i would like to have director petraeus add to this. this is one of the profound changes that occurred in the intelligence community in the last ten years which wasn't the case prior to my knowledge and is the interaction with state and local and private sector. i would take this as a major responsibility that i have and my staff to foster those interactions. i was engaged a lot with what i think is a great organization, the international association of chiefs of police who are very committed to this and very sophisticated in the ways of intelligence. one of my thrusts for 2012 is to further what working with the dhs and the fbi what to refine and bring greater fidelity to the relationship.

the issues connected with terrorism or patrician to iaea proliferation. >> the advent of the dni and the dhs in particular all of this followed in the wake of that has brought about considerable progress in intelligence sharing and intelligence integration. obviously we are all committed to furthering that progress in the years that lie ahead. with respect to your comments, congressman, i was just in mexico and colombia and met with the heads of the state and each of those countries and with the intelligence counterparts in other security officials and actually we are hosting this afternoon a delegation from mexico in return to discuss the way ahead in some of the areas that we were discussing their. i have to say i was impressed by the concepts that the mexican leadership has adopted. it's a comprehensive approach,

is it clearly the right way forward, and also by the establishment of institutions still early days in some cases, the dramatic expansion of the national police for example of the penitentiary system, the corrections system, the attention to the need for the various additional laws and so forth all are exactly what are required to stem what is obviously a very, very serious challenge that is manifested by the violence and the breakdown in the rule of law in some of the areas in mexico. columbia on the letterhead has adopted a comprehensive approach for a number of years. it's now looking to take it to the next level and we are obviously partnering with them as effectively as we can. as you know, the agency has a counternarcotics center that integrates not just those from within the agency that throughout the intelligence community and indeed with law enforcement agencies as well and that is something that we continue to focus a great deal

of effort on given the threat that it poses to our country and to the world. myself and mr. flom boren were in mexico prayer to your arrival and we are very happy with a success that all of you are having their in the intelligence community with our war on drugs and international crime. >> i just want to add very briefly on the working with state and local law enforcement as has been a key to our success on september 11th we have over 100 joint terrorism task forces which state and local represented and we have hundreds of taskforce is relating to violent crime, narcotics trafficking, what we call the state street's task forces and leverage our capability throughout the country by coming together with state and local law enforcement and the task forces and even the threats of the future including cyber its and the large part depend upon

our relationships not just with other players, nsa, cia, dia and the like but also relations with state handle local law enforcement building up the capacity to address the threat as well as ourselves. >> i might also mention the 72 state and major metropolitan fusion centers for which the program provides funding to ensure which is the nexus for providing information to the national committee and a downward. another instrumentality that the networks have grown since 9/11. >> thank you to the panel, and mr. chairman, i would yield back. >> thank you, mr. sherman and gentlemen, thank you all so much for all the work that you've done on behalf of the american people. i know that my constituents are extremely grateful as work for

the work that you do. i just want to note that it was a year ago when we all gathered here in this room for the public hearing and at that time we all have our televisions on and we literally were observing history in the making with the arab spurring and we saw the events and the demonstrations occurring in cairo believe even as you're of speaking to this committee and i am just struck by the fact that what has occurred just in this last year. my questions are regarding egypt in particular, and as we were observing that on television, since then we've seen an attack on the embassy in egypt and we also called for braking the 30-year trees iaea peace treaty and in this last yr result elections take place in egypt 175% is now controlled by either the muslim brotherhood or elements of islamists or both groups hostile to the united

states and calls as well for implementing sharia law in egypt. and i just wondered if you could comment particularly if director clapper use it to the committee a year ago that the muslim brotherhood was a secular organization. i just wonder in light of some of those events in the last year do you still stand by that statement of the muslim brotherhood is a secular organization? >> i did not make myself clear in that statement clearly, obviously, and that's a danger of sound bites and all that sort of thing. in a subsequent appearance i tried to clarify that. what i was referring to was to the point behavior within the political system, to participate in elections and this sort of thing. the muslim brotherhood in egypt is not run by religious scholars it is mostly middle class people, but to your point with

this is going to be for us a sheep in wolf's clothing remains to be seen. they have the other salafist groups in a wide spectrum that have emerged as a result have gone in egypt. this is something that we need to watch what the objectives are. there have been calls for the review of this treaty with israel and not surprisingly they're very concerned about that. so, i was not as precise when i made the statement a year ago about the muslim brotherhood as i should have been. >> thank you for your response, and another question about egypt as well, i sense that mubarak was overthrown. the sinai has become a highway for the transport of personnel

and material and the cross border attacks on israel motorists in august and the repeated bombing of the gas pipeline are just the two notable examples that we have observed. egypt also has opened its land border with the controlled gaza and we've to battalions i believe stationed in northern and southern sinai as the lead for some and the observers in charge of ensuring the implementation of the each of israel peace treaty. would you in your estimation say that our u.s. forces are at risk and have the rules of engagement changed and are they involved at all in efforts to prevent a transformation of cyanide into another tender haven or continue to destabilize the peace between israel and egypt? and if so, how come and if not, why not? >> i think at best, unless

director petraeus knows this probably best to consult with the part of defense on your question about the cyanide italian and whether or not the rules of engagement changed i don't know the answer to that, so we will get that back to you. >> congressman, first of all, i think it's important to note in all for interactions with our egyptian counterparts that the egyptian government and gerry shares the concern over the emergence of the challenges in the sinai that some extremists have flocked there and it's been used as a transit point for weaponry and so forth. and indeed our sense is the truly do take this very seriously and we can talk a bit more about that perhaps in the closed session. with respect to the multinational force and observers of the slide is my old area when i was a central commander. unless there is any change there

is just one u.s. battalion and it's in the southern part of the sinai which is actually further away from this area that we are talking about and there's another battalion from another international country that is in the north. again i would refer to the department of defense on the rules of engagement of a lie can't imagine why they would need to be changed to them. they get every opportunity for self protection, force protection and so again i would be surprised if there has been any change. >> thank you, mr. share. >> thank you, mr. chairman. i would like to go back and revisit our southern hemisphere again. mr. nunes has brought up. obviously we almost a field steve in colombia and number of years ago. the united states stepped in forcibly and turned it around and i think everyone here would say it's been a success story.

colombia is coming back. we just entered into a trade agreement that i think is mutually beneficial, but obviously we have a significant problem in our southern hemisphere. venezuela, ecuador, bolivia, central america in many places is a basket that has the highest crime rate in the world. last time i was there i managed to make that list and obviously mexico. 50,000 people have been killed in mexico in the last three years. we had a discussion recently. as horrible as the number of deaths in afghanistan and iraq are, i suspect they may be high year in mexico, on our border, the united states, and that violence is coming across our border along our southern states especially states like arizona, texas we still have problems in

california, and i would like to hear what is our focus in south america? obviously we have significant problems in central america, but we've got big problems right on our border, and these are our friends, and by golly we need to make sure that we can help them out and help ourselves at the same time. i just want to mention i had the caucus and member of the bipartisan group this methamphetamine is coming across the border is the worst drought we've ever seen. it is tremendously addictive. i think 90% of it comes from mexico. the precursors are coming from china, india, everywhere else where they are mixing this stuff up and the amount of money that is being made is obviously very corrupting to the folks of mexico and to the united states we've seen significant problems, so i want to hear of your comments about what can we do in

south america to focus on that problem which i think is a huge national security issue? thank you petraeus too let me start and then ask director mueller and petraeus i think we all share your concern not only as leaders of the intelligence community that as american citizens about the threats and issues that confront us in this hemisphere. and obviously we've been focused on other things with foot to wars and all that sort of thing when we come problems right here in our own backyard. i think you're mentioning of columbia and director petraeus was just there and did a remarked success or from the intelligence perspectives and partnership we forged with the colombian government. we are extrapolating the lessons learned from that in other places not only mexico.

