olicy arena. the fdic, certainly has been at center of efforts to contain the financial crisis. certainly, very much at center of the legislative drafting efforts with the

dodd-frank act. certainly picked up some major new systemic risk responsibilities under dodd-frank. sew we're delighted to welcome chairman gruenberg to speak to us today. i suspect he will be telling us something about the fdic's new responsibility under dodd-frank and how those are being implement the. very kindly agreed to take a few questions after his prepared remarks. join me in welcoming, chairman gruenberg. [applause] >> all right. thank you very much for that kind introduction. art's an old friend. he served as a valued advisor to us on any number of bills that we considered on the senate, on the senate banking committee while i was there. this is a bit of an old home week. i know steve harris was here earlier.

gary gensler just left. professor goldschmidt is here, all who played central roles in the formulation of the sarbanes-oxley certainly and then, and in its implementation as well. so it's a pleasure for me to be here. you made reference to former fdic chairman sheila bair, who i think was really an outstanding leader of the fddic. sheila told me two things before she left. she said one, being chairman of the fdic is very tough job and i can now vouch for that. and the second, so she was right on that. the second thing she told me was, everything will be okay before she left. that she wasn't quite as right. [laughter] >> tell you europe? >> and some other things as well. but, if nothing else, it's been an interesting, it's

been an interesting and challenging experience. and i think the role of the fdic during the course of this financial crisis, really has been a very important one and i think, if i may say, i think history will look back upon the performance of the fdic over this past three or four years and i think the performance will hold up pretty well. two things i really wanted to talk with you about this afternoon. i want to take just a moment to talk about the condition of the banking industry. just earlier this week on tuesday the fdic released its quarterly banking profile. i just wanted to share some of the results of that with you. and then i will spend really the remainder of the time talking about the big new responsibility that the fdic has under the dodd-frank act which is the, the responsibility for the resolution of systematically

important financial institutions. that is really one of the key new authorities provided under the dodd-frank legislation and i believe is, is a crucial, if we're to deal with the issue, issues of systemic risk and too big to fail and under the legislation the fdic really has the correspondsability for carrying out that very, very, challenging responsibility. but if i may, let me start, for a minute, on the, on the condition of the banking industry. 2011 represented the second full year of proven performance by the banking system. the latest data as i indicated, we released it earlier this week and our quarterly banking profile indicate that banks have continued to make gradual but steady progress in

recovering from the financial market turmoil and severe recession. that unfolded from 2007 through 2009. during the past two years the banking industry has undergone a difficult process of balance sheet strengthening, capital has been increased, asset quality has improved and banks have bolstered their liquidity. i think it's fair to say that the industry today is in a much better position to support the economy through expanded lending. however, levels of troubled assets and problem banks are still high. and while the economy is showing signs of improvement, downside risks clearly remain a concern. the fdic data does show a continuation during the fourth quarter of last year of a trend in overall improvement in the condition of insured institutions.

industry earnings have grown over the past eight consecutive quarters. the percent of noncart loans on the books of fdic-insured institutions has declined for seven consecutive quarters, reflecting improved credit quality. the number of institutions on the fdic's problem bank list declined for the third consecutive quarter. that was after five consecutive years of increases in the problem bank list. the deposit insurance fund which had been as much as $20 billion in the red moved into positive territory as of june 30 of last year and continued to increase in the third and fourth quarters. and the fdic is forecasting significantly fewer failing banks this year than last. so the overall picture is really fairly positive. however, and this is an important point, most of the improvement in earnings over

the last two years has been the result of lower loan loss provisions, set-asides that the banks make reflecting improving credit quality. as quality of loans have improved they have been able to lower their reserves but future, gains will have to be based to a greater extent on increased lending, consistent with sound underwriting. prudent loan growth is a necessary condition for a stronger economy. you can only generaters by reducing reserves for so long. at some point you have to start making loans again. that's why we view the fourth quarter growth in the industry's loan portfolio, which is the third consecutive quarter of loan growth. as a hopeful sign. the loan growth that has occurred so far has been led by lending to commercial boroughers. loans to -- borrowers. loans to commercial, large and medium industrial bow

rowers increased in the last six quarters. in the fourth quarter we saw growth in small commercial and industrial loans as well. the fdic just began collecting quarterly data on the small loans to business in the march 2010 call report. so our history here is brief. since that time this is the first quarterly increase we've seen in small cni loans. so with the longer term trend in increased cni lending with larger companies and up tick we saw in the fourth quarter with regard to small loans we take that at least as a hopeful sign. we will see how things develop over the course of the year but this is something we're following of particular significance. now if i may, let me turn to the fdic's new authorities under the dodd-frank act relating to systemic

resolution. as you know the fdic has been given significant new responsibilities under the dodd-frank act to resolve systemicly important financial institutions. specifically these include an orderly liquidation authority to resolve the largest and most complex bank holding companies and non-bank financial institutions in necessary. and a requirement for resolution plans that will give regulators additional tools with which to manage the failure of large, complex enterprises. before discussing our efforts to carry out these new responsibility is, i would like to try to place these responsibilities within the broader framework of the way the fdic's resolution activities regularly work together with bank supervision and in responding to the financial difficulties that fdic-insured

institutions. i think this is really quite an important point to make. the issue is not just, do we have authority to place systemic companies into a public receivership process. the issue is, really, developing a, an integrated system of bank supervision combined with bank resolution that allows us in effect a framework of early intervention with these institutions to avoid failure as well as the capacity to manage an orderly failure necessary. i want to just go through that with you for a minute if i may. it's important to recognize up front that resolution is always the option of last resort. the purpose of the supervisory process is to make sure that institutions manage their risks so that the risk of failure is minimized. the goal is to have a supervisory process that can recognize problems early and

encourage management to address problems in a proactive way. when an institution's supervisory rating or capital adequacy is downgraded, the institution is subject to a variety of supervisory responses intended to encourage management to take prompt action. these supervisory actions may include specific criticisms of risk management practices, formal or informal enforcement actions and orders to raise capital or seek merger partners that can bring in new capital and management expertise. under the current arrangement, should the condition of institution deteriorate. fdic planning process, in conjunction with the ongoing supervisery process and in close coordination with primary supervisor of the institution. this would include undertaking deposit insurance don't load for

deposit insurance purposes and developing a detailed plan for the institution. the goal as i indicated is to have a process for resolution, that will hopefully avoid closure of the institution, but that will, enable the fdic to prepare to carry out an orderly resolution if necessary. in such a process motivated by the credible threat of failure, the managers and investors of problem institutions have an incentive, one to work with regulators to address problems sooner rather than later. two to access new sources of capital if available. or three, sell the institution in whole or in part if necessary to salvage some value of the institution. the threat, the credible threat of failure is nothing like the prospect of a hanging to focus the mind.

and what you really want to do avoid the resolution process if possible, but, if there's a belief that there won't be a resolution, that in effect removes the incentive to address in a proactive way, the problems of the institution to avoid the costs the costs of failure. our goal in regard to the fdic to new systemic resolution responsibilities is to adapt this framework to systematically important financial institutions including their holding companies and affiliates as well as designated non-bank financial companies. this will obviously pose significant new challenges for the fdic and i'm going to get to that in a moment. but the basic goal is the system. resolution is the option of last resort. what is needed is an integrated process of supervision and resolution planning for systematicall

systematically-important financial institutions that will provide for early supervisory intervention to avoid resolution but that will be prepared to carry out an orderly resolution if needed. the fdic outlined in the paper how this process might work in the lehman brothers case. actually refer you to our website where you can take a look at that paper, if you're interested. now let me say a few words about the work we have done to prepare ourselves to carry out our new responsibilities under title two of the dodd-frank act. the fdic has taken a number of steps over the past year-and-a-half to carry out its new systemic resolution responsibilities. first, the fdic established a new office of complex financial institutions, to carry out three core functions. the first function is to monitor risk within and across these large complex

first from the standpoint of resolution. second, conduct resolution planninging and the development of strategies to respond to potential crisis situations and third and quite importantly, to coordinate with regulators overseas regarding the significant challenges associated with cross-border resolution. when you're dealing with our very largest and most complex institutioning you are jenningly dealing with companies with very significant international operations. and if you're going to deal with an orderly resolution of these companies cooperation with foreign supervisors in these highly-inat that greated global financial markets really becomes essential. for the past year this office has been developing its own resolution plans in order to be ready to resolve a failing systemic financial

company. these internal fdic resolution plans developed, pursuant to the orderly liquidation authority provided under title 2 of dodd-frank, apply many of the same powers the fdic has long-used to manage failed bang receiverships, applying them to failing systemic important-financial institution. if the fdic is appointed as such a receiver of such an institution it will be required under the law to carry out a orderly liquidation in a manner that maximizes the value of the company's assets and insures that creditors and shareholders appropriately bear any losses. the goal is to help the institution without putting the financial system itself at risk. this internal resolution planning work is the foundation of the fdic's

implementation of its new responsibilities under dodd-frank. i will about to get to in a moment, about to get to a description of what we're doing in regard to living wills that the large companies themselves will be required to prepare but people get confused on this. the living wills that the companies themselves will prepare will largely be a compliment to the internal resolution plans that frankly we have been working on for the past year-and-a-half and, for many of our largest institutions they're in quite advanced state of development. now in addition to the internal work, the fdic is largely completed the basic rule-making necessary to carry out its responsibilities under dodd-frank. in july the fdic board approved, this is july of last year, the fdic board approved a final rule implementing the orderly

liquidation authority. this rule-making addressed among other things a priority of claims and treatment of similarly situated creditors in a resolution of a systemic financial company. in september of last year the fdic board adopted two rules regarding the resolution plans that systematically important financial institutions themselves will be required to prepare. these are the so-called living wills. the first resolution plan rule which we, was a joint rule-making under with the federal reserve, this is joint authority wehe d, implemee requirements of section dodd-fr. this section requires bank holding companies with total consolidated assets of $50 billion or more and certain non-bank financial companies, that the new financial stability oversight council has the authority to designate as systemic.

this is really crucial new authority that dodd-frank supplies. previously, prior to dodd-frank the fdic had the authority to close insured banks. we did not have authority to close the heading -- holding company of the institution or the subsidy aries of the holding company. one crucial new authority of dodd-frank is the ability to place the consolidated entity, the bank, the holding company and the affiliates into a public receivership. that is authority that did not exist before. and in addition, the new financial stability oversight council can designate any non-bank financial company as systemic. by doing so would be subject to the full prudential provision authorities of the federal reserve and would, could also subject it to the systemic resolution

authorities of the fdic. if you think back to 2008, the first three companies that triggered the crisis were bear stearns, lehman brothers, and aig. two investment banks and a insurance company. so the importance of the new authority really speaks for itself. so these companies will now be required to develop, maintain and periodically submit resolution plans to regulators. the plans will detail how the top tier legal entity and the enterprise as well as any subsidiary that conducts core business lines or critical operations would be resolved under the u.s. bankruptcy code. complimenting this joint rule-making between the fed and fdic, the fdic also issued a final rule requiring any fdic-insured depository institution with

assets under $50 billion to develop, maintain and periodically submit plans outlining how the fdic would resolve it through the fdic's traditional resolution powers under the federal deposit insurance act. people always get confused about this. the new authority under dodd-frank for resolution really goes to the holding company and the affiliates. we've always had the authority to close the bank. we now are requiring come bring men triresolution -- complimentary resolution plans. one addressing holding company and affiliates. one addressing the insured institution. hopefully we have a comprehensive resolution plan for the consolidated entity. these two resolution plan rule-makings are designed to work in tandem and compliment each other by covering the full range of business lines, legal entities and capital structure combination within a large financial firm. both of these resolution

plan requirements will improve efficiencies, risk management and contingency planning at the institutions themselves. they will supplement the fdic's own resolution planning work with information that would help facilitate an orderly resolution in the event of failure. we expect and i should say the companies themselves which are now in the process of developing these plans, i should say thus far have been quite cooperative and responsive and two i think are actually recognizing some benefits. it's a little bit like cleaning out your attic or baflt, developing resolution plans. you find out things going on you hadn't thought about in a while particularly for the large complex institutions. we're finding it thus far a fairly constructive process. we expected the process of developing these plans and living gerri willis be a dialogue between the regulators and the firm. it is not a simple check the

box exercise and we'll have to take into account each firm's characteristics. . . the new rule of the first round of plans will be required from the largest companies of $250 billion the first plans will be due in july.

it is a relatively short time frame working for the largest institution. i should note and i will conclude on this point, developing a credible with capacity to place a systemically important financial institution into an orderly resolution process is essential to objecting these companies to meaningful market discipline. without this capability, these institutions, which by definition pose a risk to the financial system create an expectation of public support. that distorts the financial marketplace given these institutions of competitive vintage lot allows them to work on even greater risk and creating an unlevel playing field for other financial institutions that are not perceived as benefitting from a

potential public support. i would suggest to you that there is a very strong public interest in the fdic dissyllable the capability to carry out its new responsibilities and credible and effective way. that is indeed our top priority going forward. thank you all very much. [applause] >> do you have any questions? yes. >> i'm at boston university. why think about living wills? i think they are sort of part disclosure and part strategic and i wonder if anyone in the agency asserts any sort of strategic behavior on the part of the banks when they are

wrapping these things. for example, maybe they would want to actually give you a dhaka it to make it harder to results of the you can solve them, you've got to save them for the example. >> i don't think that's going to work. this is the beginning of a new process and we haven't received the first plans yet so in a sense it is going to be a learning experience for the firms and for us. i will say this far this much i think one certainly we in the federal reserve have the joint responsibility but for the rulemakings and the supervision and enforcement of the rule i think are obviously approaching it with great seriousness and a high sense of priority fahey and the the company's understand really this is a new legal obligation that they have under

the law and at least in the initial engagement taking it quite seriously and constructively with we will see how the process plays out and what we received in the first round in july and take it from there if at least as far we are operating on the premise both sides will approach this and i hope will be a productive exercise with on both sides. >> currently there is some limited deposit insurance for deposits in the non-interest bearing accounts, and i'm wondering, that is supposed to end december 21st, but i also understand that there are proposals pending to extend that insurance, can you give us some idea of what the likelihood that that unlimited insurance would be extended?

>> i should note the insurance coverage you are referring to which was enacted as part of the dodd-frank act such as the statutory requirement adopted by the congress, so it will be a decision for the congress on whether or not to extend it. that authority expires at the end of this year, and it will really be the congress' judgment whether to extend it or not. i would certainly expect the congress would have to consider both the condition of the industry and of the economy in making that judgment, and we will certainly be prepared to provide input from the fdic. i think it is premature at this time to guess as to what aspen institute might be. >> is it something that you

would support however? >> it will provide input to the congress. >> you have expressed a good bit of interest and concern in the recent months about the condition of the community banking industry and the future of the community banking industry might be they've certainly been very hurt by the real estate downturn about is there a pathway for them going forward given the important role that they've played in the past what do you see as the future of the community banking industry? >> that's the important question to the to a certain extent the role of the community banks and our financial system has been somewhat underappreciated i think. you know, community banks are generally defined as balanced

assets under a billion dollars, and those institutions are over 70,000 come of the 7500 or so insured institutions in the united states come 7,000 or the community banks with assets under a billion, those institutions account for a little over 10% of all the banking assets and they make up a minority of the assets to the system, but they account also for nearly 40% of all the small business lending that all insured institutions do and as you will understand, credit for small business is absolutely essentials to job growth and the performance of the economy as a whole, and the nature of small-business lending, at least a lot of it is quite labor intensive and highly customized. you know, it's the kind of lending that the large

institutions generally are not interested in doing any more. they are interested in doing sort of standardized products. the customize lending of small business is really required in these instances are particularly for the community bank and the way community banks to their business. and so if we did not have a significant and capable community banking sector in the financial system, there would be a real consequence for the financial system and the economy as a whole, and i think that is the more somewhat underappreciated, and particularly during the course of this financial crisis, most of the attention has been on the big systemic companies, and clearly for the fdic standpoint and the rest of the regulators to be an ongoing priority such

as talked about, but there really is a need i think to pay some attention in effect to the other end of the spectrum for the community banks because it really is quite important, and i will tell you we are in addition to the systemic solution responsibility, the fdic is making the future of community banks or other major priorities over the course of this year, and in part because the fdic is the lead federal regulator for the majority of community banks in the united states. in fact we just hosted a conference a couple of weeks ago on the future of community banking and we are now going to be doing a number of things in the course of this year including the series of round tables with community bankers, and each of our six regional offices around the country we are going to do a round table with community banks in each of the region's. the division of research to

undertake an effort to review the development of the community banks in the financial system over the past 25 years to gain a better understanding of sort of what's happened to community banks over that period, what had been the problem, and what business models had been successful. as far as i know it's the first review of this kind that has been done which somewhat surprisingly unless we're is the study with community banks so it actually seems like a useful get for the fdic to try to fill and i think we will learn some lessons the will be useful than a point away for word for the community banks, and i also asked our division of risk-management supervision and their division of depositor and consumer protection to take a

look at the way that we do the rulemakings and examinations of risk management and compliance for community banks to see if there are ways a margin we can do them simpler and more effectively to make our jobs easier and make the bank jobs easier while maintaining our supervisory standards. that's really going to be a major priority over the course of this year and we hope by the end of this year we will have to beat the people to report back on the progress we've made so far. so the question -- is important. maybe one more. >> one more question. yes? >> as for compensation, one of the prime suspects of the financial crash, the federal reserve put out a report half year ago that found that none of the top 25 banks connected compensation with risk, but there were no risk metrics three

life and section 39 of the fpi act provides that the regulators regulate compensation, and now dodd-frank had section 956 which prohibits compensation that, quote, encourages inappropriate risk. the statute mandated that you adopt a final rule nine months after enactment. it's now two years. >> i'm aware of that. [laughter] what i can say is week of a proposed regulation that would establish for the first time as a regulatory standard compensation in regard to the executive compensation which i think is an important principal to establish, and without getting carried away i'm hopeful we can reach closure on that rulemaking because i agree with you, it is important. >> please join me in her thinking mr. gruenberg. [applause]

[inaudible conversations]

as one of the most powerful men who ever served in washington and the 20th century. 11 presidents 48 years from woodrow wilson to richard nixon there's no one like him and a great deal of what we know what we think about is meant in legend. commodity futures trading commission jared genser recently compared the commission's new regulatory role under the dodd-frank act as having a cop on the beat. he spoke to law students about the new consumer protections as 45 minutes event took place at george washington university here in washington, d.c.