i think it also shows that this is a long hard slog and once a country is willing to partner with you what some of them are, then the work begins. what concerns me is the work in south africa as a highway fuel for the drugs allin north word, and even as we draw down and try to bring more resources to bear, which we can talk to perhaps in a closed session about with the u.s. can do for the partner nations, and i think director petraeus kim share in more detail in a closed session what we are attempting to. >> congressmen, we are quite

honestly very concerned about the numbers homicides in mexico and also for the possibility of the spreading of the violence north of the border. if we are focused on a number of directions. first of all the kidnappings for instance we have a number of kidnapping task forces that are to become our agents on the border work with mexican counterparts. second, border corruption. as you pointed out it's a huge issue both cells of the border but also north of the border, and we have 14 border corruption task forces that are addressing that particular area. if there erie is making sure that the intelligence that we gather, the dea or i.c.e. gatherers or other law enforcement or intelligence agency united states is matched up with that intelligence that is below the border with the mexican authorities by the u.s. intelligence agencies and consequently there is a concerted effort to make certain

that there is substantial information sharing along the border. the last point i would make has been pointed out as the cardinals from mexico have reached into the united states and have seen the lucrative markets quite honestly and not being suffice if to move the drugs over the borders but exert control and have pockets of high cartel personnel inside of the united states and to the extent that has happened we have enterprise investigations who are addressing those aspects of the movement of the cartel's within the united states understanding that the thrust of the fence along the border on the narcotics trafficking is customs border patrol and dea. >> and congressman, if i could, first of all with respect to columbia, you know we really have to give credit some very courageous colombian leaders over the years who implemented a

very difficult strategy. certainly we provided considerable assistance. but it was their police and their military that really implemented the strategy that was developed. with respect to mexico as i think i mentioned earlier this is a delegation here today quite high ranking. i will meet with them this afternoon after we get back to the headquarters i hope we can further our work together noting steps that mexican leaders have taken to develop a comprehensive approach under their current president and to begin building the institutions needed to implement it but again that is when to take a good bit more iaea a lot of hard work ultimately to develop the kinds of forces, judicial structures, corrections facilities and all the rest to be able to implement what is needed. >> thank you. i just want to point out that there is a war going on.

more people have been lost in mexico in the last couple of years and we lost in the vietnam war and it's right on the southern border and it's coming across. so i appreciate your attention to the problem. >> thank you. i have a couple areas that i want to try to cover, and some of it is i'm trying to understand exactly where we are policy lies at least from the united states government in relation to our intelligence responsibilities. i think i will start with the reconciliation process and just some things - we need to understand. is the haqqani network iaea how would you describe the network, director? give me two sentences on its activities that give pause for concern? >> well, the haqqani network which is affiliated with the taliban but probably not an organization that is likely to

reconcile these of course primarily in north waziristan and the tribal areas of pakistan and a very lethal organization that has been behind a member of the most important attacks, those attempted attacks on the base for example in wardak province just south of kabul. the implicated and taxed on a number of our bases and of course on the embassy attack effort as well. they also expressed some interest in reaching outside of that theater as well have been of? >> that's correct there have been over the years indications that they would like to be a bit more transnational. i'm not sure that we can say that we've seen examples of that yet. they are still pretty focused on trying to regain influence over the provinces in which they had historic control during the

taliban time. >> you can only say it's aspirational. islamic absolutely stomach the taliban has expressed some desire to go beyond their operations and it seems to me that seems to be aspirational as well is that correct? >> that's correct. >> the taliban continues today to have some relationship with logistics, finances, recruiting, sharing basis, is that correct? >> that's correct. and indeed as we have discussed before, chairman, there is a syndicate of extremist elements located in some of these areas and particularly in the waziristan not only the haqqani network also some afghan talents and pakistani temmins and al qaeda elements among others. >> some of that is a strong relationship as well. >> deleveraging taliban

structure certainly does encompassed a number of those but all and al qaeda wouldn't be necessarily viewed as part of that although there is a relationship. the haqqani network calls themselves taliban but again will freeze but sometimes to the central direction but not always. >> is iaea the taliban uses acts of political assassination to further gains do not? stat yes, absolutely. >> i just want to cover a few of these quickly. islamic as do other groups. again, the haqqani implemented the movement as well, and uzbeckistan in the northern parts. >> haqqani also uses political iaea >> all of these organizations. >> they've been to set to become successful to some degree. >> the have. >> i just want to cover a few of these to bring to light buying in the fall the taliban held responsible by the taliban were

successful in assassinating the chairman who was the chairman of the afghan hi peace council. going into this year or late last year, excuse me, the district governor of the helmand province was a successful assassination. the member of the afghan parliament and had been former chief of the police that was a successful attack and assassination. the police chief in the kandahar province, about one field. it was not successful, but there were deaths and casualties associated with it. going into this year, the district of american kandahar province was assassinated by the taliban. mohammed, and taliban title leader in kandahar was successfully assassinated by the taliban. the u.n. reports that 462

civilians were assassinated by the taliban in 2010 alone. so you'd argue by these numbers the taliban hasn't abandoned its practice of the political assassination. it's a form of intimidation in afghanistan; is that correct? >> certainly. >> and so one of the things we see in the reports coming out afghanistan is the one thing that taliban has been telling afghans is in fact we are coming back. the united states is leaving. we are coming back. we have got some great cia analysts to walk us through that not all that long ago. so that is a disturbing trend, don't you think? >> it is, certainly. some get so, you can see where many iaea maybe someone who looks all this information might scratch our heads and wonder given the fact after the negotiations started their work

to undermine all of the work of the sacrifice that the united states military and intelligence forces on the ground when some of us might get a little bit cranky about what we are doing when we talk about reconciliation and the fact iaea and you can clarify this we've already stated in the senate hearing that the individuals who were discussed as a possible transfer to the call it the confidence building and i guess what they call is the peace negotiations are deemed too dangerous to release we've established that is that correct? >> my report is it was an agency report. islamic most recently the agency was asked to assess these five individuals, the significance, and the risks that could be incurred by their release not to the afghanistan and pakistan hearing but to a third country

with a varying degree of mitigating measures, and indeed obviously the risk is higher if you have the fewer mitigating measures and lower if you have more of them and that is what the agency provided. >> at one point there's a report that says that the air too dangerous to release. that is i think a couple of years ago director clapper i think is the intelligence community report. >> that's an extrapolation of the determinations that were made by the interagency group on those who would be retained or not from guantanamo. i don't think that was the exact language used but innocence the was the recommendation of the interagency that they would be retained at guantanamo. i have to say by understand your concern with all of this but whether or not we negotiate and with whom we negotiate and the