>> welcome, everyone. welcome to george washington university law school and our program at the center for law, economics and finance where we've been discussing financial reform. my name is lawrence cunningham, a member of the faculty here and it's a great pleasure for me to introduce and welcome during chancellor, currently the chairman of the commodities futures and trading commission's, an appointment he received and took in may of 2009, and a free difficult time in our country's financial history to undertake a very difficult job. i think the country is fortunate to have had that appointment, and we are lucky that he is in that job today. his experience will speak to why we are lucky. he earned a bachelor's of science degree from the

university of pennsylvania's were in school, suma cum laude back in 1978 and the next year a master's of business administration from penn. she spent the next 18 years working at goldman sachs, the investment banking firm in new york where he became a partner and ultimately served as the co-head of finance. then washington got him in 1997, when he took up a position at the u.s. department of treasury, first serving as assistant secretary of the financial markets, and after that serving as undersecretary of domestic finance. in those important positions, he worked very closely on financial policy matters with secretaries of the treasury robert rubin and then lawrence summers. his distinguished service said the part of the treasury earned his receipt of the alexander

hamilton award the highest honor of the department. capitol hill backend next in our next financial crisis when senator paul sarbanes, the head of the senate banking committee, recruited mr. gensler to craft the reform legislation of that period in 2002, called the sarbanes oxley act. in between this busy time, mr. gensler managed to co-author a fine book targeted to ordinary americans about investing and finance called "the mutual fund trap." at bipeds americans in the ordinary complex world of investment as a critique of the mutual-fund industry and some of its practices and an endorsement for an approach to investing called indexing. i won't elaborate on the book

but you can buy the book for yourselves at your favorite book seller. but we are delighted and honored to have chairman gensler with us to talk about financial reform and what it means. so, thanks very much, chairman gensler. [applause] thank you very much for that very kind introduction and mentioning of the book. i'm wondering whether -- i don't think it is in bookstores anymore. [laughter] amazon, yeah. was kind of a neat experience. my kids will read it one day. but good morning. i'd like to thank all of you for allowing me to speak here. i think it is the third time that i've had the honor to come back and speak to this group of mix of students and academics and practitioners. and i've always found the

experience a good one. and i am pleased to discuss why financial reform matters. what it means for investors, consumers and businesses in america. but let me start by saying with the commodities futures trading commission means for investors, consumers and businesses in america as maybe not all of you are aware of who we are and why it even matters. at its core, the mission is to ensure the integrity and transparency of something called the derivatives marketplace, where the futures market and now the swaps market and along with our big sister, the securities and exchange commission we have the market regulators in this country, and perhaps since the 1930's since president roosevelt asked for the regulators and so if somebody is wondering why, it's president roosevelt in the 1930's and that crisis. and each part of the economy relies on a well functioning derivatives marketplace. future in the swap markets

provide for a way for farmers and ranchers initially the leader producers and manufacturers, retailers, service companies to lock in a price or a rate and manage the rest. that is at its core these are about locking in a price at harvest time the leader looking in a rate hike in interest rates or currency rate of something in the oil markets and so these markets are critical for commercial companies and the real economy, and let me mention the real economy is that part that employs 94% of the private sector jobs in america that's the non-financial side. it's critical for the part of the market. so that they can focus on what the do best. what do they do best? the service customers, they produce products, the enervate and invest in our economy and country point to lower the risk and lock in the price of the risk of something. that is what the mission is and why it matters. the benefits of the derivatives market go beyond the companies in the economy.

it also goes to the americans whose retirement security and pension funds and mutual funds benefit. it goes to americans depending upon community banks and insurance companies because the pension funds and mutual funds and insurance companies will also want to lock in a rate of interest or currency or commodity, and they benefit from transparent market places as back in the 1930's president roosevelt asked for transparent marketplaces for something and most americans didn't know about the wheat future and corn future. combine these markets are very, very large. $340 trillion notional amount. represents $22 of hedging or yes may be speculating in the futures and swaps market place for every dollar that courses

through our economy. let me repeat that $22 of futures and swaps for every dollar of goods and services that runs through our economy. by every measure that is pretty darn meaningful for investors, consumers and businesses in america and that's why it matters to get the finance reform right as well. future in swaps markets nearly every aspect of the economy. the third, the price at the pump to our mortgages and credit cards and retirement savings, and given how important these markets are come it's of course essential that they be transparent, competitive and free of fraud and manipulation. the cftc is discharged over the futures market place. that since the 1930's to about 60 years to get that through congress from the time of the invention of the futures market. the swaps market place invented in 1981 to about 30 years to get regulated. it's actually progress in the historical context.

but in 2008, the unregulated swaps market helped concentrate risk in the financial system and as we all know that still out to the real economy. the real economy that employs 94% of the private sector jobs and affected every business across america and every consumer across america and every one that tilts the swaps played a role i may just remind you of aig. everyone of us in this room got hurt by that crisis to read the crisis led to 8 million americans losing their jobs millions of families losing their homes, thousands of small businesses shuddering, and three years later we still face a challenging economy. and in 2010, congress responded, along with the president, the hard work of many, many people with passing the dodd-frank act which expanded our mission at the ftc to now oversee the u.s. swaps market place, the market place that is eight times the size and far more complex of the

market we used to oversee. the three goals to keep them simple, three key goals of the parts we oversee in the dodd-frank act, one, bring a transparency and competition to the market. one, transparency. two, protect against wall street risk, spreading out again over the rest of the economy. the lower risk, number two. and three come enhance market integrity. transparency, risks, market integrity. on transparency why does that really matter? transparency and competition in the market's lower the cost for investors. it does in every market. transparency competition. it could be in the health markets, it could be in the auto markets, the oil market. it lowers some of the cost to the people using the product. and that nearly $300 trillion notional side of the u.s. swaps market though remains the largest dark pool in our financial target's. i see harvey here. you probably developed door

pulls on the security market. this dwarfs the door pulls on the security market with respect, my friend. the dodd-frank act squarely addresses this why shifting some of the information advantage from wall street to the rest of the economy. and it does this in a number of fundamental ways actually. but it provides the public information of the pricing and volume of every transaction once it's completed, the so-called post transparency. it does so also by providing all market participants the opportunity to come together to transact on the transparent and open competitive trading platforms, so-called free trade transparency. so after the transaction and before the transaction. and these trading platforms will mean that the end users, investors and speculators benefit from seeing available bids and offers and get the provision of liquidity. it'll all even goes further by providing the public with a daily valuation over the life of

all clear swaps and in addition it provides greater information to the regulators. one can have an effect. rules to actually benefit if they are enforced. the cftc has completed seven of the nine reforms to bring such transparency to the swaps market. the commission already has begun receiving position and permission from the large traders and the physical commodity markets including the oil and energy markets to bring the light and shine on this market place for the first time. in addition in starting this july, the public will start to get reporting on every transaction or nearly every transaction and what is called the real time public reporting of all that different from what is in the corporate bond market place and something called the trace reporting. bye contrast, prior to 2008, none of this. none of this was in the largest indoor pole market and now to

the public regulators will start to get information. financial reform also means lowering risk of loss reposes to investors and consumers and businesses across america. dodd-frank reforms does this entryways comes this is the three ways to lure rest. one, through bringing transparency, as i just discussed the transparency in and of itself helps low risk. number two, by mandating that the standard transaction, the standard swaps to be brought into financial entities called clearinghouses. and tree, by actually regulating the dealers in this space because they were not regulated before under what was an assumption that they were banks, they were kind of regulated anyway. that assumption didn't work so well. clearing houses have lowered risk in the futures market by standing between no buyers and sellers of these contracts and guaranteeing each party against the failure of the other party and by the clearing houses have to be overseen for comprehensive

risk management. they've worked to lower risk for a long, long time. in fact, in contrast to this past century, there's been many bank failures. we've lived through this great suppression and the 2008 financial crisis. and clearinghouses have to be managed well and have a vigorous oversight, they are far better than the alternative of leaving this risk and the banks. dodd-frank financial reform also mandates that the swaps between financial entities or 90% of the financial transaction could possibly move into the clearing houses. ..

>> i think fundamentally we follow congressional attack and allow in users the opportunity to choose rather than being swept up in regulation, they are the enormous benefactress of this transparency. if the financial system has lower risk. investors, consumers and business in america also benefit for the first time from comprehensive regulation and oversight of the swap dealers themselves. the cftc has begun this reform.

we passed three rules, to register these entities, to make sure they're better sales practices when they transact with the marketplace, particularly with pension fund and municipalities called special entities in the law, and we have also completed roles with regard to the own risk management or into business conduct, including firewalls between their trading and research side, and i know you had a panel earlier on implications of sarbanes-oxley for dodd-frank. this is one of those reforms that sarbanes-oxley that was picked up from the security side and moved over to the commodity side that somebody can't have an oil trading research efforts or influence the trading desk, and vice versa. we're going to build on these by finalizing capital and margin rules, and segregation rules for these dealers as well. financial reform further mean something to investors, consumers and businesses in

america, you see the theme repeating itself, through market integrity. as was the burdens that may arise from excessive speculation. markets work best when you actually can have rules of the road and a cop on the beat. we learned that in the 1930s in the reforms in the air in the securities and futures world. so market integrity is critical. on the dodd-frank act closed a significant gap in our authorities to pursue manipulations charges in the marketplace. one by extending into swaps, and two, by nearing the securities and exchangsecuritiesand exchany to prohibit reckless use of broad-based manipulative schemes. i assume the lowest in the room know what i just said. i learned it but i never went to law school. we also have a new whistleblower authority where people can come in and point out the abuses. and also directs us to establish

aggregate position limits for both the futures and swaps marketplace for the first time for the energy, agriculture, mineral markets. we had limits through 2001, and then they were backed away from. and in october of 2011 we completed the rule so that no single speculator is able to obtain an overly concentrated position in the market. now, full and effective implementation of these financial reforms, the best benefit is public does, however, necessitate funding. i can't finish the speech by not mentioning it. but about 700 people at the cftc were smaller than her sister agency with about 4000 over at the sec, to give you a sense of scale. we are also only 10% greater than we were at our peak in the 1990s. and in the meantime, the market that we historically have overseen, you know, the corn and wheat futures and the energy

futures and financial futures, that market has grown fivefold, and we have grown 10%. that's efficiency. that's a good use of taxpayer dollars. but now congress has said where to take on the swap marketplace which is $300 trillion in size, and not do it with any more people. that's fundamentally what congress has said to us and, unfortunately, that's where we stand right now. the cftc will continue working hard and effectively to oversee the futures market and implement reforms for the unregulated swaps market. and this year we will finish the rules of the road for the swaps market and a thoughtful and balanced way. but without sufficient resources, the nation cannot be assured that this agency can oversee the futures and swaps markets, and the end users, because fundamentally this benefits all and users and their consumers and customers, we can ensure that they get the benefit of transparent markets, lowering

risk and enhance market integrity. the financial crisis was devastating for investors and consumers and businesses in america. dot frank responded to the crisis with reforms that brings transparency to the market, brings greater integrity to these markets and financial reforms benefits the companies and the real economy that provide the private sector jobs. that 94%. it benefits all of us in this room as taxpayers so we don't stand behind future bailouts. it benefits everybody that has a pension fund or a mutual fund and once that fund to be able to invest in a more transparent market place. so i was a kind of benefits just about everybody, possibly with the exception of a few people that benefit from keeping this market dark. but most of us really, really did benefit from this reform. and i think that was the nature of your conference you wanted me to kind of see why i think this

matters. so some have raised the concerns that these reforms will raise costs for end users. i say not true. i say in users of the big beneficiaries here, as long as we continue to get the congressional intent right about end users not been caught up a definition here or a definition there. let us not forget the far greater cost overall, the 8 million jobs that were lost, the millions of homes that were foreclosed upon, the hundreds of thousands of businesses that didn't make their budgets and didn't make their plan. and that's really what reform is all about, and what it is so necessary. and with that i thank you again for inviting me. you can see i can care about this do. i believe in a. i think it really matters but i would be glad to take questions from the participants, and afterwards i'm going to be available for the members for those to stay outside. [applause]

>> so chairman gensler, do you feel comfortable taking questions? do you feel accountable calling on folks did was absolutely. as long as you introduce yourself, tell me your name. >> jim cox. duke university law school spent i've also. i have read some of your papers over the years spent hopefully he will still answer my question. [laughter] >> housing would argue, the press has lost her reports the result of regulation in this area which is dried these transactions offshore, but the risk will remain here, particularly among financial pashtun i'm not a commodities person. i just wonder what reassurance can you provide that the president is wrong on this be? it is true that risk and money knows no geographic border or better. it's a click of a mouse or an algorithmic trading system that sends it around the globe. and that is why we here have

been working so closely with the europeans and asians and australians, on financial refo reform. but i do think that we can't forget the financial crisis that we have here, and that congress moved ahead with the president to say we've got to shine a bright light in these markets. i think that the american benefits by that. if you transact here, in this country, you have a u.s. party, even if it is a cross-border transaction, the u.s. party has to get the benefit of transparency and the benefits of lower risk. if the transaction happens of course, you know come in china that's another matter. but if it's cross-border and it really affects the u.s. people, then we've got to bring that transparency. and i also feel very encouraged by the progress europe is making, canada, japan is already passed their law. i'm actually flying this weekend for yet another international

meeting on monday and tuesday on these matters. so why so we got to get it right to bring transparency and protect the public year. we are working actively internationally and there's been good progress there as well. >> chairman gensler, i'm john with the trade financial and also a member of the adjunct faculty. we heard earlier this morning back in the context of legislation drafting, sometimes mistakes can be made if actions are taken -- >> title vii. [laughter] >> no, that's not where i'm going. if actions are taken to quickly. and i would say perhaps the latest example of that would have been possibly the mf global situation where money was being traded from accounts that

contained both mf global funds and customer monies. and so do you see, to try to prevent something like this happening again, that you should have a complete segregation of client funds and firm funds? if not, how do you prevent another mf global for mapping? >> let me just say i'm not participating in that matter because it's an ongoing investigation that i'm not just debating in. but in terms of the overall questions that you're asking, congress really, with a focus on the crisis, gave us one year to complete the implementing rules of these financial reforms. now, it's nearly two years since congress passed the law, so for us or we're taking our time. i think we're doing in a balanced way. we're taking a consideration comment to speak with 28,000 comment letters and summaries like legal briefs. summer 300 page long comment

letters. some our one page, thankfully. we have had 1300 meetings, and you can go to website. listen, we've had 16 roundtables. where courtney with other regulators around the globe and that hundreds if not, approach in 1000 things with other regulars. so we are doing this in a thoughtful balanced way but we're also doing it with an eye towards a need, the american public needs this reform. with regard to segregation, that's a core foundation of the futures and swaps world. we tightened up, rightfully tightened up in the summer where customer funds can be invested in something that i felt for these last two years we needed to be your we proposed back in 2010, and some people said slow down, cftc. don't tightened investment of customer fun. it's not really dodd-frank. and i'm very proud of the staff that recommended it. and commissions that support it

through out. we finalize that december. we have enhanced the clearinghouses by something called gross margin. we in january finalize rules for the clearinghouse segregation of funds in the swaps marketplace, which was a historic move where there's going to be legal segregation down to the clearinghouse that didn't exist earlier, yet to exist in the futures market. so i think we've made some very good progress we also just completed two full days of public roundtable to hear from the public what else can we do, and to the extent the consensus forms, the consensus first among the staff and commissioners but to the extent that can census form will seek public comment on further reform. >> up your and then back in the corner. >> there some concern that the big bang dealers who have historically dominated over-the-counter markets are going to try to dominate some of

these somebody's newscenter counterparties and other clearing facilities. is the cftc and maybe a sister agency trying to do that, nation from oakley from occurring? >> a number of things. you're right, these market, the swap markets have been rather concentrated. around something called the g. 14. you might've thought it was countries, but it's a group of 14 dealers around the globe. there's a lot of things that create a more access to the market, democratization of markers but i truly believe that when you bring access to markets and transparency to market you get greater competition. i think it's why there's been pushed back. why there's a lot of thoughtful comments from the financial community opposed to this. they are being rational actors. you should the information advantage to the public by shunning a lot -- a light on the market. you provide equal access.