terms of negotiation is not an intelligence community called it's a policy issue. >> and extend the, director, however, the intelligence the life of the national security council was having access to and i imagine that they're getting access to the same information we are; is that correct? and yes, they are. >> this is important because i want to make sure that what information that we see and why i think from a policy perspective which is at the end of today why we are engaged in this whole debate it's important to have this discussion i happen to believe this is iaea if this happens we crossed a red line that we will never be able to get back. it's a serious doctrinal change for the united states government. i, mike rogers, believes as a member of this committee seeing the information that we collect tracks very well of why this is a bad idea. i just want to make sure that they are seeing what we are seeing so we can come to the

conclusion together and why i think there were so much bipartisan opposition to this during the national ns si consultation if you will with congress so i am just trying to establish basically what we are all looking at so that we can all determine from the policy perspective that this is a good or not a good idea for the national security at the united states. so we understand your version to the policy debate but unfortunately, you fuel the information that policy makers are going to use to make this decision. i'm just trying to iaea >> i understand, and we've made clear that the intelligence community writ large has been a part of these deliberations in the interagency come and of course i don't think that anyone who ever is any illusions certainly not in the administration and there hasn't been a final decision made on this whether this will pan out or not, would but it seems from

the administration point of view worth exploring. >> i understand and i take exception to one comment. i'm not being critical but there have been operational things that have been conducted at this point. so this isn't an aspirational policy change, this is something that is well under way, and it has been at least a suggestion that has been passed along to the very people that we would like to negotiate with. >> that's very different than we haven't really made any decisions it's not really done yet. i will take exception on that point and i think that this is so serious the we get this piece right and i think what mr. thornberry brought up and we wouldn't the vehicle went and told the senate sure we have a right we said by the secretary by mid part of 2013 will be able to make a transition to the

combat role to the training advising will. i can't find anyone here that believed that was the time line over which we were on both from the armed services committee the appropriations and certainly the intelligence community. the was never our understanding so that is the fact of change because if you were going to make it by mid 2013 even by the directors time lines you have to start earlier. so i guess i'm confused about all of this is because the rhetoric of which we are pursuing this doesn't match the intelligence of which we are receiving. we've just clarified they are in fact still using the political assassination. we've clarified by our intelligence sources excuse me that the taliban is in fact looking at this is triumphant, we know their timeliness they have to survive but we've seen reports of the defections to the

taliban but it's all about intimidation that's how we know where they are. in 2006 it may have been in 2007 the pakistani effort i'm going to call the peace negotiations with the tribes and the taliban and fata. are you familiar with that? like what the peace accord. are you familiar with that effort? >> if you talk about the effort with the pakistani, that's correct and was limited to the area of the swa valley with the north west frontier province and the ttp broke that in short order and that's why the pakistani army then subsequently went in and cleared swat delhi in the northwest frontier province, something they continue to hold today and they lost a lot of soldiers in doing that. >> which is important because that negotiation give them breathing space to both

reconstitute, recruit, refinance, retrain and we just saw that as a matter of fact and we have seen that with the taliban over and over and over again, and we are just frustrated in the sense that we have some very classified sensitive briefings on this a long way and i commend the administration for that in the classified setting they were just the opportunity to advise and consult you can imagine how frustrated we are when we talk about it was a little further along than that and certainly a press conference on january 22nd basically alluding to this peace process that i think ha is very, very dangerous to the national security interest and i just felt was important we get this on the record to know that negotiating with people who are associating with this level of

violence is very concerning given that they hadn't even slowed down their political lives as a nation during the course of those very negotiations. very, very disturbing brough. and i hope the packages of the intelligence that we see at least in the hands of the nsc so they can make a wise decision to consent to the advice and counsel of the bipartisan members of the intelligence community to turn this around before i argue that. i just want to talk about iran quickly. director, i heard several times this is so important that the operation of the force tried to conduct in the united states to politically assassinate which is a state sponsor of terrorism act the saudi ambassador by the way for civilian casualties, u.s. civilian casualties was buffoonish, amateur, not well done, but i just want to cover a few facts that i think are

important. the criminal that they approached and mexico, but he have passed a criminal vetting if you will be a pretty good bad guy to be doubled to move weapons, people and conduct operations across the border in the united states? >> it's hard to definitively say, but certainly he had the wherewithal. if not himself to contact others who would have that ability. and so there's been some talk that the way they transfer the money was a bit ridiculous. >> can you talk about that? those accounts were because the fbi was early engaged in this operation which was like a bit of a stroke of luck was not? >> it was handled by the dea and brought traditionally to our attention. >> and so, you can imagine that

surprise in the area and offered it shows up and says i have a deal for you. but that's the dea source. that's not the kind of a information they would normally take is that correct? >> it may not be iaea i think all of us now take whatever information we can. the dea, fbi, but they did absolutely the right thing and understood the importance of this, and we then immediately followed up including carrying the investigational through the point in time where the money was provided for the plot to go ahead. >> i stated my question to the adjustment we were fortunate that the dea had gotten this guy on another matter showed up in the dea was exceptionally on the ball and the fbi to the estimate i might add if i could, going back to the discussion of this had before on this particular issue is this certainly was a voluble plot and it also is representative of the willingness to utilize coxey's

or others to carry out attacks which other visiting character petraeus pointed out a modus operandi of iran. >> director clapper doesn't this get to your point during the senate testimony that the iranians have made a calculation that they could possibly pull off an attack in the united states and might have some capability to do that. and given the aggressiveness and incredible boldness in such an audacious a plot. which they had intended to effectuate here in this city. so we have to be vigilant for more of that. >> that's not the only act that

we have seen globally. the have reached out and other places of the world and have done something similar, maybe not the exact, but they've done something similar, have they not? >> there another instances of outreach through the proxy's and attempts to plot the one in thailand is the case in point. >> so, one of the things that we saw in the reporting as iran's strategic shift to iraq. they believe with the drawdown that there's some opportunity for them in iraq. can you talk about that a little bit? >> i will start. yes, they do. they see this our departure from iraq is a favorable conditions for them and they certainly want to try to exert influence to the extent they can. in iraq i'm not sure the

environment there is entirely conducive to that. i'm sure that clearly there interest isn't in yet. >> welcome they've tried to do this all along. there is no question that they have exercised a degree of influence at varying times since the end of the regime. the fact is the iraqi leaders have no desire to become the 51st state of iran. they want a relationship. iran is always going to be to the east of iraq it's always going to be larger. it has considerable resources of its own but they also remember that they fought a bloody war with each other and that one aspersion the other is arab, one speaks arabic and the other four seats. so the predominant religion in each country is the same again your conscious of the differences and actually the

iraqi is our quite naturalist in their approach so while they will take assistance and what the religious tourism and want a variety of their electricity diesel and other necessities right now at this stage of the devotee development they don't want again to become a satellite of iran but they've been engaged only killing u.s. soldiers in iraq for the proxy what makes that clear also i rockies by the way and they have been very engaged in stealing the sectarian violence that we see in iraq today. they supported groups without question over the years while we were there in the force and they still continue to pay support them now that caused problems and sought to intrude in the various ways in the political realm and the economic realm as well. d.c. the expanded role they felt