access. that's the open access to clearinghouses, and access also to the trading platforms. so that's what we've done. we finalize rules last october on the open access to the clearinghouses. significantly took down some of the barriers. there were, frankly, they sort of were put there in place at one time for risk management purposes, but upon further reflection probably not needed in the same way. we are looking at some rules in about a month on a very technical area called client clearing documentation, and it is a very important rule for access. and it seems like the comment letters were five or six to one, but you can imagine the one out of five of one out of six on the other side, you know, frankly from some of the dealers because these client clearing

documentation's rules are so critical for access to the market. so those are some of the things we are doing. >> i am a financial sector analyst, and i'm a member of the nukes aside as he could and was and i served on the rights committee, and socially responsible investing community and the committee for improved reporting. spent congratulations for all that. >> they cut me slack when i wasn't working and they let me do these other things. so my concern however is related to the power of bank management to in effect proliferate the contract, inflated their balance sheets with these contracts and the capability and effect of this proliferation of contracting which the boards utterly failed themselves to rein in. and so you can gain the income stay with the unrealized non-cash gains. quantitative easing but i'm curious what power you would

have, the commission has, to be able to service some drained from management, especially the enter banks, because they're pretty abusive. so the agency stopped eating. they had just been pretty much been able to get away with what they pretended they have been -- where can you step in and clean up this mess? >> thank you. there's some of that you addressed is addressed in a role that we finalize last week, and others, pieces of what you raise are really around with the security and exchange commission does with generally accepted accounting principles. but that which we've done is financial reform as congress passed and said we should put in place rules about risk management, recordkeeping, reporting and firewalls. and so we completed these rules

last week about the enter the risk management of the desk, which includes of course the risk management of the usual things you'd hope it would include, interest rate risk and liquidity risk and currency, et cetera. but it also includes supervision. very key rules of the road about responsibilities to supervise the desks and so forth, or to the policies and procedures in place for that. and firewalls between the trading site and the clearing side, and firewalls as earlier mentioned with research. but the second piece that you're talking that really relates much more i think to the security and exchange commission authority, and ultimately the folks in connecticut that set the accounting standards. they are still in connecticut, right? yeah. and i guess even the public, the pcob that you heard from steve harris who was here earlier, because a lot of what you're talking about is also

accounting. but what we are able to do is really say you've got to have supervision and things have to be brought up. the second thing i would say is transparency in markets, the more that's on a transactional basis reported to the public makes it a wonderful thing for the accounts when they are trying to see what are the values of things on the books. because everybody benefits by the discipline of seeing where the last transaction occurred. so you take a very dark market, 300 trillion notional dark market and he moved to something like i was a like the corporate bond market where you i shall have to report each transactions. that changes a lot of the ability to manage the valuations. >> warren buffett only has like 300 of these instruments. i don't know what the notional of that is, and granted he's a much more cautious investor, so to speak, but he called them in

effect financial weapons of mass destruction whereas the banks, because there was no regulation, have been able to again just abusively contract, call it dating, call the agency self-feeding, but are you saying do you think this can serve to restrain some of this proliferation? >> i think the transparency is a critical piece of risk management as well. the transparency of markets shines a light inside the country -- company on the value of the transaction your booking either that day or last year. and so that's a critical piece of this. trans-penn's hill to the injures but it also helps in the risk management of these institutions. i had a lively discussion with mr. buffett last year when he called in to tell us to keep doing what we're doing. so i kind of, that was encouraging.

>> you mentioned the aspiration that 90% of the contracts will be cleared on clearinghouses? >> 90% this is based on bank of international sentiment system sticks, approximately 90% of the net notional amount is between financial entities. so about a third of the markets between dealers to dealer, about 55% is between the dealers and financials, and nine or 10% is what we call in users. not all that 90% will come to clean because some of it won't be standard enough for the clearinghouse. >> but that exemption, some people have expressed a concern that that is the loophole that could end up swallowing the rule. so my question was, what steps do you think the cftc will take ultimately to get to that 90% goal? >> again, it will be less than 90 because there really is a part of the market that is customized and legitimately customized. but whatever portion of those 90

points can come to clearing can be standardized will have to go through a period of public comment as well. and i would envision that this determination of what's called the clearing mandate, or what is clearable or standard enough, our hope is that that will begin sometime in the spring. the clearinghouse is just in the last two weeks have done the first draft submission to us, a large clearinghouses. in february they did. so we are starting to walk through that. the interest rate swap market right now, there's a clean house out of london that clears, i think it's a quarter of a quadrillion, meaning it's like $250 trillion of dealer to dealer swaps. the energy swap markets, the to u.s. clearinghouses, and a lending clean house, between the three of them clear the vast, large, significant sums in the market place. credit default swaps but credit

default swaps but i think is of a quarter to half is already clear. that's all voluntarily but it gives you some evidence as to how clearable this marketplace is. particularly in interest rates in the energy markets, where clearinghouses have been set up for about 10 years to do so. >> i'll go here and then there, there. >> could you explain under -- >> could you give me your name? >> jeff. heidi capital, how are you? can you explain the cost-benefit analysis regarding the application of dodd-frank? in other words, under section 15-a of the commodities futures act, companies are refusing to supply cftc at times information. in other words, how has the ct supposed to create let alone implement and then way and distribute force regulation a cost-benefit analysis as required by dodd-frank? >> well it's actually, just to

sit a little bit more on this. under the commodities and exchange act, not dodd-frank, we are required to consider cost benefits, not analysis, just to give you a little technical side. but all the special people take these things to court. and they will, that's part of our democracy. and have. so, we as commissioners when we do a rule or to consider the cost of benefits along these five factors in this section 15-a, the commodities and exchange act, and we do so, when we go out in the promotional stage would ask a lot of questions and we try to seek public input on both a qualitative and quantitative aspects of it. and as jeff said, we get some input, but often we don't get a lot of input. part of that is because commenters are a little bit hesitant to give away their information.

part of it might be that they don't know yet. there's a very new regime. but what we did is we go through the comments. we go through our economic analysis, chief economist, and his office is involved in each one, has to sign off on each one of these. the policy folks and the lawyers of course have to sign off as well. and the five commissioners waiting. i think we are doing exactly what the commodities and exchange act tells us to do. is to way, consider and to seek public comment on it. >> david. >> which organization are you with? >> wharton. >> i like that. spanky have a view on the best way to fund commissioned by should be fund with assessment unregulated industry, and if so, are you worried that might tie the agency interest too closely with that of the industry's?

>> so david's question is how to best fund the agency. number two is would be good to do it through some a fee. three, with that ties too closely to the industry, is that -- i think it's critical to be funded, and i am looking forward to working with congress anyway congress wants to. [laughter] i mean, it really is. to be on a 700 person agency, and i know we have a very significant challenge as americans with the budget deficit and fiscal situation, so to go to congress and as for literally a 50% increase in the size of the agency from a $209 agency to $308 million agency, i do that with deep respect for what congress and the president have to do but i think that it is a very good investment for the american public. all one has to do is look at t.a.r.p. that was 700 billion. i mean, i'm not going to say that a well rated swaps market was off, was needed to avert

t.a.r.p., but it's a really good, it's like buying insurance to have a well-funded cftc. and anyway, congress wants to do, if presidents, both republican and democratic presidents have suggested congress is controlled by both, all parties, to consider is the, if that's what our oversight committees and the appropriate is wanted to work on, i would stand ready to work with him on it, anyway that we can help them get funding. if that's not the way, i would just keep advocating with the appropriators and the congress for the funds that i think are appropriate for this very expanded mission. [inaudible] >> volcker rule timing. chairman bernanke said before house and senate financial committees that it won't be ready by july 21 when the statute provides that it be

enforced. and i think in his words, they obviously, his words, won't enforce it if there's no rule. your views? what's your forecast? trading accounts is, was the home of some of the most illiquid and problematic financial positions, some of which are in your purview. went do you expect to begin enforcing the volcker rule? >> you know, i think it's a collaborative effort between, i think it's six regulars and the department in treasury. we publish a rule for comment a little after the others because we frankly had capacity issues. you know, just moving through all that matters congress asked us to do. so we just published hours in the last week or two, and our comment period closes april 16. so if any of you want to, we look forward to the comment on how to best protect the public through this means.

and i would assume that we have worked with the other five regulars, and again, in a balanced way to complete what congress laid out. and the challenge is well known. it's to prohibit proprietary trading from editor to protect the taxpayers, that banking entities that have some support from the federal deposit insurance corporation, in essence have some form of safety from the federal reserve and the fdic, prohibit protectorate trading, but permit eight or nine other activities, including market-making. and so it's how to deal with prohibiting proprietary trading, permitting market-making and not having swallow up the other end the final rule. and i think that's the court challenge, 17,000 comment letters have already come into

the bank regulators. was there one other? i see you want to get me out of here. >> you are welcome to stay longer. >> no, know. i will take one last one. there we go. i don't want to say it's a friday. i might be standing between you and a golf course or something. .. [applause]

>> i'm taking over of mug, anybody want a clock? it looks like under 20 bucks. there you go. that? you never know what the clock costs. no, that's over 20 bucks. [laughter] >> we will auction off the clock after lunch. thanks. [applause] thanks very much.

here is a portion. ♪ >> how do we understand this president and his time in office? do we look at the day's headlines or do we remember what we as a country have been through? >> the president-elect is here in chicago and has named the members of the economic team and they all fly in for the first big briefing on the economy. what was described in that meeting was an economic crisis beyond anything anybody had imagined. >> overtime of standing protecting their interests and putting off the decision, that time has surely past the cup of passed. >> which is one, which is to,

which is three, which is five? if we don't do this now, it will be a generation before. for 30 million people don't have insurance. >> if the auto industry can feel what happens to america? what happens to jobs in america? what happens to the whole midwest? >> entire national security apparatus was in that room and now we have to make a decision, go or not go? as we walked out of room, he's all alone, this is his decision and nobody is standing there with him. ♪

>> president obama was in virginia this afternoon. he talked about the economy. you can see that in a video of the republican presidential candidates on line of our website, c-span.org. you can also find an interactive map of the delegate count. there were a couple instances he was aware of so-called he said i will wait for them to come alongside, and then players are going to lob hand grenades down the hatches and the other members of the crew are going to machine-gun the germans on deck.

the obama administration recently announced that it's on track with a goal of doubling of exports by 2015. u.s. trade representative ron kirk spoke about it in a conference hosted by the national association. of counties. it's just under half hour. >> i am paula brooks commissioner from franklin county ohio columbus. i can see some of my oeo colleagues here. it is our distinct pleasure to be here today and we would like

to begin with a very brief introductions. i mentioned i am from franklin county ohio, columbus, and i and vice chair of the international economic development task force, and the chair valerie brown gives her re. she is unable to meet today and i lived like to acknowledge larry, our naco ceo and also stephanie osborn who really does well in keeping us apprised of everything we need to know. and if we could, i would like to start on the left-hand side and ask our task force members to introduce themselves. [inaudible]

for the u.s. commerce secretary posted last month. >> we enjoyed having him. thank you. >> [inaudible] >> it's good to see you. >> tom freeman. >> and dennis come also not a member -- [inaudible]

[inaudible] >> thank you very much. in the interest of time, i think we will go to our main attraction today. we are really honored to have united states trade representative ron kirk joining us today. i almost called you mayor kirk because investor kirk used to be the mayor of dallas texas, and he has done so many things to be actually he's done at all. he's been a very successful attorney, i mentioned mayor and he was the secretary of state under governor ann richards. we are proud to have him now talking to us today about trade. he has really exerted an unprecedented level of effort on behalf of president obama in working to increase exports in

particular and we are delighted to have him here. he's the father of two daughters, right? and we were talking about vacations and a little bit about tourism before him, so without further comment, i would ask representative ron kirk from our u.s. trade representative to step up catullus what's going on. [applause] >> thank you, and feel free to call me mayor come i'm going to call you vice mayor, my new best friend and thanks to you all for giving me a chance to come and visit with naco. i've gone back with larry from working both with the municipal league as well as the u.s. conference of mayors and larry still dresses better than tom. [laughter] i won't bore you, i want to get

your time but larry, you have the best. tom cochran and i have one thing in common we know where we were when tupac was killed because we were on the same street corner in vegas but that's a different story. [laughter] it's good to see my good friend the commissioner here from gerrans county, our good neighbor, and so many of you as i was trying to write down your states because what i'm proud of the fact i think i've visited every one of your states during that time that i've been in office as we have sought to build a new template for a trade policy that was focused at least as much on the job-creating benefits of trade than the traditional benefits, and we did that for a fairly simple reason, president obama recognized two things early on: given the reality of our global economy and our competitiveness and the opportunity that america has to answer or number-one concern,

that's hell do we keep our economy growing, how do we create the next generation of jobs that america has to be in a position to go out and compete for all of these new consumers that are now coming of age in places like brazil, russia, india, china and south africa. you will hear the term bricks mentioned a lot, and for those of you that maybe don't studied trade as much, that's that's an acronym for is brazil, russia, india, china and south africa. so one, we intuitively understood that a part of our economic revival and part of our economic platform in this president's initiative of building an economy that lasts had to be our ability to do a couple of things that the president outlined in his state of the union. one, we needed to save more. we have to be more than just the bulbs biggest consumers, and we needed to invest in our young

people, and you heard the president simply we have to out educate come out in the feet and out build the rest of the world in what we want to do then is model beebee the world's most consumption market but begin to feed the appetite of the next 95% of the world's consumers who now live somewhere other than maryland. we want to sell them things and the good thing part of that is working moms of us are ready to declare victory or are comfortable with the pace of our economic recovery and listening to you. some of you represent economies and counties that are probably doing well. some of you represent counties that may not have experienced any of this economic boom that all of us have friends and neighbors that still are very anxious about this. all the fuss over the first time someone that has been personally touched by this economy and a word about job creation, but the reality is much of the president has put in place is working.

we created jobs for 23 straight months now, over 3.7 million jobs in the last 12 months we've added 2.2 million private sector jobs, and one of the things we are proud of, part of that story has been an initiative the president put in place to years ago to double u.s. exports, so five years knowing that about every billion dollars in exports we can create 5,000 jobs. so, if we were to double our exports could create another 2 million jobs and right now economists estimate that almost half of our job growth is coming from exports. the significance of that exports only represents about 13 or 14% of our gdp. consumer spending is three times that much. so exports punch above their weight, and communities that are able to invest in helping

businesses export do so for apparently fairly simple reasons. it's a great way to grow your banks and create jobs, and we know the businesses that export more tend to grow faster. the high year more employees, and at least the data shows that employees that work for a company that's involved in exporting tend to earn about 18 to 24% more than the national average. now why do we want to talk to county and local officials about this? my bias comes into this job as a mayor was based on a couple of things. one, a understand how frightening the words are from the government and i'm here to help you convened a small business and secondly, if you are a mayor and county officials, we are closer to our businesses than any. we interface with these folks every day and we intuitively understand that if you really want to grow and create jobs, it's great if you are blessed to

have a dillinger general motors or caterpillar or dell in the neighborhood but just about every elected representatives in the world over present a small business first-come and still, half of americans who get a new job get one working in a small business. and so part of what we've been doing is trying to grow our export base not only working with larger exporters, but also demystify this world trade for small businesses because we did a number of things in the the most important when i came into this job the first thing i ask this who are our customers, who exports? i was stunned to learn that there were fewer than 300,000 businesses in america and export, it's roughly flat use the number of 290,000. what stunned me is that 97% of them for what we define as small business. and as we pull that back even more, we've found that most of our small businesses to export only go to one country and only

have one customer. now again, we saw this as low hanging fruit. the global average is about three to 5% of your base. ipod know if we can terms of volume down. how does that help. but anyway, if we can double that number that is a great way to not only increase exports, but to create jobs as well, so we have a number of tools that we utilize. one, the work that we do in the u.s. tiahrt is twofold. i'm the principal advisor for the president and congress on the trade policy. so the first thing is we find new markets and we accomplished that in a big way by working with congress to address outstanding concerns in past trade agreements with korea, panama and colombia which are going to give us access to $12 billion more in markets and help us and we think at least 70,000 jobs. the agreement with korea will go

into force march 15th. the meaning of that once we pass an agreement then we have to work with them to make sure the control. the important thing is 80% of what we sell with terry everett now in manufactured goods the minute that agreement goes into course that's going to go to zero. two-thirds of what we sell to korea and agriculture products and the minute this agreement goes into force the tariffs will go to zero. let me give you an example, our tariffs are the lowest in the world. we have an inherent belief that by lowering first of all we empower consumers and business. we make it cheaper for you to buy what you want to buy from wherever you want. most other countries' tariffs do this to 100% higher so if you are a business person selling in korea and you're paying an average pay 18% on everything

yourself and that goes to zero from day one, you can understand what that's going to do for your competitiveness. we are also moving to conclude to bring the colombia and panama agreements and to force, and when we do that we will have that same advantage there. the other element the president told us to focus on the was enforcing our agreement. are sharing with a commissioner that i'm fortunate enough to have found someone who would put up with me for the last 24 years and i am a native texan, so my wife was born in ohio and she was raised in detroit, and when i went before the senate committee for confirmation one of the senators asked me what in my background as a mayor qualified me for this job and it to the answers, one, sense of urgency come and number two, having a bunch of in walls that all auto workers because if you are from texas, like commissioner brooks and i come if you are from california or

hawaii or washington, you know, frankly when i go to those states they are telling me cut the brake line, go, go let's trade, trade. but i do think that my having been in detroit and cleveland and cincinnati the last 20 years i realize not everybody looks at trade the same. there are a lot communities they're justifiably frustrated about the trade policy and the single biggest complaint i heard from is we don't enforce it. we open up our borders and we are fighting for america's workers when other countries don't give us the playing field that we deserve. so from day one we had a very aggressive posture to not only find markets that president obama insisted we were going to have the strongest and for some of initiatives in any administration and we've done that. we have more cases in the world trade organization, we've brought twice as many cases against china as any other administration, and we are winning this case is not to be

bullied but to stand up for the fairly basic principle. the trade only works if everybody plays by the rules. i've never met a business large or small that asks me for a special advantage to what they've all said if you give me a chance to compete on a level playing field i will take my chances, but i cannot compete the deck is stacked against me, so the president has said we are going to address that and last week the president announced and created by executive order an interagency trade enforcement center to make sure that we bring all the agencies and government that have the ability to enforce our trade agreements so that we are working as thoughtfully and aggressively as possible, and that we are not wasting money because we are under the same financial pressures that you are and if we had been asked to do more with less we want to make sure we have the devotee to do that. i want to make sure i have time for all of your questions so if i can i want to do two things. i'm going to give you my

website, it is ustr.gov, and number two, i'm going to ask for your help because i know that many of users on the tourism board, which we don't think of all the time. tourism is of huge part of our trade infrastructure. but for those of you particularly that interface with small businesses, and you think they may benefit from some of what we are doing i want to give you to websites. the president's broad all of the government in and said one of the biggest concerns we've gotten from the businesses is we love what you're doing and we love what we hear from commerce and we love what we hear from us or from what we hear from sba and then i get, and i will forget this, i don't know who to call, where dysart? i'm not a gee, i'm just a small business. so we have launched a new web site called business.usa.gov. it's new, so work with it. but the idea is we want to have a single point of entry particularly for small and medium-sized businesses to the

want to know about exporting or taken get marketing having to go to the one site, and there is an export specific website called export.gov if you can't remember business.usa.gov, go to export.gov. if you have questions or comments about that. and finally, since you all our local officials and i understand where you spend a lot of your time, one of the other issues that we have highlighted with both governors and mayors, if we are going to meet this goal, we have to also address those other elements of the president's initiative and that is infrastructure. we are offering to compete with china and korea and others with ports in many cases that have not been modernized in the years we have one of the most efficient but one of the most aging real infrastructures in the world have been at ports from tampa to baltimore to washington and houston, all

excited and nervous about what is happening in panama because it has been $14 billion so that they can widen that canal and transport goods. the ports, the counties that have the ability to take advantage of them have a huge opportunity to answer their economic base, but collectively i think we can work to do a better job of helping the american public and congress understand that even in a very challenge economic environment we cannot shortchange our investment in our young people and we have to make sure they have the tools to compete, but we have to invest in the core infrastructure so we can continue to grow. i want to stop. i know i have said a lot and thrown a lot at you but i'm thrilled i have a chance to beat with naco and i have time for a couple of your questions. if you have a follow-up, please feel free to contact me. christine is here with me. some of you may remember christine has been with

secretary tom vilsack working on the issues but her first love is international affairs, so she is going to run the intergovernmental relations board. so if you can come and get me feel free to reach out to christine. >> if you would like to take a couple questions i see this gentleman. would you give your name and county? >> my name is tom friedman -- [inaudible] to meet with the ambassador at the economic institute, and i have a question they could not answer. is this administration going to improve the increase to the h-1b visa cat with the implementation on march 15th? if i ask that question without putting you on the spot but it's important to look at the direct investment that has come through

>> rabun give you a long interval to your information we have addressed some visa issues, but congress is very prescriptive about my work. if any of you ever get asked to come in the federal government until it got the best job in the federal government and i've been a mayor and a secretary because i may have 250 employees so we don't have to work out the thousands of public employees doing things to get you on youtube every night laughter, but congress retains the authority to enter commercial treaties and one thing they tell me is they don't want me making immigration law about trade policy, so we will engage on the issue which is frankly crippling us right now because i know many of you are frustrated we hear from business after business. we go and make these our customers can't get a visa it's because we learn how to do the product but there's a difference

between some of those visas and the h-1b, so i want to make sure i don't mess this up, but again, collectively this is the place where we need to make the congress have a common sense immigration policy, and we need to have the visa reform as a part of that. but the tourism as welcome tourism numbers are up about one of the things constraining it is the difficulty some people are having in getting visas. commissioner barracks? >> investor, progress are we making and the protection of intellectual property and the company's trade with china for instance? >> well, one of the areas that we spend probably half of our time on in terms of enforcing its no practical reason and i've been to detroit, i've been in steel mills, the steel mills,

the auto plant today is and what people think it is. these are high and the innovative, high-tech industries now and as the president has often highlighted, america's ability to compete and win in the future is going to be because of innovation. we lose that if we don't have protection of our intellectual work product, so we worked diligently with a number to make sure we have a strong intellectual property rights while maintaining the trey grimsley past we know more than we did with nafta so we don't pass a trade agreement that doesn't have the highest standards of intellectual property rights we can get to reverse a courteous, panama and colombia have some of the strongest intellectual property rights you can get. one of the most ambitious initiatives we are working on something called the transpacific partnership. we are working with nine other asia-pacific economies to design what we would like to believe

would be the start of next generation trade agreement with and that we are going to seek to take that to another level. last year we signed the anticounterfeiting trade act which when congress passed, i think the intellectual property rights act in 2007 directed the administration to do everything we could in the intellectual treaties to make sure that we have strong rule of law. now you still have some countries in which they just don't do it, and in that case, we take them to court if you will in the world trade organization. one example is you may have read that the presumed next president of china, the vice president was here two weeks ago, and you may have read about him went to iowa where he decided 15 years ago that he meant to california. one of the biggest issues we always press china on intellectual property rights

enforcement combating piracy,, vetting theft of intellectual property, and we won a fairly significant case against china in the wto particularly on the copyright and pirated goods, and in the middle of that trip we were able to get them to agree to comply with the film. i can go into great microsoft intelligence that for every computer for example sold in the united states we spend about $285,000 on software. and most emerging countries, that's about half of that. in china it's less than 10 cents on the dollar. the government itself is operating on about 90% pirated software. so one of the things we are doing with china is to say how about if you buy the software so we pushed them they've agreed to buy and then they said if you're going to buy if you have to give

your agency the money to buy it. we want you to audit it, and if you will set the example, then hopefully others will begin to do it, but it is a huge issue for us because we'd lose a lot in terms of privacy and theft around the world. >> we just released a study this week in the united states surveyed 400 directors in the united states and [inaudible] >> to be somewhat brief, that isn't a question, that is an answer, and i mean, look, people

think differently about the stimulus bill, but the stimulus bill worked. there are some that have argued it doesn't work and half of the stimulus works for the tax cuts because that's what the republicans want, it's the right thing to do, but many counties, many communities use that stimulus bill to partner with state and local resources to build roads, to build bridges, to build parts, but we need to do more of them and as you know, we have got hundreds of thousands of construction workers laid off aren't the country. it is a common sense thing to do. the president included infrastructure funding in the jobs at he's asked for in every budget and we are going to continue to press, and we need on a bipartisan basis a non-partisan basis governors and mayors and county officials to stand up and say, you know, this isn't -- this is how you not only put america back to work, but it's doing something that we've radically need to do.

i was home this weekend with a little bit of pride because we cut the ribbon on a bridge to had the chance to work on when i was the mayor because our department can tell us and said all these bridges are about 20 years beyond their life but it took us 14, 15 years to get you come you don't know how long it takes it can't take that long anyway i think it is a common sense thing to do. hopefully you can join the forces and work with our leaders in congress to do something to just make sense, enhance our competitiveness, put hundreds of thousands of construction workers back to work. >> thank you very much, ambassador triet [applause]

nearly half a million people started working for work last month and most of them found jobs. a large number of people streaming into the workforce cut the unemployment rate unchanged at 8.3%. even though employers added 227,000 jobs for the month.

now to a discussion on u.s. foreign policy that took place at annual policy conference of the american israel public affairs committee for aipac. speakers included former state department list cheney and former representative jane harman. this is about 35 minutes. [applause] >> thank you. good morning everybody. my name is david and i am the founding editor of the times of israel. [applause] thank you. this morning we are going to explore the challenges that face the united states and israel. here with us today is the former deputy assistant secretary of state and near east affairs, ms. cheney. also joining us is a lease analyst from channel two news from international fellow of the washington institute.

[applause] and last but certainly not least former member of congress and the president of the woodrow wilson center, jane harman. [applause] >> let's jump in with the most difficult and complicated issue, iran. in the last few weeks we have seen iran threatened to close the straits of hormuz. we have seen acts with ties to iran occurring in georgia, india. jane, i know you have long seen iran as a global problem, not just a problem with israel. can you talk about that? >> i would love to but let me first say thank you to the republicans and democrats in this huge hall for so much support and love over 17 years in the united states congress. and especially in 2009 when i was the victim of a political

smear campaign i will never forget meeting to tell me jane, we have your back. it really meant a lot. [applause] am i one key to all of you is you come to the to visit offices in the next two days and push for an agenda which i share is that you urge them to stay bipartisan on the state of israel. israel loses if we make her a political football in this campaign. [applause] now, about iran, you are right. i have long worried about iran. i'm a jewish grandmother and soon to be a jewish and great-grandmother. so i come by this honestly, but iran not only is an existential threat to israel which we all understand and get, and the clock is ticking, but iran has shown over the years that it is capable through proxies' like hezbollah to attack this hemisphere, the attacks in buenos aires in the 90's for the

largest since the holocaust more jews died they're the online leffinge, so we'd better take this seriously. and if iran gets a nuclear weapon, the arms race that will ensue in the destabilization of only of the region, but of the world i think means that iran and a few other countries that we will get to like pakistan or countries we need to worry about. it's in our national interest to prevent iran from getting a nuclear weapon. [applause] >> thank you. let elaborate on that. what with a nuclear capable iran mean for terrorist groups like hamas and hezbollah? >> certainly, david, there is no greater threat that anyone faces from israel, the united states, than a terrorist armed with a nuclear weapon, and when you think about the fact that iran is one of the worst state sponsors of terrorists today,

and their sponsorship of those groups of hamas and hezbollah tells you that only do you run the risk that they will transfer the weapon and assault on a transfer a dirty bomb to hamas has a lot, but also the potential for nuclear blackmail. and when you think about people who say that we could contain a nuclear-armed iran, you your peoples as a beacon to in the soviet union. but i would tell you that when you are thinking about a hamas, hezbollah terrorist who is interested in doing anything possible to die for allah that person as much more likely to use the nuclear weapon and the soviet union never would have been. the danger is much greater. [applause] and i want to make one other point on this issue. when you hear the discussions about well, the united states intelligence and the israeli intelligence says why, i would tell you don't forget that america's track record on

predicting when nations reach nuclear capability is abysmal, that we completely messed the indian test, the pakistani test before the first gulf war, the israelis understood far better than we did the status of saddam hussein's nuclear program, and just back in 2007 it was not until the israelis came to the united states with photographs of the nuclear plant that the north koreans were building in the desert that we understood there was a nuclear capability there, so putting your security of the united states of israel in the hands of american intelligence ability to predict the status of the program i would say is a very dangerous act. [applause] can you paint a picture for us how far does iran influence

reached already and was it doesn't mean for israel security? >> i think that iran is trying to play big brother for the middle east, and they do believe that the nuclear bomb or the perception that they are very close hanging in their just beneath the nuclear threshold will give a boost to their operation for the original hegemony. now there are three things that they are now engaged in. number one is trying to save after the massacres and the big slaughter in the city and the primary importance because this is the formation between hezbollah and iran to syria. number two, they're concentrated

efforts off in the relationship with the greatest state in the region in the east if with nations of rivalry and relations with some corporations coming into the other thing is they are trying to fall to the muslim brotherhood which are taking over the to the sunni shia divide is probably dirigible and i will turn you quickly to the fact that because of khomeini who was the leader of the brotherhood writing, and they are making the effort say into the muslim brothers your concept of the islamic state is not that different from how khamenei. >> let me just come back to you

talk about sanctions. we see that it's tumbling and they're having difficulty conducting financial transactions but the nuclear program continues. so my question is are the sanctions having an impact, and what more can be done? >> it's clear the sanctions are evident that on the economy in iran but the air is absolutely no evidence, david, that the sanctions are having any impact at all on the nuclear weapon program that iran is undertaking. [applause] and i think it's important to remember here as we look at what iran is doing. it often seems to be the case that people say well, they need to obtain illegal sophistication that other countries have obtained. they need to be dealt with a - the iranian and the need to be able to put the iranian on a missile and the need to be doubled to test it in a way that we have seen other nations to and i would urge that that in

fact is absolutely not the case. it's critically important that we understand where the red line should be. iran cannot be about to become capable of doing those things. [applause] finally i would know anybody that tells you that they haven't decided whether or not to pursue a nuclear weapon in this to explain why then are they willing to stomach the economic pain of the sanctions, and why are they turning the iaea repeatedly from the sites that the international community wants to see? [applause] stegano you want to comment on this as well. let me ask you the nuclear capable iran, should that be a red line to the united states? what danger does that pose even before it becomes an iran build a nuclear weapon about the breakout in the nuclear weapon? >> i think that iran already does pose considerable dangers for all the reasons that have