they could get a pro iranian regime i don't think there was any love lost and gained but today had southern lebanon as a destabilizing force and now they feel like they could conduct an actual attack in the united states, brazenly moving their operational operations. what is the sense they believe that when we say all options are on the table that they honestly believe all options are on the table? you can see where the narrative from their perspective might be a little different in mind that drives in the intelligence we are getting at the committee is their calculus not looking for u.s. allies clearly but we are making progress there. we have some destabilizing efforts in iraq that aren't going well and afghanistan and general clapper mengin knees welcome to talk about that. so it seems if you're looking at it from the iranian perspective

things are going their way. how do we get them to understand that we are seeing is about all options on the table? >> well i think the change in the rhetoric connected with the street and the initial threats to close it, and i think when we made it clear that that was not acceptable the kind of temper their rhetoric and also by their behavior when the lincoln transit st., suite investors the rhetoric, their assertiveness, but i do think that they have respect for what our potential capabilities rp relating as well the sanctions are obviously led by the united states for having

an effect and having the impact on the economy has never before, so do they take it seriously? again this gets back to what extent the leader of this country or any other for that matter is seen reality. as a matter and understand that it just seems to me it's a little disjointed on the policy front something that i think we need to work out both from the executive branch and iaea if we don't focus together on this problem, it really shouldn't take the congress acting on both of the sanctions bills to get the executive branch to impose sanctions which i do believe crippling but you also have to have a layover. the narrative is they have to believe we are serious when we say all options are on the table. i'm not convinced we are there yet. >> mr. chairman, if i could make a comment quickly on nt and alladi because i think it's

really important that both senators understand that because there's been some mischaracterization in the press, as you know, we look at post 2014 afghanistan. it's not looking at how things develop in the recent years or so other than just how the implications are for 2014 to read indeed, it devotes all of that one to the state of the insurgency over the last year, noting the did lose ground but it remains resilient which is something i think we all recognize. by the way, we did a word search for the word stalemate. it's not in there also, but what it does do is it postulates different levels of support for afghanistan compost 2014 and then assesses what will the situation be like under those different assumptions, and not surprisingly if you put more in you probably get a little more out and so again, i think just very important because as we have discussed before it hasn't

necessarily been characterized correctly. >> i understand that although i read it again last night just to make sure some of this is making cover in our closed session but it is iaea there are things to be concerned about and again i would argue iaea >> there's plenty to be concerned about by the secretary of defense without getting into details in the nie also will lean credence, lend credence, excuse me, to the less than rosy predictions in the nie. how was that for not trying to get around that one. >> i've got it right here as well and i reread it this morning. >> mr. chairman, thank you for having these open hearings. as you know, we have to deal in a classified way to the benefit of our country and national

security, but it's very iaea it's very important for us to communicate as much as we can especially about the intelligence community so people understand what we do what our mission is and we are there to protect our country and not to evade civil liberties or anything of that nature. i think this hearing has been good. there's been a lot of issues and topics to the two areas i would like to focus on and then i will allow us to ask questions first is the cyber threat. those of us who've been on this committee and ask questions what keeps you up at night and i guess if you look at the two biggest threats from where i sit, and i want to hear what you're point of view is is the issue of the weapons of mass destruction and other radical groups that are out there that have the capability to kill people. and the other is cyber. what concerns me about the issue of cyber is that our average person in the country is not really aware of the cyber threats that are out there for whatever reason we know our media writes about a lot of

issues especially the republican primary, but the issues that are out there. and when we have a cyber intrusion or attack or whatever you want to call it it seems like it's not even a front-page story. when nas-daq is attacked and other areas are attacked it really could have a severe benefit. we know that our pentagon iaea we know that our business sector iaea i will just as an example in october, 2011, the national counter intelligence executive indicated that china and russia are responsible for the extensive u.s. computer networks and theft of u.s. intellectual property. we go further with the knicks had an immeasurable impact on the national security and to the foreign diplomats deployment. we need to be concerned as a country, and i think it's important that we start talking about the impact of the

cyberattack 66 cyberattack sar almost considered like a war sometimes we call every intrusion an attack but we know on a regular basis thousands and thousands from different countries iaea my concern would be the radical extremist group paying italy and packard to go in and take down in major banking system to be we north triet gunning major bank for a couple of days so what i would like to hear especially you first director mueller with your concerns are as far as a catastrophic attack. i know that alexander has talked about it and you and i have had discussions but i think the public needs to know here how serious this form is we have secrets their being taken and we have a lot of issues that are out there but how about for the national security of our citizens? >> let me start my prefacing remarks by saying that i do

believe that the cyber threat will equal or surpass the counterterrorism in the foreseeable future and the effort that we put on the counterterrorism the same intensity, breaking down of stovepiped and the light has to be undertaken with regard to the cyberattack. and quite obviously there are a number of targets and ways of looking at it. on the one hand, taking on the electrical grid, the power grid or the ability to bring energy or other materials from the pipelines and the like all are dependent on iaea air traffic control, financial system. there's very little we do in this day and age is and associated somehow with the internet. the theft of intellectual property, the theft of r&d, the theft of the plans and programs of the corporation for the future all of which are vulnerable to being exploited by

a tax so on the one hand you have to defend the infrastructure and on the other hand you have to identify as director clapper was saying the attribution is as critical as anything else. what is somewhat unique in this venue is that you don't know whether the attack on nasdaq or rsa or google or sunni or someone else is undertaken by a russian or chinese actor. that is a state actor ian an organized criminal record could be a terrorist group, it could be just an organized-crime group. in organized crime group may be associated with an intelligence service for a country or it could be just an organized criminal groups looking for profits to record feared it could be that high school student whose down the street upstairs who has hacking capability and has hacked into a financial and institutional and can bring it to its knees. so for us in the community coming you do not know the a traditional working on the

program. isn't it a program in which you undertake the investigation? is it a national security of that? is a criminal yvette domestically? which is required us to come together and to develop mechanisms much as we did with the terrorism arena to share information. .. the last plug i put in for the legislation is a data brief reporting requirement that

requires those institutions that have been hacked, have been intruded into our mandated to report that because they are not reported we cannot prevent the next event from happening. the 47 states with different reporting mechanisms are asked -- there has to be one mechanism that requires that reporting structure. >> as director of the fbi there was a strong statement to say that you feel that cyber attacks could be more serious to our national security than counterterrorism and by the way i happen to agree with you on that. does anyone else on the panel have an opinion as to the threat and how serious it is? >> as we discussed i think we all recognize this is a profound threat to this country, to its future, to its economy and its very being and the intelligence community across the board whether foreign or domestic, and i think i have to acknowledge

yet the other components to the government, dod, doj, department of homeland security all recognize this and are committed to doing our best to defend the country. >> absolutely the same, a very serious threat. >> general burgess? >> i identified myself with a previous remarks. [laughter] >> okay, well you know one of the things our role in congress is committee oversight and it's important i believe that we move forward quickly. and i'm going to talk a little bit about our bill and how we got to where we got and where we need to go. we work very hard for over a year to find a bill that would very quickly move us to a level where we can at least start protecting our country. whenever we pass legislation in congress sometimes they're unintended consequences so one of the things we try to do is