been mentioned. i do, however, disagree about the assessment of our intelligence capability. this is something 93 close to, and after our initial failure in iraq, congress passed the intelligence reform act, and we do much better. iran is one of the toughest target's plight think israel agrees with us that iran is the east a year away from having a testable weapon and two years away from being able to take it on a missile. i think that's the general agreement. then comes the question what you do in the meantime this is a very tough issue. obviously israel is struggling with it and so are we. i was very heartened to read the interview that president obama just had with judge goldberg in the atlanta magazine where he made clear that he is not bluffing and that containment is not an option. containment is not an option. we all agree on that. [applause]

pointed out that the muslim brotherhood is now an political power increasingly in countries surrounding israel and it is very important to think about the changes in the neighborhood as we think about how to stop iran, and so my suggestion here is with respect to sanctions first, they will fall the cake in the sar even the a iranians have admitted that they are fighting. the rial has been devalued by 75%, the transportation banking and petrochemical industries have been devastated inside iran. there are no spare parts and factories. the gdp has dipped, and the iranian according to the polls are blaming their own government which is fighting with each other rat and us. the entire world is cooperating. russia cancel at the s300 sales to iran. china has cut back on its

purchases of gas from iran and dancing oil -- advancing quayle and seems to me we should let a few more months go by to get success a chance. finally, let me comment on syria. if we can break syria away from iran and deny iran the back door to hesla and hamas and lebanon and israel will be an additional huge strategic blow to the iranian exchange, so i think we have a few more months pellicano and i would urge president obama to make it clear that he will act, use the military component as he has to to prevent. [applause] >> imagine we could spend the entire time talking about iran which wouldn't be a bad thing but i want to cover more ground. we are going to hear a great deal more in the next couple of

days about the american assessment and so want let's quickly move on to syria which is in the midst of a horrific crackdown, 8,000 as a fairly widely circulated to give people killed by the regime. first of all from this perspective what is the stability in the north and for israel? of course it has been a very quiet border for us for decades. the truth my friend, just a word about iran. it's very important to keep in mind they have taken a decision. the decision is to do everything so they get as close within reach of the breakthrough which will probably take 60 days between the iaea inspectors to iran they will be able to enrich

uranium. so this decision has been taken. i think israel has taken a decision, a quiet decision that we do not know in syria is better than the devil we know. we know the inaction, the nuclear reactor, the support of hezbollah and they will fire the and the missiles that came from iran for example. the perspective breaking between syria and iran is extremely important, i do not share the concern of many syria is bound to fall under the leadership of the muslim brotherhood. people tend to forget syria is a country consisting of about 40%

minority -- etc. it's a to be very difficult for the muslim brotherhood to gain victory in syria the same way we did in egypt, iraq and lately morocco so from the israeli point of you let them go. islamic let's be specific. how can we have to get rid of the regime for? something that should be considered. >> i think military intervention would be difficult there and we would lose the world coalition we put together with of the tragic exception of china and russia to support regime change. i did suggest in an article last week in "the wall street journal" that the examples of yemen might be worth looking at. six months ago i would have said at least for that snapshot in halftime yemen was the most dangerous place on earth.

that's before president obama helped to take on al-awlaki and a couple others who were propagating jury dangerous materials into our country, and inspiring some in our country to engage in acts of violence. but in addition to that, but we did is helped broker personal communities for the 40 year dictator in yemen also i am persuaded he committed more crimes against his people the better course was to get him out of there. he's now headed to exile and there has been a peaceful transition and an election of his former vice president who has pretty much universal acceptance in the country. the act of violence has stopped more or less. the united states still has access to curb any al qaeda people who may be hiding out and would tend to attack us and if that kind of deal could be

worked in syria, even though i have the same view as of what to do about the atrocities committed, i think we would keep that country from civil war and break it from iran and that would be a very big component of our strategy to change policy in iran. >> the question of the potential collapse of the regime, its implications to hezbollah and especially for iran. >> i will answer that, david, but i want to go back to iran for just a moment because it is such a hugely important issue. the test here is not when will iran did a testable within. the redlined must come much sooner than that. [applause] and second, the president's interview with jeffrey goldberg

while interesting is not a policy to everyone in this room knows that president obama and members of his administration have spent many months now issuing public statements that are more focused on containing the israeli action than they have been on detailing. [applause] i.t. everyone on this panel and everyone in this room hopes that military action can be avoided. but the only possible way for it to be avoided as if the iranians understand that we will stand firmly, shoulder to shoulder with the israelis high and that we will in fact take military action if necessary. [applause] >> let me ask you very quickly and address that question the

consequences of the regime toward iran. >> i think that clearly has jane said, it is in america's interest to go and in israel's understand it will clearly hurt iran. iran obviously uses syria and bush are sought as a total for a place to which they funnel weapons and money to the terrorist organizations, and it is past time for asad to go. having said that, asad's departure is necessary but it is not sufficient. we do have to be concerned with what comes next. and here again, i think it's important -- i wish i had more faith in the current foreign policy team here in washington. it is a very complicated situation, a complicated set of circumstances. we would not like to see the muslim brotherhood come to power after assad. we need to be working very closely with the opposition and syria. we ought to be arming the opposition in my opinion today, and we should be working closely with them to ensure, in fact,

that the muslim brotherhood does not follow assad. [applause] >> there's a fair amount to cover. we talked about syria and iran. the jewish state is a threat also from hamas and the possible reconciliation between hamas and the palestinian authority. but we come back to you first. what is his thinking behind inviting him into the government? >> i don't think i've ever been asked before to speak to the palestinian authority. so i don't know of his thinking is. but i think it's absolutely clear that the message from washington, d.c. publicly must be that the palestinians must have a stated they have terrorists and their government. [applause] is that what we go to jane with

the same trend of thought can israel be expected to negotiate with the palestinian government that includes an unreformed iran? >> absolutely not. [applause] but let me disagree a bit with liz' comment on this administration focusing on contemning israel. i think that the administration has done more than any in history to help israel protect herself. [applause] there is a ten year 30 billion-dollar military commitment, $3.1 billion in this year. there's over $600 million to be spent on missile defense, twice what was spent in toys years, 200 million odierno bilmes which i know we all agree is already saving lives. a strong commitment to israel's qualitative edge, and an unprecedented military cooperation between the countries. i agree it is important for president obama who will speak here soon to get the israelis

and the iranians to believe that he will act including what he calls on the military component in order to prevent iran from getting a nuclear weapon. it's important for him to gain that trust and to do that is to make clear that he will act. iran only acts when she proceeds the force will be used against her, so the strongest possible communication is necessary. but in the end of the should understand we have a world coalition now supporting sanctions against iran, of most of the world coalition trying to force regime change in syria. the sanctions have not fully taken effect yet, and if we can find the means to stop kuran from getting in nuclear weapon short of military action, i think we could potentially prevent something that has been hard for our country, which is

the ten year sought in iraq and afghanistan. it's much easier to go into a country than to leave it, and we have paid dearly in treasure and lives, and the results in those places are still uncertain. it's very upsetting that the head of iraq, maliki is pro-iranian. there is a very troubling fact and so it seems to me to the extent we can be copyrighted -- clear-eyed it is absolutely clear that the u.s. will act hopefully with the world coalition using military force if nothing else works. that is the best defense of israel and it is the best way to change the policy in iran. [applause] >> what i want to do now and i hope we will be able to is cross to jerusalem. the unspoken but some of the threat of israel's borders to read some on the ground say -- i

see my colleague will go live to the diplomatic correspondent of the times of israel, rafah hail. astana is really what are the threats that most concern you? >> good morning, david. >> good morning, rafah yell. >> everyone is talking about iran, and we are very well aware that the mahmoud ahmadinejad regime is inching towards a nuclear weapon, and we are keeping an eye on the situation and of course we are looking forward to what is being discussed at the conference and the meetings between president obama and the prime minister netanyahu. the split between israel to launch a preemptive strike cut iran to perpetuate in the way that is in 1981 when israel was acquiring a weapon. then there are those of course who feel that the consequences

of the military strike in iran would be both dangerous that instead of being called about twice present military authorities have said in israel that 20,000 missiles are being launched at could be fired at any given time if israel attacks and the defense minister spoke recently about possibly 500 in retaliation, so we are very weary of that but on the other hand it would be to say that the israelis are panicking. they are not panicking we are just keeping an eye on the situation, and the same is true for internal terrorism and it has been a marginal phenomenon as is late and is really safety. ..

>> in a ceremony, and hands were shaken, warm words were exchanged and he told the israeli ambassador at its very important for the two states to maintain the peace that was signed in 1979.

thank you, david. >> thank you. that's fascinating. i will see you back in the office on wednesday. let's move, the fact that for 30 years israel has been able to plant its security strategy with a secure southern border in mind. with the changes in egypt, israel has to rethink its baseline for defensive needs. so looking at egypt, do you think that the new egyptian government has taken shape will seek to uphold the peace treaty? >> i do believe the position, that they would like to preserve the peace treaty. every statement that i've collected from the leadership indicate that they don't want to bury the treaty. there is talk about some amendment which is very dangerous. now, that amendment that they are thinking have to do with the restrictions of the egyptian military deployment in the sinai

pull in to the -- sinai peninsula. israel has an interest that in allowing and in accepting different deployment of the egyptian army in the sinai. that is closely to the israeli border. for the simple reason that the sinai peninsula three times bigger than the state of israel has become the black hole in the triangle of peace between israel, egypt and jordan. it's full of malicious. the toyota pickup with the submachine gun on the back has become the new camel. they write poems and songs. they used to write only songs and poems for the camel. it's a different situation there, and with the class of egyptian security services and egyptian police, in most part of egypt. and sinai the egyptian government has become -- so i

think there is a possibility to work out a new arrangement with the new regime in egypt. and i can say one sentence how. spent one since? >> one sentence. we have an understanding going for over a decade with egyptians, it's called the mechanisms through the nfl which is led by the u.s., which allows for the parties to change the deployment of egypt -- each of them come along the border. we can activate this, and then we will have it probably better chances of preventing flareups in the peninsula. >> we are very short on time but i want to end the discussion by asking each of you to give us one prediction about the middle east and what we'll be talking about at next years policy conference. liz, let me start with you. you have about 30 seconds. >> i think there are fairly lots

of debate you about policy and which will got to go, particularly with respect to iran. but i think it is very, very important as you listen to the rest of the speakers here that you remember there are facts. one fact is there is no president who has done more to delegitimize and undermine the state at issue in recent history than president obama. [applause] >> let me stop you there and go -- >> i have a prediction. i will do it quickly. i think it's important to remember that president obama said when he went to cairo in june, in 2009 and he equated the holocaust or the situation under which the palestinians live today. don't forget that when you hear additional different words from that president. i predict that when we meet here, i predict that when we meet here next year for the policy conference it will be to celebrate a restored american israeli relationship under a brand-new america. [applause] >> jane, i'm going to ask you

for your production. going to ask you to do better. stick to the 30 seconds. >> i think it is a grave mistake, and as i said at the beginning, to turn support a visual into a political football. [cheers and applause] and i won't. my prediction, is that the world community will stick together on iran, and that by the end of this year, this is a game changer year, we will come together to the right answer about how to stop iran. but also we must pay attention to pakistan. let's not forget that that's the country next door to iran with 100 actual nuclear weapons, and building more, and a failing civil government, a military force that is protecting terror groups inside of pakistan, and jeff goldberg's last blockbuster article was called allies from

hell, and made the point that there are at least six nuclear sites in pakistan that are not adequately protected. so this matters to israel and aipac and to the united states of america, too. >> thank you, jane. finally, ehud. next year's prediction. >> i think next year come by next year we will see more arab countries in which the arabs are performed themselves for the first time in history from subject to season. [applause] we should applaud them. number two. no war next time this you will be able to judge better whether it's democracy which is coming to the arab world, or some systems of monarchy, which is unfortunately a possibility. and the third thing we'll still be debating the iranian nuclear program, only i the iranians will be quite a bit ahead. >> thank you, ehud, thank you

lives. packaging. thank you ladies and gentlemen, for your attention this winter i want to thank our wonderful panel for the thoughts and insight. we look forward to continuing this discussion for the next two days. thank you very much. [applause] >> all the republican presidential candidates are on the campaign trail today. mitt romney began the day in mississippi.

>> why are -- fire j. edgar hoover? i don't think the president could have gotten away with it. >> reporter and author 10 wider details the fbi's 100 year hidden history and j. edgar hoover's fight against terrorists, spies and subversives. >> over stands alone. he's like the washington monument. he stands alone like a statute in haste and growing. as one of the most powerful men who ever served in washington the 20 century, 11 presidents, 48 years, from woodrow wilson to richard nixon. there's no one like him. and a great deal of what we know, or what we think we know, about j. edgar hoover is myth

and legend. >> tim weiner on "enemies: a history of the fbi," sunday night at 8 p.m. on c-span's q&a. >> ernest hemingway is considered one of the great american writers and his works still influence readers today. but not many people know of his work as a spy during world war ii. >> there were a couple of instances he was aware of chairman submits approaching fishing boats and saying hey, we will take your catch and your fresh food. so ernest said i will wait for them to come alongside, and then my highlight players are going to live hand grenades down the open hatches, and the other members of the crew are going to machine gun the germans on deck. >> military and intelligence historian nicholas reynolds on hemingway the spot. sunday night at 8:30 p.m., part of american history tv this weekend on c-span3.

>> israeli president shimon peres was here in washington recently and spoke at this year's u.s.-israel policy conference and aipac. he talks about stopping iran from developing nuclear weapons and the u.s. commitment to israel's security. he talks for about 20 minutes. [applause] [cheers and applause] >> thank you.

thank you very much, thank you. dear friends, as the president of the state of israel, first and foremost, i say on behalf of my people, toda. thank you. thank you president obama, for being such a good friend. [applause] thank you aipac, for your dedication and excellence.

there's no organization like yours. [applause] friends, it's great to be here. to be together. strong, united. i see old friends and new ones. and i see many young faces. young girls and boys, the future belongs to you. israel loves you. [applause] i am moved by your generous tribute. i stand here, before you, a hopeful man. proud to be jewish, proud to be israeli, proud to be here at the

birth of israel, proud to hav served my country for 65 years. [applause] proud for our alliance with the united states. [applause] israel, like america, was conceived as an idea, born in defiance of history, creating a new world by drawing the values of the past and the innovations of the future. friends, the restoration of jewish statehood after two thousand years in exile, is a historic miracle. [applause]

we started as a doubt and we wound up as a certainty. it's a long way from being a doubt in becoming certain. we had to fight six wars in six decades. we did not lose one. we never will. [applause] we cannot afford it. we had to defend ourselves. self-defense is our right and obligation. [applause] with little land, water or resources, israel grew tenfold in population.

and fifty-fold in gdp. israel's high-tech and innovation enriches the world its agriculture makes deserts green. israel built new villages, new cities, universities, ne theaters. our children are speaking the language of our prophets. [applause] hebrew literature is flourishing. from a dispersed people we became a united democracy. [applause] no day of war ever interrupted a day of democracy.

never. dear friends, permit me a personal note. fate placed me in the eye of the storm. i was 11 years old when i lost my grandfather, rabbi tzvi melzer, accompanied me to the train-station on my way to israel. he hugged me and whispered in my ear only three words, shimon, stay jewish. those were his last words to me. i never saw him again. in 1942, when the nazis arrived at his village, they forced my grandfather, together with the remaining jews into the wooden synagogue and set it on fire.

not one survived. no one. what remained was my grandfather's legacy, his last words to me, stay jewish. [applause] dear friends, i was privileged to work with the father of our nation, my mentor, the unforgettable david ben-gurion. for me, ben-gurion's great leadership with my grandfather's legacy became my compass. that compass is comprised of four core values, our moral code.

our pursuit of peace and security. our quest for knowledge. and our alliance with the united states of america. [applause] the moral code, the return to the book and its values, enabled the jewish people to survive, for four thousand years. not because of quantity, because of quality. not because we have had thousands of guns, but due to ten commandments. [applause] we are guided by the call of our

prophets, to me it means to be just. to do justice. to never deny justice to others. dear friends, the pursuit of peace, for us, is not a passing opportunity. it is a moral imperative. it is the tenet of our national security. to make peace, israel must be strong. [applause] the middle east is undergoing its greatest storm. with horrible bloodshed in syria, where a tyrant is killing his people, killing children. i admire the courage of the syrian people.

and i wish them peace and freedom from the depths of all of our hearts. in spite of the storm, we have to reach out to the young generation in the arab world, to those who strive for freedom, democracy and peace. dear friends, the palestinians are our neighbors for life. peace can and must be achieved. [applause] a peace based on a two state solution. a jewish state, israel, an arab state, palestine. [applause]

it was accepted by past and present israeli prime ministers and american presidents. bill clinton, george w. bush and barack obama. [applause] the principle of the two state solution is a paramount israeli interest. we want to preserve an israel that is jewish, democratic and attractive. at the same time period. [applause] i meet from time to time with president abbas and prime minister fayyad. they need and want peace. i believe that peace is possible. they are our partners for peace. not hamas.