make a very small bill and a very important decision as i said before in my statement, that members on my side of the aisle and congressman thompson and congresswoman schakowsky, congressman langevin and carson schiff worked very closely and we felt strongly about the issue of civil liberties and sometimes we felt that we worked through and test a bill with these issues there but still in this business sometimes you don't always deal with facts but perception so you have to be very careful when you are trying to protect your country that you don't deal with this issue. so that is why this bill is an 11 page bill that we feel strongly needed to move forward. i know already there is some pushback and i want to read a statement i have that the possibility that a military arm

of government the nsa could become the gatekeeper. information from the marshall industrial sectors is a concern about privacy and when i see this i know that comment was made by another member on another committee and looking at this issue and we purposely left that open for the administration because we understand sensitivity. as much as i respect nsa we have to understand the perception of what is out there and just as an example the sopa issue and that is what we have to do. highpoint and i want to ask you this is we have to move quickly. there are a lot of bills out there on cybersecurity and there are few people i've worked with us for years and now it's time to move quickly because i want to ask you director mueller this attack could be a month from now and really we don't have the tools and we believe because of general clapper you talked about the pilot program and our bill is based on a program that

works. and then we deal with the issues of civil liberties as it moves forward. do you feel we needed very quickly to move forward with a very small bill that gives you the authority to protect this country? do you feel a threat could happen tomorrow or a month from now? >> well, the attacks are happening daily. some are a lot larger than others and particularly when the attack start coming on the infrastructure whether it be the financial or the electrical grid or what have you, they could well be devastating. a great deal has been done in terms of breaking down the walls between the various agencies and working closely with nsa and the same way we work closely now with the cia. we would like to address a catastrophic attack should one happen but our effort is the same come in the same way we try to prevent the attacks in the

counterterrorism and the terrorism arena, our goal is to vet the attacks and where we really need the help us in the resources and the support, the legislation in the two areas i talked about sharing, intelligence and data breach would give, data breach reporting would give us the ability not just to investigate after-the-fact that also to prevent the attacks before they can have the devastating impact that we anticipate. >> switching to another subject quickly, because the public needs to know this. we have always been concerned and i know you have on homegrown terrorism and i think that when leaders were successful in bringing awlaki from yemen an american citizen who spoke as it was to recruit homegrown terrorist to have the magazine and how to make a bomb, that we came a long way but it's still a

very difficult issue to identify. homegrown terrorists who will try to kill americans. could you just very quickly talk about where we are, as the result of the death of awlaki? are we still under great concern that especially yemen is training people to come to the united states? >> well, removing bin laden and removing awlaki was contributing substantially to reducing the threat around the world and the military and the agency and the others contributed substantially to the safety of the american public. over the last two years what we have seen is an increase in the lone wolf activity principally because you have the internet that can be utilized for radicalizing and can be utilized for instruction, training, organization and the like.

with the growth of the internet, the growth of the ability of a lone actor to undertake attacks has grown substantially. if you look at the work we have done in the last couple of years and the plots we have thwarted in almost every one of those the internet has played a role and we can anticipate that happening. not just international terrorism and not just terrorism affiliated with the ideology of awlaki or al qaeda but also individuals and domestic terrorists who want to kill people for other reasons. it's not to say the threat has been removed in yemen. it has not. yemen is a hub currently, individuals who want to undertake terrorist attas and it's up there with pakistan and afghanistan and somalia. >> thank you. no further questions. >> thank you very much. thank you for your time. i want to commend general burgess for the second time in a row avoiding heavy fire.

well done, sir. we we will get you in closed session. there are three generals in this one -- did you feel insecure today director mueller? >> it takes three generals and one fbi guy, doesn't it? >> i was going to the congratulate general clapper for making the right decision at the outset and that is joining the marine corps. >> we are going to have an abbreviated closed session to keep you all on schedule and we will offer you some refreshments on the way down so you can take a minute to take a breath on the way down. we will reconvene within a few minutes. we will reconvene at 12:30 in the closed spaces for an abbreviated closed session. [inaudible conversations]

[inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations]

[inaudible conversations] [inaudible conversations] [inaudible conversations] hear some news from the road to the white house. comedian and reality tv show host roseanne barr has thrown her hat into the ring and she will pursue these presidential announced for the green party. the former sitcom star resides in hawaii where she runs a macadamia farm. the green party holds a national convention later this year in baltimore. and taking a look at the road ahead tomorrow nevada holds their caucuses well maine against theirs, running through

the 11th. vittori seventh its it's caucuses in colorado and minnesota as well as the missouri primary. former cbo director douglas holtz-eakin said the president health care law will be more expensive than what the congressional budget office projected. his remarks are part of a conference hosted by the national association of health underwriters, looking at the future of our health care system. this is just over 20 minutes.

[applause] >> no standing ovation? [laughter] wow, my people. i want to thank everyone for the chance to be here today and to spend a little time talking about the costs associated with the affordable care act and close with a little bit of speculation about its likely future and how it might evolve over time and then answer a few questions that the audience might have. i will warn you in advance that discussing the cost of the affordable care act is not really suitable for polite company and i am also the former director of the congressional budget office and it's my job to stand up and talk about apocalyptic things so this'll been entirely depressing presentation. there are four kinds of costs associated with the back. the first or the budget cost and i won't walk through those and talk about the jobs the cbo was burdened with and how i think

about the scoring of the affordable care act but past that i think they're significant costs that are not often recognized. there cause i think that have missed opportunity costs associated with the bill. there is an genuine economic policy issues and economic costs that are going to burdened the united states and its ability to continue in its current form and then there has been severe political fallout and i think an unmistakable implication for our political future. i want to touch on each of those and answer your questions. the first question that always comes up, is this really going to pose the -- close the budget deficit or not? i want to say just as clearly as i can at the outset that the cbo has received an enormous amount of criticism, much of it from my people, conservatives in america, about their scoring and i think they did an absolutely superb job. i think they conducted themselves in exactly the fashion that they were asked to

and unfortunately the cbo in analyzing it operates with golden handcuffs and those golden handcuffs say that the cbo is not allowed to ever say two things about a piece of legislation. it cannot by law ever say that's not a good idea and i cannot ever say it's never going to happen so it is not allowed to ever judge a future congressmen whether they will stick to something and take the law at face value and they are not allowed to opine as whether it's a good or bad idea. many of the holes that transform the affordable care act from something that is on paper talents over 10 years to something which in my view is going to widen the already frightening deficits we face come from the fact that the bill contains literally a menu of budget giddings, probably the finest budget gimmicks we have seen. the congress is gilded budget gimmicks. they brought all their accumulated expertise to the

bill including the class act which during the budget window it ignored all the spending that would happen after that by providing cushion in the budget. it roll some student loans savings always a central discussion and health policy savings to the bill counting on cutting about $470 billion of the medicaid or medicare over the next 10 years. these take two forms. one of which is medicare advantage which we can debate over the policy of that and particularly a program that is disproportionally used by low income and minority seniors but also here provider cuts and we have seen movement on provider cuts before which is that congress says this is expensive and we are not going to do it. at impeaches on the ability of beneficiaries to get care. the congress rethinks that usually by a vote in their home office and they put the money back in. the bill can't say it's

implausible that you are going to take $500 billion out of medicare. they came to a point where if we do this at his written we will see hospitals closing all of america and instead they have to pretend those cuts will take place. if you put that money back and you will see an explosion of costs in the bill. the cadillac tax on high cost land that you claim you are going to impose, well we saw how that worked out during the legislative debate. every time you said you're going to do at the union said don't you dare so they kept wishing it further out and making it look less important. it may never happen and if so what happens to the deficit? so they're a whole bunch of reasons to believe that the bill as written will not actually execute and we will instead see something that instead of having $500 million in cuts and $500 billion in taxes to pay for a trillion dollars worth of spending we will not get those cuts and we will not get those taxes and even worse, the one place where i would disagree on

a professional level with the cbo's analysis of the bill, i find it implausible that we will see only a tiny number of americans and up in the federal subsidized exchanges. it will be the case that people making as much as $70,000 will be eligible for subsidies of $7000, 10% of their income and there'll be there will be so much money on the table that asic arithmetic will say you know an employer can stop providing insurance, give the employee a raise, take their after-tax rays and their subsidies and buy insurance that is more generous than that which their employers providing them and they will be better off. the employer can pay a penalty and still be better off and thus both the employer and the employee will be ahead of the game and they will end up in exchange is a matter of economic arithmetic. the only loser there will be the american taxpayer because if you end up with as many as

35 million americans in those exchanges the cost of the bill explodes. there are many scenarios by which that could happen. it could be up your employer drop. could be some employers never get into the insurance business. it could be as we are finding out employers don't offer family coverage any more. they will simply offer employee coverage and the spouse and children will be left to get insurance on their own. one way or another if you put enough taxpayer dollars on the table people will show up and they will use it and this bill will be far more expensive and then the cbo envisions. is my deepest concern about the future of the affordable care act. time in the nation's history when we need to spend less, comptroller that more, we are going the wrong direction and i think that is a central cost of the bill and i want to come back and belabor that point until you pass out in exhaustion. [laughter] point number two is there a severe opportunity cost here. in my view health care reform should have begun with medicare and medicaid reform. that was the agenda for this.

[applause] by using medicare is a financing mechanism placing medicaid as a mechanism for expansion of coverage, the bill so intertwined in the programs with issues that it takes off the table and any in any reasonable way sensible reforms the two programs that are demonstrably broken. the medicare program right now runs a gap between premiums taxes than in spending going out of $280 billion. it is the fiscal cancer, and that program will not survive for the next generation of seniors to use it as the key part of their social safety net. it is a disgrace for it country of his greatness to have a program in such disrepair and to leave it unmanned it for extended periods of time and that is what we are going to do. [applause]

medicaid as this group knows, medicaid is probably worse. many of them beneficiaries cannot see primate care physicians and end up in the emergency rooms. they are, medicaid is a tax on the federal budget and certainly a bigger tax on the state budget. it's entirely a definite -- deficit finance a we have two key elements of our safety net that will not survive and we are fixing them. that's a real cost to the affordable care. we spend our time on the wrong problem and then we did it we didn't take on one problem it we needed to take on which is what is the cost of health care in america? what is the cost to actually produce, consume and deliver better quality? insurance and i know i'm talking to, i'm not just playing to the house, insurance is a sideshow in the american health care system's problems. our problem is the bill is too big. [applause]

so this is why we hate the policy guys in the political world. that is not our problem, don't do that. [laughter] and so we missed that, we missed a chance to take on bending the cost curve and we are now still burdened with the fundamental problem which is spending grows faster than the economy and we haven't taken out on at all and what we have done is layer on insurance in the health insurance more expensive, less flexible and in and less high-quality for americans. that is a real cost. that is all the good news. [laughter] now here is what i'm really worried about which is this economy is struggling along and if you pretended there wasn't this debate over health care and health insurance and just ask yourself, is this good economic policy, it is really hard to imagine that this is what we

need to put americans back to work and to deliver to our children the same things that we inherited, an economy that is larger and stronger and the standard of living is reliable. it is a bill, which has in it hundreds of billions of dollars in taxes. it is a bill that has two new entitlement programs, the insurance subsidies in the contact which may meet as the speaker say an entirely timely demise in the near future. at a time when we already have entitlement spending problems. you can look at the research from around the globe at countries that have our problem in our problem is slow growth, high debt and the gdp is 100% as the speaker said and projected to explode over the next decade. we have bad debt problem, what is the recipe? the recipe is keep taxes low and preform if at all possible

pro-growth and cut spending. not all spending is created equal. needed to preserve the core functions of government national security basic research infrastructure and education, those things which have been around since the founders of this republican you need to take on the scale of government employment and unnecessary transfer programs. you have to have an efficient safety social net. this bill from the perspective of doing what needs to do is exactly the wrong direction. it sets a programs which will not survive and sets up new taxes which might include taxes on medicare tax, net investment income the kind we are saving and investment in new technologies and capital that we need. it is an enormous regulatory push that is simply almost impossible to fathom and here i want to take just a second of shameless self-promotion. i am president of a think-tank american action form. we have a web site american action form and we have a health care reform piece but we also

have a regulatory reform piece and i have a fabulous web site that tracks the implementation and implementation cost of the affordable care act and it's one of the most impressing things he will ever see in your entire life. is such an enormous burden between the mo of our, this sort of basic benefit package delegated to the states, the affordable, the health care organizations, the list of kinds of regulatory intrusions, federal rate review. this is a recipe for bad economic in the insurance sector. employers cannot bear those higher costs. we know how this works. workers pay for those higher costs and they don't get the raises they otherwise would and they don't get the jobs they otherwise need and beyond the employer community the economy as a whole will continue to be burdened with debt saddled with higher taxes and taxes the do not promote growth and inhibits the accumulation of raider wealth in the future.

berman economic policy point of view this is exactly the wrong measure at exactly the wrong time. this country is spent 15 months of doing this instead of solving the problems of growth. so, i -- [applause] i want to close with three points. there are subtle pieces of this that we do not yet understand how they will play out. the subtle piece number one is i worry about what it does to the quality of innovation in the medical sciences, in the devices, the pharmaceuticals, in almost every aspect would have been some of the most vibrant internationally successful aspects of our economy. an example of this but not the exclusive problem is the so-called independent payment advisory board. if you think about the job the ipad was given and let's not

denigrate the people that may or may not ultimately serve on this, the job it was given was find is something we can do in a year that will bring medicare payments down to a target but basically in one year what can we do to hit the target? no matter who they are, no matter how well-intentioned they might be there and many people who will one year hit the budget cost and in fact the typical would be we are not going to cover it at all. the things most likely to get singled out for reduced reimbursement were no revision whatsoever would be the expensive things. that would be the newest most innovative technologies and therapies that are hitting the medicare population. they will be deemed unaffordable and taken off the table. if you are an innovator developing a device for therapy or biologic and at the end of all your hard work you have a payer whose basic approaches to randomly taxi or cut you off

entirely that is not a super innovation incentive. and i worry that what this bill will do taken as a whole, given a heavy regulatory burden, heavy tax burden and the subtle innovation incentives is that will actually harm the core reason that we have been so successful in this country. we have had greater innovation, greater technology, greater productivity than any other large a developed country and this is the kind of policy that undercuts that and that is my deepest concern from an economic point of view. the second thing i worry about is what it has done for policies. the united states of the role the clock back everyone recognizes the united states needed health care reform. it needed a way to make patients patience is under their care and it needed a way to give them high-quality insurance options and affordable cost. there was no disagreement about that. instead what we got was a bill which meets my definition of a bad bill because the policy was bad in the politics are worse.