[applause] a peace that is a dream for both of us, is a nightmare for the ayatollahs in iran. they are afraid we shall make peace. iran is an evil, cruel, morally corrupt regime. it is based on destruction. and is an affront to human dignity. iran is the center. the sponsor. the financer of world terror. iran is a danger to the entire world. [applause] it threatens berlin as well as madrid, delhi as well as bangkok. not just israel. iran's ambition is to control the middle east, so it can control a major part of the world's economy. it must be stopped.

and it will be stopped. [applause] israel experienced the horrors of war. it does not seek it. peace is always our firs option, but trust me, if we are forced to fight, we shall prevail. [applause] president obama is leading and implementing, an international complex and decisive policy, imposing economic and political sanctions against iran.

president obama made it clear that the united states will not permit iran to become nuclear. [applause] he made it clear that containment is not a viable policy, and as the president stated, all options are on the table. dear friends, the united states and israel share the same goal, to prevent iran from developing a nuclear weapon. [applause] there is no space between us. our message is clear. iran will not develop a nuclear weapon.

ladies and gentlemen, the quest for knowledge defines jewish history. judaism is a constant debate. it is about asking the right questions. it is about being a liberal and pluralistic society. i believe, jews are never satisfied because they are always seeking new answers. for a better world, a better tomorrow, or what they call -- i believe that the next decade will be the most scientific, the most dramatic chapter in human history. it will expose possibilities that today sound like science fiction.

its center will be brain research. the more we shall know about ourselves, the more we shall be able to control ourselves. because in a global world without a global government, self-control is really vital. friends, in a world of science and knowledge the jewish people and israel have an exciting role to play. much to contribute. and so we shall do. friends, members of congress, may i say america was, is, and will remain the indispensable leader of the free world.

[applause] the indispensable friend of our people. [applause] today more than ever, the world needs america. [applause] i have had the privilege to meet all american presidents in the last fifty years, democrats and republicans. i was strongly impressed by their deep commitment. their real care for israel. that commitment was and is bipartisan. [applause]

mr. president, members of the administration, members of congress on both sides of the aisle. we are forever grateful for you for your unwavering support, your un-breakable alliance between the united states and israel. thank you from the depths of my heart. [applause] i first met president barack

obama, our great friend, when he was a senator from illinois. i saw before me a born leader. his care and devotion to israel's security was already then evident. mr. president, i know your commitment to israel is deep and profound. [applause] under your leadership, security cooperation between the u.s. and israel has reached its highest level. [applause] ladies and gentlemen, we have a friend in the white house.

[applause] he reflects the values that make america great and make israel secure. thank you president obama on behalf of my people. [applause] soon i will return home. great challenges and opportunities await us. thank you for your love and commitment, and america's great friendship. ladies and gentlemen, i return home, much more hopeful, much more encouraged. thank you really, all of you,

from the depths of the heart of my people. god bless america. god bless israel. shalom to you. thank you very much. [applause] ♪ ♪

>> how do we understand this president and his time in office? do we look at the day's headlines, or do we remember what we as a country have been through?

the president-elect is here in chicago and he named the members of the economic team, and they all fly in for the first big briefing on the economy. >> what was described in that meeting was an economic crisis beyond anything anybody had imagined. >> our time must stand intact, protecting interest and putting off unpleasant decisions. that time has surely passed. >> his advisers would ask where to begin, which urgent need would he put first. >> which is one, which is two, which is three, which is four, which is five? where do you start? >> if we don't do this now, there will be a generation before 30 million people have health insurance. >> if the auto industry goes down, what happens to america's manufacturing base? what happens to jobs in america? what happens to the whole midwest?

>> entire national security apparatus was in that room. and we had to make a decision. go or not go. >> as he walked out the room, he's all alone. this is his decision, and nobody is standing in there with him. >> president obama visited virginia this afternoon to talk about the economy. you can see that and video of republican presidential candidates online at c-span.org. also find an interactive map of the republican delegate count. >> this weekend are two ways to

watch the tucson festival of books on book tv. >> veterans affairs secretary eric shinseki was on capitol hill this week testified on his department's $140 billion budget

request for 2013. that's a 10.5% increase over current levels with additional funds to care for veterans returning from iraq and afghanistan. he went before the senate veterans affairs committee for about two and a half hours. >> good morning, and welcome to this morning's hearing on the fiscal year 2013 budget and the fiscal year 2014 advance of progression quest for the department of veterans affairs. i want to welcome all of our panelists today and really appreciate your coming and helping us work our way through these critical issues for our veterans. as i do most weeks when i'm home, last week, i convened round table discussions with veterans from across my home state of washington. i heard from the very men and women whose lives this budget is asked going to touch. while some veterans praised the care and access they were receiving from the va, many more laid out concerns that must be addressed in this and future

budgets. i heard from veterans who still face unacceptably long wait times for mental health care, or are still not getting the type of mental health treatment they need in their communities. i heard from women veterans who are struggling to receive specialized care and from veterans who are fed up with the dysfunction of the claims system. i also heard from veterans who still find themselves confronted by obstacles to employment and who are even afraid to write the word veteran on their job application because of the stigma they believe employers attach to it. last year's passage of the "vow to hire heroes act" was a great first step in tackling these problems and the high rate of veteran unemployment. as i'm sure secretary shinseki will discuss, now is the time to take advantage of public-private partnerships and the sea of goodwill that exists in corporate america towards our veterans.

but doing so will also require beating back misinformation about the invisible wounds of war. i'm pleased that the administration has showed real leadership in engaging private partners in this area and i will continue to highlight the tremendous skills, leadership ability and discipline our veterans bring to the table. i also look forward to learning more today about va's involvement with the president's proposed veterans job corps. any way that we can get our veterans both employed and more involved in bettering our communities is a program worthy of investment. as everyone on this committee knows, with the end of the war in iraq and the upcoming withdrawal of troops from afghanistan, the budget challenges will only continue for va. last year, this committee held a hearing to explore the long term costs of war and what is 100% clear is that we have an obligation that will continue long after the fighting is over. today, as we review this budget, fulfilling our nation's obligation to our veterans not only today, but throughout the

course of their lives, must be our most pressing consideration. now, let me say that as a long-time member of the senate budget committee, and as someone who has seen just how difficult this year's budget is for many other agencies, when this budget arrived on my desk i was encouraged. given the current fiscal environment, va has done a good job putting together a budget that reflects a very real commitment to provide veterans with the care and benefits they have earned. thank you, secretary shinseki, for your efforts. i also want to applaud va's ongoing commitment to end homelessness. this is an area where you are making real strides, and i'm encouraged to see that the administration has again requested an increase in funding for homeless programs. i'm hopeful that we will continue to see a significant effort to reduce the number of homeless veterans and prevent those who are at risk from becoming homeless, but i also believe va has some real work to do in the area of serving female homeless veterans. but while va has done a good job

putting together a budget that works to tackle the challenges our veterans face, there is also clearly room for improvement. for the third year in a row, va has proposed cuts in spending for major construction and non-recurring maintenance. these continued cuts are deeply troubling given last year was the first time va's budget even outlined the department's vision for a ten-year construction plan, with a price tag that approached $65 billion. yet, despite this plan, for the past two years va has requested only a fraction of the amount it needs. i'm disappointed at the size of the gap between the funding we need to bring facilities up to date and the funding requested from the congress. in addition, this budget request proposes a series of initiatives intended to save money, including better controls on contract health care, better strategies for contracting, and cutting administrative overhead. i am pleased to see that va recognizes the importance of efficiency, but i have concerns

with these proposals. a gao report released on monday showed that many of these initiatives, and initiatives from last year's budget, did not in fact generate the savings va predicted. i will review each of the initiatives in this budget with an open mind. but i want to be clear, our first priority, our obligation, must be to ensure that we're fulfilling and honoring our commitment to our veterans. if va fails to meet the proposed cost-savings estimates, it will have to find a way to make up the difference so that veterans don't end up paying the price. medical care collections is another area where va has to do a better job of both predicting targets and collecting funds. it's impossible to build a budget on funding that isn't collected. another area of concern is mental health care. at a hearing last year, va witnesses acknowledged that they may in fact need more resources to meet the high demand for mental health care. i want a straightforward answer from va about their actual needs, and whether the department's proposed five

percent increase is enough. last year i asked va to conduct a survey of mental health providers, which revealed significant shortcomings. va proposed a plan to fix the problems, and they must complete those steps as scheduled. but va cannot stop with what was outlined in that initial plan. it must continue to work to find ways to make real and substantial improvements. this year we will continue to be aggressive in our oversight of va mental health care. not every veteran will be affected by these invisible wounds. but when a veteran has the courage to stand up and ask for help, va must be there every single time. va must be there with not only timely access to care, but also the right type of care. challenges like ptsd or depression are natural responses to some of the most stressful events a person can experience. and we will do everything possible to ensure that those affected by these illnesses can get help, can get better, and can get back to their lives. finally, like chairman miller, senator tester and others, i

remain concerned about the questions surrounding the effects of sequestration on veterans' health care. throughout the budget control act process that established sequestration, i made it very clear that including va among those agencies that would receive automatic cuts is unacceptable, and repeatedly made clear that this should not be the case. and although i'm confident that all veterans programs, including health care, will be protected in the event of sequestration, i want to make sure that you know i will not accept anything else. i believe our veterans deserve clarity on this issue, and if you cannot provide it today, i will continue to work for it. in fact i've already asked the government accountability office to issue a formal legal opinion, which will provide some resolution to this issue. secretary shinseki, as we all know, budgets are a reflection of our values. and thanks to your work this budget request demonstrates a strong commitment to our veterans. but while we're in a position to make sure va has the increased funding it needs, we should also

be mindful that the demand for service is going to mq to increase, no matter the number of troops deployed. i look forward to working with my colleagues on this committee, and on the budget and appropriations committees on which i also sit, and of course, with secretary shinseki, his team, and the leaders from the veterans' community, to ensure this long-term commitment. i thank all of you for being here today and my committee members, and with that i would turn to mike ranking member, senator burr, for his opening statement. >> thank you, madam chairman. secretary, welcome. welcome to your leadership team. as well as welcome to the veterans service organizations who are here this morning. we're here today to review the president's budget request for the department of veterans affairs for fiscal year 2013, which includes a four-point fibers increase in discretionary spending. i continue to believe it is important that we provide adequate funding so that

veterans of all generations will be able to receive the benefits and services they have earned and deserve without hassles or delays. but, we also need to analyze the budget request to ensure that we spend the taxpayer's money wisely and, more importantly, that the funding will actually lead to better outcomes for veterans, their families, and their survivors. as we will discuss today, i have questions about whether that is the case for several areas of today's budget hearing. to start with, the budget for mental health care includes an advanced appropriations request for fiscal year 2014 of $6.4 billion. if adopted, it will represent a 4% increase over fiscal year 2013 and a 66% increase over the fiscal year 2008 level. but, at hearings last year, the committee heard about the

devastating struggles some veterans faced when trying to get the mental health treatment they needed from va. in fact, va's survey of its mental health providers last year was pretty clear on the problems. 70% of survey respondents indicated that they did not have enough mental health staff to meet the current demand for care, 45% indicated that a lack of off-hour appointments is a barrier to care, and 51% said it takes 30 days or more for a veteran to be seen for a specialty appointment, such as for post-traumatic stress disorder. clearly, this is an instance where increased funding has not translated into better services for veterans. today, i hope we will get a better understanding of how va plans to address these issues,

how the requested funding would be used, and whether it may be time for va to start thinking outside the box to find a solution to the barriers veterans face in accessing care. another area of concern is the backlog of disability claims. pretty common discussion we had in this committee. this budget request represents a 41% increase in staff since 2008. but, let's look at what happened during that time. the number of claims pending at the end of the year has more than doubled. the average number of days to complete a claim has increased by 26%. the quality of decisions has trended down and is now below 84%. according to one performance measure, there has been a 16% decline in the number of claims completed annually by employee. the appeals resolution time has

increased from 645 days to 747 days, and va decided hundreds of thousands less claims than it received. with statistics like these, it must be a priority to ensure that the initiatives va is pursuing to get this situation under control will actually be effective, so that veterans, their families, and their survivors will receive timely, quality decisions when they seek benefits from the va. another area of the budget i'd like to briefly make is the legislative proposal to spend one been dollars over five years on a veterans jobs corps program. while i believe it is important that we help our veterans find meaningful work, i am interested to learn how va would suggest paying for this new program and about how it would be structured. so, i hope va will be able to provide us with more details about the proposed program today. madam chairman, the final item i want to highlight before i turn

it back to you is the continued increase in staff at the va central office, and quite honestly at the visn level. for example, since fiscal year 2008, the staffing at va central office has grown by close to 40%. and the office of human resources and administration has seen an 80% increase over the same period. also, the staff at visn headquarters has increased by 52% between the 2008 and 2011 i think we need to ask serious questions about whether this increase in staffing directly benefits our nation's veterans, whether these employees are essential to delivering services to the veterans who use the va system, and whether any of this funding could be put to better use. the bottom line is that, particularly in this time of record debt and deficits, we

need to ensure that we spend the limited amount of money we have , we do it wisely and we make certain that the veterans are the ones that receive the benefits and services that have been earned and deserved. the trend lines are troubling to me. they should be troubling to this committee. they should be troubling, quite frankly, to the va. file focused much of my attention on those today, in questions to the secretary and to his leadership team. i thank the chair. >> thank you, senator burr. will now turn to our senators are opening remarks in order of appearance with senator akaka, we will start with you. >> thank you very much, madam chairman. and i want to say aloha to secretary shinseki and his leadership staff at va.

i want to thank all of you for your service to the veterans, and, of course, to our country. and i don't need to tell you what you have been hearing, that secretary shinseki and the leadership staff has been improving the services, because claims have dropped, and that's an indication. they care and treatment which is our duty to provide the veterans is something we must continually strive to improve. and you have been doing that. i am encouraged to see that the total budget request for va was $13 billion above last year. i know we have budgetary

constraints, but we owe it to our veterans have sacrificed for our country, and you have planned and moving along and then progressive about meeting those needs. i am glad to see increases in budget requests for mental health, suicide prevention, and iraq and afghanistan veterans programs. i am also encouraged by major increases in funding for homeless veterans, and women veterans programs. while budget increase provide opportunities, we all know that these funds must be utilized with thought and efficiency in order to best serve our veterans, and their families.

as the defense department continues to reduce its participation in overseas contingency operations, and more veterans come home to their families, das capacity to treat veterans is sure to be tested even more. we have talked about this, and i know that you are doing all you can to prepare for the anticipated growth in number of veterans seeking va services. secretary shinseki, i'm also very pleased to see that an important project for hawaii's veterans, which i had championed for years, is in the budget. a much-needed care facility that would alleviate some of the overcrowding at the medical center.