most bills and the united states are bipartisan in nature because they are durable. they are informed by the best ideas of both sides and this bill does not meet that task. partisan law is bad law. one of the things that happens in this is we failed to get the white house leadership necessary for a bipartisan bill. now i worked on on the camp -- ducaine campaign. i say this not as a criticism of the president himself but is an observation about the way our system works. only the white house's position to go to his party and say you know, this is a bad vote for you. we will show the campaign in your district, that judge you always wanted, whatever it may be they can do that. only the white house can go to the underside and say we understand this is a priority and we don't sign unless it's in there. they are the only one that has the leverage. we saw a supercommittee struggle

last fall. fall. it was a sincere effort. i worked a -- closely with both sides. they tried hard to get a deal. they failed miserably because the congress alone can't surmount the hurdles necessary to get to the finish line. only the white house can bring it there and we now have failed during the decade when it was crucial to fix the entitlement programs and fix the health care problem to get the leadership to do it and now we have to do it when we are already -- growing slowly and so we have a much harder problem that i think literally be more difficult and require greater not lesser leadership. that is the great political cost and i don't know how it plays out but in a world where -- was full it is now bulging. [laughter] everyone's eyes are on the supreme court case and my organization has filed three amicus briefs about the individual mandate and the economics of it about the medicaid expansions and the

proper burden placed on the states. .. >> you say you have to stop

the but then they don't cover things are reduced reimbursements but that violates the beneficiary because they don't get all the wanted. the only way they solve that the there is a two the provider community and beneficiary "this is it" for this individual so do something sensible. those are the efficiencies that characterized the other 85% develop coordination of care, take advantage of information technology to build the model to get it right to. but i am looking the evolution is a real effort to develop private sector to pursue those kinds of strategies and then we make a big change that we need to be successful. in the process we will shed much of the programs that we cannot afford, the affordable care act, the counterproductive that does

not address the problem and many bureaucracies which in one of the best reports written by a government agency that said we are accountable. i love that. we will not see this. it cannot survive is written. there are some elements that i think would be beneficial and one is the exchange. the market place to allow americans to genuinely shop for their options and make choices. if designed well they could lower the cost of insurance for many individuals in be afforded many more choices. businesses and individuals. that should be the goal. a better insurance market for americans to be delivered in short supply and we need to fix it and do it in a sensible fashion. that is enough on any cbo director on anymore it -- morning. i'll be happy to answer questions.

thank you. [applause] [laughter] i want the picture of less. my first and only standing ovation ever the. >> the question is, what do estimate the overall cost to steady and implement and run the exchanges will cost? >> to study and implement and run the exchange's? you have about $100 billion. i am not sure we can do with. i am quite sure that they cannot be done has written by 2014. there is a legitimate case made that they may not be doable as written and here's

why. asking for hhs and the irs to each month in advance identify out of the 300 million americans those are eligible of the insurance subsidy, i calculate the correct amount , deliver that subsidy to the current state of residence to the insurance company of their choice on they exchange and there is no way we can do that right now. it is not doable. that is a legislative fantasy. we have air raids on payments with much simpler programs like the tax credit took three years to implement it we did not even come close to getting it right. i don't think that could happen right now. you could throw a lot of money at it and still not get right. the intrusiveness necessary

to get it right may not be acceptable by the american people. we will have situations where suddenly an employer will find out that one of his workers has sent a spouse to exchange and say we didn't have this problem or my wife lost her job it is a very interested if the employer employee relationship. we know congress is limited to the clawback of individuals who get subsidies and appropriately because it turns out they were making them afforded and do not have to pay it all back but have yet to be gratify get my money in virginia they go to massachusetts and how they reconcile across states? and not advertising a broader opportunity but wondering. [laughter] i think the budget cost is the type of the iceberg but not even close what is necessary to get this right. thank you. [applause] >>

cement half of all energy will come from non fossil fuel sources. >> the first to use nuclear power for transportation navy secretary on the reasons for a new energy standard for the fleet. >> we're too dependent on potentially more volatile places on earth to get our energy and we are susceptible to supply shocks it even if we have enough we are susceptible to the price

shock. win with the libya situation is starting in the price of oil went up $40 per barrel that is almost $1 billion and the only place we have to get the money is operations or training so the ships steam less we train the sailors and marines loss. >> more with the navy secretary sunday night. >> congressional lawmakers investigate with the mf global collapse yes j. the house financial services subcommittee held hearings testifying in the first panel was the former ceo who warned jon corzine of the rest but the concerns were dismissed a few months later he was replaced in mr. grossman says my views certain they played a factor in my replacement" . this was the fourth hearing

on the above global collapse it is three hours 20 minutes. >> the committee will come to order. you will have opening statements 10 minutes to each side and also although not members of the subcommittee joining us today members of the full committee asking unanimous consent members of financial-services could join us today to participate in a hearing. good morning. this is our second hearing on the collapse of the mf global. anna the purposes of these hearings is to find out what

happened why a very old company ended up in bankruptcy creditors and shareholders and unfortunately customers lost money. we may have additional hearings one of the things you hope to accomplish from the series of hearings from the investigation we have been conducting is to publish a report to give a time line and findings of how these customers lost their money and how a company that was allowed to slip through the regulatory groups the knowledgeable some of the problems going on, we will hear from people today inside the organization and from those who were outside the

organization. we have mr. stockman and mr. roseman here today officers inside the organization and the bottom line is to figure out what we will sense what we have seen in other problems in the marketplace is there are those who say if we had dodd/frank and placer this regulation or this, and people jump to conclusions to try to overreact. we want to get to the bottom of what happened then make a finding. one of the things i think we have seen when we look back at the 2008 crisis coming people said there was lack of regulation but the truth

is had retaken the time to ascertain what happened and, we could have found 2,008 have been did not because we did not have enough regulation but regulators not doing their jobs comment marking behavior that was not acceptable. the purpose of this hearing and those of the past is to get to the bottom of that so i look forward to hearing from our witness is today. with that i yield to the ranking member. >> thank you. another series of this issue i have not met any person that knows much about everybody that i knew i simply asking questions and for me as a supporter of dodd/frank i have no idea yet whether it could have or

should have addressed this issue. there is not enough knowledge on the table yet. for all i know it could be simple basic criminality or excessive risk. i have not talk to anybody who has drawn a conclusion yet. i am here to learn i did not come here today or the next hearing or with those conclusions that is why i am here i have a lot of different questions i fear or feel we could be ahead of the curve for a change we may have questions that probably cannot yet be answered but it is important to ask them to see not just in this one instance it is always bad for any company to lose $1 billion. if it is the criminal aspect, that is not what congress does come of those

are other people. we are here to see if this particular case represents any threat to the system. if others are doing it. holes in the regulation or need for either enforcement or regulation, are not. that is what i am trying to ascertain hopefully we could make a few more steps to do that. with that i yield back. thank you, mr. chairman. >> thank you mr. chairman i believe this requires are persistent attention because there were many failures expose a month the failure of the ceo bill year to heed warnings of internal risk managers and a clear failure of the credit rating agencies to identify the risk mf global had taken on