this proposed relief will certainly help meet the needs of our veterans in hawaii. and mr. secretary, i have been impressed with all that you and your team have been able to accomplish in the past three years. you have made tremendous strides to improve mental health care and suicide prevention, homelessness, and help veterans find jobs, among other accomplishments. however, we know that there are areas where we can improve the care and services provided to our veterans, which they earn and most certainly deserve. so i look forward to hearing your testimony today, mr. secretary, and continue to work with my colleagues and va to

help provide the best care we can to our veterans and their families. thank you very much, madam chairman. >> thank you very much. senator johanns. >> madam chair, and ranking member burr, thanks for holding the hearing. very, very important hearing. let me just start out and offer an observation, mr. secretary. first of all i want to say thank you for stopping by my office a week or 10 days ago. as you know, over the past few years while i've been here, and you've been in your position we have had an opportunity to meet on a number of occasions. i've always appreciated that. i come away with those, from those meetings absolutely convinced that you and your team have the best interests of vets

in your heart, and you're trying to do everything you can to deal with all of the problems that we're going to mention today. but one of the things that we have found in working with vets in my senate office, and this is the reality of the veterans administration, is every veteran have an individual problem. that's not easily solved with one sweeping policy approach, or whatever. we have found that we really have to sit down with each vet, and talk to them and help them work through that problem. and even in my senate office, we have found that we had to step up to do that. i have more people in my senate office is working on the veterans caseload than any other, any other caseload that we work on.

so what is just part of what we have to do. i think you have great perspective on what the veterans need, and he are always willing bring that to the floor. i've been in your position before, and the complexities of what you are doing are enormous. so, i want to start out on a positive note, just tell you i think your heart is in the right direction. but if you think as we look at the metrics, the progress we're making, it's important to see what's working and what's not working. and just simply acknowledge that, and try to figure out, is there something we're missing your. i also want to just mention briefly, and i won't dwell on this long but it's worth mentioned to me. as you know, like other areas in the country, we are struggling with a va hospital that was built decades ago.

notwithstanding the kind of heroic efforts of the staff there and the doctors, the nurses and the administrative personnel, it is just a very, very difficult situation. we are very pleased that we are on the priority list and we're making our way to point at which we hope we can get, we can solve that problem and replace the facility. i think today we are like 18t 18th, if i'm not mistaken, so i am aware of the fact that it just does take a while. we are hoping to work with you and your staff. maybe there's some things we can do. there's some serious parking problems right in the middle of omaha. and so maybe there's some things we can do to move the project forward. ..

i don't know what we are doing with education benefits but at least from our experience, something is working. whatever model the effect could somehow be transferred to the disability claims and i appreciate they are much more complicated, but that seems to be working, and you have had to ramp that up pretty significantly. so, i am hoping i can hear some thoughts and maybe there are some ideas that would work in other areas of the va system. we are also hearing that trends

express to us that the expanded access to information via the ebenefits system is something that they appreciate, they feel good about. i think all of us have been optimistic and hopeful. maybe that is a better way of putting it. hopeful that ebenefits system would pay dividends. we think it is. we think is veterans are getting more used to that, it is paying some dividends, hopefully saving some staff time because people can get information or whatever they are needing there. i will just wrap up and began thank you madam chair. i do appreciate the opportunity to be here. thank you, you and your whole team for the work you are doing and i hope you can advance the cause because there is so much more to be done. >> thank you. senator brown of ohio.

>> thank you madam chair. i appreciate your leadership at the veterans issue. thank you mr. shinseki and all of you that dedicated big part of your lives. thank you for coming to ohio and the service you provide for veterans in my state and for all of us. it's a good budget and shows a strong commitment to veterans. i think when you look at what the advance appropriations mark is, 140 billion with the advance appropriations, the 13 billion-dollar increase, it's saying the right thing and doing the right thing for people who clearly have earned it and it reflects the understanding we all have about service to country. i applaud the va for its investments and eliminating disability claims backlog. we are all of course very concerned about that. as senator johanns said, we still hear horror stories of 12 and 18 and 24 month delays. we should have course never

tolerate that and i know your views about that secretary shinseki and know that we need to continue to push with better trained staff and improvements in electronic and other processing efficiencies. i also, on a similar note, the disability rating system clearly needs substantial improvement. a obama in charlotte should be treated the same as a bum knee and -- and did many ways related at the same time makes sense and i know your commitment to wanting to do that. we expect to see results as we move forward. i am aware too of the funds in this budget to train our record nader's. and to operate targeting claims to provide other services specific to particularly rural veterans but veterans everywhere who simply don't know enough

about veteran services. people from the va, officials from the va joined me in a field hearing in appalachia, to areas in ohio, won in 2007 and one in 2010. we talked about everything from applying for veterans benefits to liheap and the earned income tax credit. so many low income veterans don't know of -- enough about those services the services and today i believe there are 30 community-based outpatient clinics in ohio and your commitment to going everywhere to reach veterans not just in the va centers in chillicothe in cleveland that but well beyond that and i'm very appreciative of that. but the outreach efforts obviously need to be stepped up and targeted. not just the demographic of rural appalachia but certainly other places too. our main concern is about the department outsourcing of more and more work, the quality of outsourced work is often subpar

and this whole political view that outsourcing whether it's selling turnpikes or selling prisons or outsourcing part of the military. you know the work is subpar. the cost savings are usually illusory and often the costs are significantly great. the contractors and political contract -- but that happens too often. we go places with outsourcing that does not lead to good government. we also i think, many contractors lack the dedicated service mentality if you will of career civil servants and it's always popular to beat up -- we have gone through that state after state and in the federal government but i like the idea of an individual's motivation to serve our veterans as a career leads to better service

contrasted sometimes to services provided by companies that are motivated by some of the most dedicated people that i have ever met. they want to serve in this whole idea that outsourcing saves money, enhances quality and it's pretty ill-founded. the va under veterans is viewed as just another client. we see this at the basic level of services in places like dayton. and focusing on fixing the other problems that dayton. source workers tell me sometimes it does not come back clean and what is the point of outsourcing if that happens. the va continues to outsource more and more activities at some point are we going to reach the point where the va health insurance provider whether the health care provider and we never should get close to that line.

on a lighter note, thank you, monday was the first day and i was lucky enough to be there at the community patient clinic when the va for reasons which i disagree, probably needed to do, shut down the va hospital in brecksville, part of the deal that they would put this cbot in parma. it was crowded the first day and it serves an important population and i thank you for that. >> thank you very much senator brown. >> thank you madam chair. i want to hear the testimony of the folks so i will be very brief. i agree with senator burr on job issues and the fact that we are going to be spending a lot of money. happy to do it and we want to see how it's going to be paid for but also importantly seeing if there's any duplication. seems to be a lot of things happening in that field and what may have these types of issues

we usually throw everything against the wall and see what sticks. just want to make sure we do it efficiently and don't just throw money out there and if they are working let's keep them but if not let's get rid of them. bless you, bless you, bless you. [laughter] concerned about obviously the long timeframe in filing claims. i will say that is happening in massachusetts, with new people helping and you seem energized and it helps we are in the same building and we have had some great success. in the public veterans hearing we have had on this very issue. the big elephant in the room is the 1 millionth retraining veterans and the obligations we have to keep them, and get them whole and i am thankful. i know you have met with the secretary to discuss that mission to make sure that we don't just have a million new veterans, and that will be

released in a thoughtful methodical manner so you are not overwhelmed and so you can't get out. i will discover that i look forward to hearing your testimony. i'm going to be going to the floor madam chair. i have to speak but i will be back. thank you. >> senator, isaacson. >> i too will be very brief because i'm anxious to hear from each of you. secretary thank you for taking the time to come to my office two weeks ago. secondly have two pieces of business. one is on the jobs from. you probably have heard about this but i want to make you aware. the founder of air train which is now southwest has created a foundation called gratitude america which is a web-based platform to match job needs with veterans. it has a component that links them with training for jobs where for veteran is looking for a job he can search it on the internet and if he finds a job he likes but he's not qualified

it matches and with the closest training facility where he can get the training. i think it's a great idea. it's something that's very important and i appreciate lewis doing it and i thought you'd like to know. sec and i want to complement director goldman who spend a day in dublin georgia last week. he cedes -- surged 51 counties and he is trying to partner with a commander of roberts air force base to merge the va clinics and terry georgia and macon georgia with dod health care on the base, to utilize the facilities advantage of having all of the imaging equipment already on on the active-duty base and not having to have redundant costa staffing which i think is a great idea to make better health care available but also at a lower cost to the the veterans administration and the taxpayers. i wanted to bring those two pieces of good news to your attention. thank you for what you do and thank you for being here. >> thank you madam chair and again very quickly, just want to

thank the secretary for being here and the team you have assembled, for your hard work. senator brown mentioned that you know there is a lot of individuals in the va that are there because they want to be and could have other opportunities and certainly you are in that category. you have led soldiers and now you are serving veterans so we really do appreciate that very, very much. the other thing is, senator isaacson mentioned, i do appreciate the fact that you are very willing to work with congress and very legible, you and your staff. that is something that is appreciated so we appreciate all that you guys have done in the past and are looking forward to you doing a bunch in the future. i yield back madam chair. >> thank you very much. with that i want to welcome again secretary shinseki. thank you for coming here today. to get your perspective on the department fiscal year 2013 budget and fiscal 2014 advance

preparation request. secretary shinseki is -- alison hickey, undersecretary for benefits, dr. robert petzel undersecretary for health and we also have todd grams executive of the office of management and budget financial officer and roger baker assistant secretary for information and knowledge he. thank you go for joining us today. secretary shinseki your remarks will of course appear the record but we welcome your opening statement. >> thank you madam chair and ranking member burr. thank you again and i look forward to this opportunity to extend the dialogue we have but thanks for this opportunity to present as chairwoman -- the chairman said. the president's 2013 budget and 2014 at dance appropriation request for va. this committee has a long history of strong support for our nation's veterans and i can

speak of that first-hand, having worked personally the past three budgets with you. the president has demonstrated his own respect and sense of obligation for our 22 million veterans by signing the congress once again another strong budget request for va and i thank the members for your unwavering commitment and i am here to answer your questions and seek your support on this budget request. i would also like to knowledge the representatives from our veterans service organizations who are here today. i would tell you as we develop our budget, their insights, their experience is helpful as we put together our arguments for resources and as we strive to continuously improve our programs. madam chairman thanks for introducing the members of the panel. i have a written statement which i asked to be submitted for the record. this hearing occurs at an

important moment in our nation's history. is not the only one. there have been others i could refer to. i am old enough to have experienced a return from vietnam and to have witnessed tersely the end of the cold war. we are again in another period of transition, an important one. our troops have returned home from iraq and their numbers and afghanistan are like to decline over time. history suggests, as the chair indicated, these requirements for these two operational missions will continue to grow for some time, long after the last leaves afghanistan, and maybe as much as a decade, maybe even more. we must provide access to quality care, timely benefits and services and job opportunities for every generation of veterans, and the

generation on hand is the one that comes home from iraq and afghanistan. the next five years more than a million veterans are expected to leave military service. this generation relies on va at unprecedented levels. through september 2011, approximately 1.4 million veterans who deployed in return from operations enduring freedom and iraqi freedom, 67% had used some va benefit of service in some way. a far higher percentage than those in previous wars. the 2013 budget request would allow us to fulfill the requirements of our mission. health care for a .8 million enrolled veterans, compensation and pension benefits for nearly 4.2 million veterans, life insurance coverage, life insurance covering 7.1 million active-duty servicemembers and veterans added 95% customer service rating.

on over 6500 campuses. home mortgages and veteran loans with the nation's lowest foreclosure rates, 120,000 eligible family members and are 131 national cemeteries befitting their service tradition. this budget request continues the momentum in our three priorities as you have heard me speak about over the past three years. increasing access to care, benefits and services, eliminating claims with claims backlog and ending veterans homelessness are an effective, efficient, accountable use of the resources you have divided. access encompasses va's facilities programs and technologies. it's a broad term but there is a lot that it encompasses. this 2013 budget request allows me to continue improving access

by opening new or improved facilities closer to where veterans live and providing telehealth and telemedicine linkages, connectivity, including in some cases where it is needed and veteran sums. also by fundamentally transforming veterans access to benefits with an electronic tool called a the veterans relationship management system, this is an effort to get telephones. by collaborating with d.o.t. to turn the current transition assistance program that we both share, tap come into an outcomes-based training and education program that fully prepares departing servicemembers for the next phase of their lives. by establishing a national cemetery presence in a rural areas and better serving rural veterans and i'm happy to provide details later. we expect that more than 1 million veterans will leave the military over the next five years. potentially all will enroll in va. over 600,000 of them based on

historical trends. over 600,000 of them will likely seek care, benefits and services from va in the out-years. regarding the backlog, from what we know now, fy2013 will be the first year in which, first year in a long time in which our claims production going out the door will exceed the number of incoming claims. and the paperless initiative we have been building for the past two years, automation tool, becomes critical to reversing backlog growth and increasing quality. we must not hesitate. stability and i.t. funding is critical to our success. homelessness, from january 2010 to january 2011 loan the estimated number of homeless veterans declined by 12%. we have created momentum in the homeless program.

much remains to be done to and veterans homelessness by 2015 but the 2013 budget is a presentation of how we continue to do that. we are now developing a dynamic homeless veterans registry. i think you appreciate that much of what we understand about homelessness is an estimate of real numbers. we are not able to count everyone out there but it's a valid, statistically valid process. in the meantime over the past three years, we have been building a registry of former and current veterans by name so we know who they are, what their issues are, the individual level of concern as expressed here. what their issues are, where do they reside and whether they are migratory and move from one va to the next. as we think about adjusting the footprint they somewhat we see sea day today, we want to be

careful that we are not doing something that ignores may be an issue that is going to require help. so building a veterans registry today, over 40,000 names of formally homeless veterans, allowing us to better track and understand the real causes of veterans homelessness. in the gears ahead, we think this information will not only help us more effectively prevented and that is where we are headed, not just for veterans but perhaps for other communities as well, where we have partnered in taking on the homeless issue. we look to develop more visibility at the at risk veteran population in order to prevent veterans from falling into homelessness and this budget supports that plan. so, madam chairman and members of the committee we are committed to the responsible use of resources that we seek in the 2013 budget and i know that has been the question some of you

have posed. for both the 2013 budget and the 2014 advance a pro-grisham requests we are committed to the responsible use of again and thank you for this opportunity to big -- appear before this committee. >> thank you very much mr. secretary and let me start the questions getting this off the table. is on the issue of sequestration and cuts in spending. like i said in my opening remark i believe all the programs including medical care are exempt from cuts but there is some ambiguity between the budget act in the existing law. when i asked the acting omb director to address this issue during a budget committee hearing two weeks ago, he said omb has yet to make the final determination. so i am concerned that by not settling this issue now we are really failing to provide our veterans with a clarity that they really deserve to have, and so while you were here i wanted to ask you comity believe that all of the a program's including

medical care are exempt from any future cuts? >> i think that an chairman, the answer that the omb director provided to you is the same one that i understand. they are still addressing the issue. for my purposes, i would tell you i am not planning on sequestration. i am addressing my requirements, presenting my budget, as you would expect me to do. i think sequestration on part or on whole is not necessarily good policy and i think the president would argue that the best approach here is a balance deficit reduction and he believes that the budget he has presented us that, and asks that the congress look at that budget and favorably considered. >> we want to provide clarity to our veterans and we are very

concerned about this issue. mr. secretary, last year we talked a lot about mental health care and i think we have covered a lot of serious issues, best summed up by a veteran who i heard from recently who uses the ann arbor medical center had to wait months and months to get into counseling but then he had glowing things to say about the mental health care providers want once he got in. in order to address those types of issues, the va has to be certain it has enough resources to not only keep up with the increasing number of veterans who are seeking mental health care but also to bring down that unacceptably long wait time. over the course of the last two years the number of iraq and afghanistan veterans who are looking for mental health care went up by about 5%. that is about 18,000 veterans every quarter. so i wanted to ask you this morning if you believe the increase in mental health funding in the budget request is sufficient to accomplish the

goals and keep up with his increasing demand? >> i believe that the budget, if you look at the 13 budget request, i think it's adequate for us to meet what we understand our requirements. are there issues up there that we will discover between now and the execution of our budget? i would say, if we do, madam chairman i would be the first to tell you. now you asked us to do a survey and we did. it was very hastily done, and senator burr referred to some of the output conclusions out of that survey. out of 20,000 of our health care, mental health providers, 319 were surveyed and the results were as described. my question of vha is did you go

to the places we thought there would be problems and the answer was yes. we were asked to go figure this out. i would say we got a pretty pure response. what i think we need to do is take in a broader look to make sure we understand across the larger population what our issues are and where there are opportunities for reallocation or you know, as it becomes clear to hire more people. i would offer to the chair, i took a look at what we have done in mental health over the last four budgets. if we look at 12 to 13, it's rather unimpressive. i mean it's 5% and it matches the increase in the medical budget, but between 09 and 13, our increases 39% in mental health. if you include the 14 advance it will go up 45%.