but this affects our constituents and their money. i have an e-mail that i just received this morning a substantial amount of still missing funds. the largest three credit rating agencies they are major market movers one s&p issued the warning of global soon collapsed. of course, it was risking bets that causes mf global to collapse but the action taken by moody's and s&p hasten the result. it should be argued the troubles are identified as soon as possible and then it is so precarious validated those actions there is a demonstrable poll -- demonstrable pattern of this happening again and again mike lehman brothers

general calm to have major market disruptions that securities radiated favorably by the until the minute the house of cards collapses but if we could avoid these abrupt shocks to the system, the financial system will be sounder and investors will be more confident. when a situation like mf global occurs it is our responsibility to figure out what happens and considers bork-- reforms to make sure does not happen again i appreciate you facilitating this hearing and i yield back. >> thank you gentlemen. now mr. boyce is recognized. >> three months after the initial hearing and still we have most of the questions unanswered in terms of what happened to the 1.2 billion dollars of customer funds. the most pressing public policy and address is of course, there breach of segregated customer funds

and the shocking part has been around 75 years according to the regulatory community not difficult to understand today's difficult to understand or in force. the foundation of the cftc protection regime. one question is how did the cftc fail with the most basic task? despite what some have said or may say again today, i will just give this perspective from the cftc commissioner who said the perception that mf global happen because of lack of regulation is mistaken with the community exchange act and regulations require mf global to segregate futures customer funds. also there were calls for coverage for the futures and swaps market. this would be a mistake to

expand the safety net to the vast market would be unworkable and compounding the moral hazard problem is hitting the sector but it does appear there should be several steps to be taken the focus is on improving market discipline and the basic regulatory functions are met by the agency's. thank you for holding this hearing hearing. >> thank you chairman. i have a little bit of a different perspective on this. there is no question that customer funds being transferred, speaks for itself and never should have happened. period. the law is clear but on top of that it is further compounded by one of the biggest travesties in market history. who made a decision to allow

the bankruptcy not under the commodity bankruptcy laws? what we did is somebody stole their money, then those customers were hit even worse because the bankruptcy laws will work against them. that is the biggest travesty definitely in market history and undermines the entire u.s. market certain a commodities and futures. with that i yield back. >> >> i believe that is all the opening statements. >> they will be made a part of the record. >> now to introduce our panel today, the former chief risk officer and also told mr. michael stock men from the mf global ltd. before we proceed we ask you two raise your right hand.

do solemnly swear and affirm the testimony you're about to give will be the truth the whole truth and nothing but the truth? they do. without objection year-end statements will be made a part of the record and you will be recognized five minutes to summarize your testimony. >> chairmen representative neugebauer and representative capuano and members of the subcommittee i was formerly the chief risk officer mf global through january 2011. thank you for the opportunity to testify today i hope my comments will build on your knowledge to the events that led to the collapse of mf global. >> please call your microphone closer. >> regarding my background i started my professional career as the aerospace

engineer after graduating unit university of delaware. as the aerospace engineer. 1994 i received a degree from the business school and pursued a career of financial services by first jolla named the financial products with the risk analysis function the following year i moved to the trading team to co-managed the u.s. dollar option portfolio for a number of years before turning to risk-management. >> then i joined the bank of montreal and then with the investment activity in the united states and a mandate and the management activities and capabilities of the bus. then in 2004 i became the chief risk officer of the

americas with the at risk management capabilities to support the growing brokerage business. in each of these experiences i lead anchor native significant efforts to do best practices policies come analytics in support of business is to bring full transparency and in governance across the organization. august 2008 i joined mf global as the chief risk officer reporting to the asea responsible for the department world wide. are also had a mandate to elevate the risk-management capabilities support strategic objectives and to support the recommendations made by two consulting firms that were hired by the company. as the c0 provide leadership for and oversaw the framework across all categories of risk. including sharing of the monthly enterprise meeting.

further, a member of the executive management team to provide regular coo reports to the board. then i coordinated closely with the management and the board to implement the new comprehensive framework including the establishment of new risk management committees and policies that and the risk appetite statement to associate delegations of authority across all categories of risk for, among other things i coordinated the efforts to implement new analytic severs measures, strengthen the 24 hour monitoring of risk and comprehensive controls across the organization and with the ceo to establish solid risk-management drop the company. with out -- was part of my responsibility i reviewed -- reviewed their exposures and then to approve the risk appetite to

the board and management. both executive management board received a monthly report that detailed exposures with the risk appetite at approved limits. as coo i presented requests from the executive management along with the associated press. regarding the sovereign debt position and mf global had country level credit limits and sovereign limits in place to control exposure of all activities in all countries as well as specific sovran exposure. with respect to spain, portugal, ireland and greece there were limits in place to support the european brokerage activity prior to mr. corzine joining mf global. this was well within the risk appetite when chris -- conditions began to

deteriorate in greece and i believe march 2010 less than $500 billion total across the issuers. june and july 2010 received a request to adjust the elements. i review the position and limits in detail with business heads and mr. corzine for our express might caution and the outlined credit default swaps market and along with political and financial uncertainty in the relevant countries. while mr. corzine and i have different views of different default risk we agreed upon $1 billion total across the name sovran. by mid september i recalled the position it had been at 1.5 $32 billion a day express my increase concern to the capital risk associated with the growing position and began to express caution on the

growing liquidity risk. around this time the strategy was looking at the maturity trades given the profitability of the transactions. and the importance of generating earnings. at this point* i indicated to mr. corzine we need to consult the board for the approval of increased sovran limits for the risk is related to the approved risk appetite. as such the decision was made to consult with the board to discuss a strategy, the risk and the sovran limits subsequently they were presented to and approved by the board. by late october they were approaching 3.5 $34 billion. and i was asked for another request of the board to increase their total limit at 4.$75 billion but representative this point* not only was i concerned about the capital at risk

but given the size now concerned with liquidity risk relative to risk appetite taking into account the risk that with other positions held by the company. i began to discuss my eight concerns with mr. corzine and others. however the risk scenarios for challenges that were impossible and at the end of 2010 board meeting, i presented it two request along with a detailed analysis of potential liquidity risk stress scenarios park ave include potential variation for price changes of securities and as well as potential initial margin calls. the scenarios with the sovereign those across all sovereign and counterparties and provide the analysis of the market to highlight the significant capital risk associated with unresolved

issues in europe. during the meeting of risks were debated and challenged by some members of the board has not been plausible. ultimately conditioned on the limits which is why i left the company i would be happy to answer the committee questions. >> you are recognize. >> chairman neugebauer, ranking member representative capuano and members of the subcommittee, a figure for the opportunity to make this brief statement. i am deeply saddened by the bankruptcy of the math global and the impact on customers, shareholders and employees. although i was only at the company for approximately

nine months i hope my testimony will help the committee to obtain a clear picture of what happened at mf global while i was of the company. work and financial-services industry more than 25 years but of particular no-fire served as a risk officer for over a decade at ubs rising to the position of chief risk officer for the americas for that institution. since 2006 was a member of the advisory board or i also served as a scholar in the fall of 2009. i began interviewing for the position of chief risk officer in the fall of 2010 during the interview process i was informed mf global was in the process to transition the business model to a full-scale investment bank and they were seeking a new chief risk officer to assist with that transition.