>> that is the result of a number of soldiers coming home, which is dramatically increasing, correct? >> true, but we are trying to anticipate that there is going to be a larger requirement in the out-years even if we don't have clarity. we are trying to prepare for that. we want to do a larger survey here, as i indicated, and then see what the outcomes are. but let me talk with dr. petzel for any details. >> thank you mr. secretary. madam chairman, as a result of the hearing we had earlier in the year, we have now done two things that are i think important and on point with regard to your question. one is that we developed a staffing model. it is the only staffing model that i know of that is available about mental health. it's in the beginning stages but it is giving us some information about what the key might be but

i think more importantly we are site visiting all 152 of our medical centers to look at the access to mental health services both evangel appointments and subsequent appointments for the impatient -- and patient program or individual psychotherapy. what we are finding is that, we do meet the criteria board the first appointment in most every instance. we are having some difficulty in some parts of the country making the next appointment in a timely fashion, giving them, as you mentioned earlier, into the specialty services. this could be the result of three things. one is, do we have enough staff out there? have we given enough positions and enough resources? two carmarthen is positions filled? are they filling up those positions in a timely fashion and the third is are we getting the appropriate level of productivity out of each one of

those people? if we do discover, as the secretary just mentioned, that we do have additional needs, i can guarantee you we will be in communication with the committee about those needs and in for discussion. >> i appreciate that. is a top priority for us the see your. >> i would just share that in fy 11, we hired about 897 additional mental health professionals, bringing us up to about 20,500 mental health professionals, so the interest is there and trying to determine what the requirement is. we are not hesitant about increasing those numbers. >> thank you very much. senator burr. >> thank you chairman. since the chair just asked about mental health let me ask if my impression is correct. in december the va pulled their facilities and they found that there were 1500 open mental

health positions. is that accurate? >> i will turn to dr. petzel. >> can you repeat that number? >> in december 2011 levin to be a pulled their facilities and found there were 1500 mental health slots that were unfilled. >> out of 20,500, that's true, yes. >> i just want to make sure the information i had was correct. mr. secretary i wanted thank you for something unrelated to this budget hearing. march 31 in north carolina, we will have the first in the country welcome home vietnam vets day, an all-day event and i want to thank you for the va's cooperation in making sure that the va presence is there to make sure that we are able to catch those who have fallen through the cracks and work with those who have problems and will have a va mobile presence there as we well from dod and a lot of your entities that are working on the

employment placement. i think this is a very very special event. is long overdue and hopefully it will be the first of a total of 50 that are held around this country. i thank you for the pas participation and i may ask for chart number one to go out. earlier i mentioned a number of for formants matrixes that seem to be heading in the wrong direction when it comes to claims processing. but i want to start by talking about the quality of the va's decisions on disability claims. your goal is to have 90% accuracy, but for the past three years, accuracy nationwide has been about 84% and as of december 2011 the accuracy rate at regional offices around the country varied from 94 to 61. mr. secretary, in total, how much is va requesting for the 13 budget to carry out all of those quality initiatives including the quality review teams in each

of the regional offices? >> thank senator. let you turn to secretary to answer that. [inaudible] >> senator burr thank you for your question and i'm glad you are asking about quality because we are focused on both reduction in quality. it's not a trade one for the other. i think it's a specific on each one of those costs but i can't tell you we expect the impact to be significant in our ability to produce a higher accurate and more consistent response across the board. it's not just the quality review teams, but they are a critical part of this and for those of you who may not be aware but those are, we have taken what is nationally recognized even by i think you all as members of this committee and your staff, our star accuracy team based out of nashville tennessee. we have replicated their skill level, their training and what they do every single day. now inside every single regional

office across the nation, their responsibility will not just to be to check quality at the end of the process or check quality at the end but a new part of the process that works closely with our employees in their training environment to check different parts of her process where we make the most errors and correct those early. >> at what point on the calendar would you make a determination as to whether those quality initiatives are going to work and what indicators would you look at to make that decision? >> thank you senator for your follow question. i will tell you we have partied on that. no initiative we have in our transformation plan of the 40 plus initiatives in the people's category and those things trained to do our work and in the environment how we have adjusted or in our technology solutions, have not been tried, tested, measured for impact before we are implementing so in fact of the quality review -- >> but at some point you have

got to say we are going to look at it and see this working. >> we did, sir. absolutely did and we did a local pilot and we are just announcing this week -- >> silly year from now when we get together for the 2014 budget, if the quality is not improved or the timeliness down, it will have failed. >> no sir, i can only expect a quality not to have improved. we have very significant decisions and initiatives. >> my point is, what has it done? >> we will adjust as necessary to find the reasons why and we will tackle that hard but i don't expect that to be the answer. i expect us to see improvement in both quality and production. >> senator if i might, quality is a function of trained people with the right tools and we are working on both items right now. >> my question was simple ms. secretary, what at what point it will we determine what is working? >> we will be happy to provide

that. we set a target of ending this issue with backlog for 2015. we began fueling the automation tool we have been building for two years. the fourth quart of this fiscal year, we expect that -- will be rolled out nationally throughout the 2013 budget and as we do that we expect those that do in quality to go out. >> if i could as the chair for one additional question on this round? i would call up the second slide. va made this projection last year at the budget hearing. productivity due to the impact of the overall transformation plan, which will rise from 89 annual claims per direct labor in 2012 to 129 in 2015. as you can see from the chart,

and we talked about productivity per fte last year at 79.5%. this year we are looking at 73.5%. what her son age increase in individual productivity do you expect from the veterans benefit management system, and what percent do you expect from other initiatives that are underway? >> well, i will turn to secretary hickey for the details. i would say what he's charged over flex senator is that in the last three years, we have taken on some other projects unaccounted for here. the g.i. bill, requirement to get that program the program up and running and today we have over 600,000 youngsters in college under an automated system that didn't exist in 2009. and i think we all recall the first semester we had to do everything manually and it was not the prettiest.

processing event. we do that manually and got 173,000 youngsters in our school and on their path to the future and at the same time we began building this automation tool for the g.i. bill. by april we have the first part of that tool out, fielded and we have had it -- added four or five more programs to make it productive. we will get better over time. it's hard for me to give you a day in the month when this quality factor will meet any of our expectations, but we set 2015 as the date in which we would have the backlog solved and the quality at 98%. that is what we are focused on. i will give it the best weight points that we can figure out, but that will be a product of what we are doing to train our workforce and what we are doing to give them the right tools. we are talking about the right tools now, but at the same time

your question about the growth of our human resource investments for the department. we have trained nearly 300,000 of our workers. many of them who have never been trained on their jobs, so they can produce what we expect and that they can leverage these tools when they arrive. >> thank you senator burr. i would just like to first start by saying thank you to you and to chairman murray and your leadership and the members of this team and this committee for an unprecedented level of increased budget that the va has enjoyed in the last three years. i think we need to put that into a little context. that 36% was used to tackle 48% increase in claims in the same period of time and that would

support 12 million servicemembers, veterans, families and survivors and that is including a net increase in the last year of half a million male veterans to our roles that did not exist and are using our benefits and services. so, we did also for the second year in a row complete more than 1 million claims using those resources. that is 16% more claims per year than we have done in 2008 before that chart started doing some of those things. i will put it prank we have a table we put more than $3.3 billion i thank you for celebrating our vietnam veterans. we put more than $3.3 billion in the hands of 117 thousands of those vietnam veterans in the last year. that had an impact on that line. that impact was over 260,000 other claims in back log. that also had an impact on fte because to do those right and well, we put two times the fte associated with each one of those claims on those very

difficult, complex 50-year-old claims. in addition we stood up in the same period of time and put the level of fte to our most wounded, ill and injured in our integrated disability and evaluation system to give those folks taking care of right and well the first time. that also has an impact on the line that you have laid out in front of us. the positive news about all of that is, we are done. we are down to the town's of 10 level, kind of double-digit levels of the agent orange cases. 99.9% done through those 250,000 pages. we are now capable of shifting all those 13 resource centers. we had an approximation that were hunkered down doing those agent oranges. one march tomorrow, we are shifting that all back into normal backlog caseloads. it will be focused on our

benefits at discharge for veterans and i will be focused on our quick card entry and frankly focused on our oldest cases we had on the books during the month of march. >> senator cochran. >> thank you madam chairman. general shinseki, as you know we often face challenges in treating our veterans who live in mainly rural in remote areas. this is especially true in places like alaska and hawaii, where you just can't get to some places by jumping in the car and driving there. i know that you are working on an ammo do with the indian health service to find solutions for -- to help provide services to our native american veterans. and i commend you and all your

involvement in these areas. mr. secretary, can i get your commitment to look into possible ways of working with the native hawaiian health care system and the native americans system to provide services for in this case native hawaiian veterans who live in many of the. [roll call] parts of the state of whole why he? >> senator, you have my assurance that we will do our utmost to provide for any of our veterans, wherever they live from the most rural in remote areas, the same access and quality to health care and services as we provided to someone living in a more urban area. there is a challenge with that but we are not insensitive to that challenge and we are

working hard to provide va provided services and where we can't, to make arrangements where it if quality services exist in those areas, making arrangements for governments to be able to participate in those local opportunities. we are, i think you know, working and have been now for some time on signing in mou with the indian health service so that wherever they have facilities and we have a vested interest, a veteran eligible veteran, going to an indian health service facility will be covered by the a's payments and we are in the stages of trying to bring that mou to conclusion. we intend to do that. and where tribes approach as

prior to the signing of that mou and want to establish from a tribal nation with the va a direct relationship because they have a medical facility and would like us to provide the same coverage. we are willing to do that but that would be on a case-by-case basis. >> thank you. secretary shinseki, staffing shortages continue continued to be a problem, although there has been progress. some clinics are seeing staffing levels below 60%, causing excessive waiting times for veterans that need care. i understand this is an issue you have been working on. as you know, there were a couple of veterans services is growing nearly. it shows that you have been making progress. can you an update to us on the

department's progress and address staffing levels? >> mr. secretary thank you. thank you for the question. we have addressed and we have talked about mental health earlier and the efforts we are making to try to assess whether there is adequate staffing there. i think you're probably talking about primary care, which is our largest clinic operation. we treat 4.2 million veterans in our primary care system and it accounts for the lion's share of our budget expenditures. we assessed staffing three years ago when we began to implement what we call the patient alliant care team or pack program and have done it again recently. we are finding that we are now able to bring up the support staffing and the physician

staffing to reasonable levels associated with the standards around the country. i would like to take off record, off-line, any information you have about specific places where there is a 50% vacancy rate. i am not aware of the fact that we have this around the country so i would be delighted to meet and talk with your staff and find out where these areas might be so that we can address them specifically. >> my time has expired, but secretary shinseki, as we face budget constraints, we must all work to improve quality efficiency and redouble efforts and find ways to get the most from our budgeted resources. my question to you is, can you talk about any steps you are taking to improve the acquisition process at va and

any efficiency you have been able to realize in this area? >> senator, i would tell you that we have been working for several years now on restructuring our acquisition business practices. three years ago, acquisition was read throughout the -- now one comes directly under dr. petzel and that is for all medical acquisitions, gloves, masks, aprons. we have to be able to leverage that and get a good price on those kinds of things. for everything else, we have an office of acquisition and logistics and construction. we have a director and everything else governing acquisition is consolidated under his review. both offices, the work of both

offices then comes up to my level to the deputy secretary as part of our monthly oversight review process. >> thank you very much. senator johanns. >> thank you. mr. secretary, let me if i might visit with you about the national call center. this is something that i think we had high hopes for. you might have had high hopes for it. but i have to tell you, it's not working well. here is what we are running into. the complaints kind of fall into two separate categories. the first category would be people that called a call center and no one answers. i mean it just rings and rings and rings and there is no one there. i will tell you in my own senate

office, my staff has run into this problem, where we just can't get a live person on the other end of the line. the second area is to finally get somebody, a live bersin, to answer the phone and you get connected with them, and they don't have information. we are calling in our somebody is calling in. what is going on with my claim or whatever it is, and you are just not getting a responsive human being on the other end of the line. i am guessing what it is his they just don't have access to the information that we are seeking, and so it seems to me that we are creating an expectation of service, when really there isn't much service there. i would like to hear your thoughts or whoever spots on your team about the call center,

what the prospects are for that. are you hearing these problems, and if we are still committed to the call center, what is in place or what will be in place to try to solve the issues that i have raised? >> thank you senator. i have tested the system myself sometimes and you know, unpleasantly surprised another times disappointed but that has been something i have done for three years now. i then demanded that we go out and fix it. so we are in the process of putting a fix in place called the veterans relationship management system. if the concerns you are expressing our anything six months, the experience occurred six months ago and older, i would offer that we have put this tool in place and changes are occurring weekly.

i will ask secretary hickey to provide some detailed. but i, like you, i think when the veteran picks up the phone to call the va there ought to be someone there that answers, or if he or she chooses to come in on line, then it ought to have information that is useful to them that is easily discovered, so they don't have to run through a series of traps to find what they're looking for. we owed them, and that is the first step in any service organization, and that is our intent here so let a call in secretary hickey. >> senator johanns thank you for question and i appreciate your comment early about ebenefits. that is part and parcel of our multipronged approach in our veterans management capability, about being able to converse with that veteran by the time and method that they choose.

we have surveyed our veterans and 73% of them want to to meet us on lines of ebenefits is partly that solution. but let me address specifically your questions, first about no one answers, no life worsen and let me tell you about the new pieces of functionality with we have that we have measured outcomes on from our j.d. powers investment power's investment survey. the first of which is virtual hold. that means of the veteran calls us and there's a long waiting time, they can elect to hold, hang up the phone, continue feeding the baby, getting ready for work, doing whatever it is they need to do and we will call them back on cue. 92% of our veterans have elected that option and we have connected with them as well. the second one is our scheduled callback, meaning i can't wait on this line with you now but can i schedule a time that i can talk to you and you will guarantee to call me back? we have just implemented that one in december. between those two our veterans, 1 million veterans have elected

those options. as a result, we have seemed clear demonstrated measurable performance. we have a 15% improvement in overall satisfaction on the ability of our veterans to get through and we have seen a dropped call rate reduction of 30%. those are both part and parcel of the new technology and that the new ways we are doing and working in our veteran adage meant capabilities. in terms of another vrm initiative, in terms that they don't have the right information. yesterday, not today, yesterday our colleges would have had to cycle through 13 different databases we have to get the veteran or family or survivors the information they need. today is critical for i.t. budget coming if i'd desktop to put all 13 databases under that critical and permission that you want to know on one's green, making them much more effective in delivering a good outcome. also built into this call

recording, call tracking, data analytics and the package we are using every single day to improve our services in that environment. >> i'm out of time but if i could just ask, as these things are being implemented, as we are going down the road here, if periodically you could give us on the committee and update as to the progress you are seeing, because i do think there is real hope that the veteran can at least get somebody who can answer their question, etc.. i would just like to stay abreast of how we are doing. >> i would be very happy to do that. >> thank you very much. senator tester. >> thank you madam chairman. i appreciate seeing secretary shinseki and all the folks on the panel today, and a special thank you to the general from coming to montana last year. the veterans were very appreciative of that that is was myself and thank you very much

for being there and listening and hearing. so thank you very very much. i want to talk a little bit about what senator cochran talked about very quickly. and that is the strategies that va is using to recruit folks. this is not in the gp area. this is an area that is much more difficult and gp is not easy, and that is the need for mental health professionals. we have as you know, mr. petzel, you were there i think when we opened up the facility in helena, and we need -- it's a great facility. we don't have staffing at this point in time as far as from a psychiatric standpoint. do you have the adequate amount of flexibility to be able to go out and recruit and if we go to the secretary or mr. petzel, to be able to go out and recruit and really get folks and? because i'm not sure where they

are at. >> thank you mr. secretary and thank you senator tester. i am aware of the issues in, at fort harrison. we have for psychiatric psychiatrists vacancies. in general, we can recruit around the country very successfully for psychiatric social workers, for psychiatric nurse clinicians and for clinical psychologist. the most difficult improvement versus the m.d. psychiatrist. we are not unique. this is an issue that all systems around the country faced. we are very competitive however in terms of wages, in terms of working conditions, and the other kinds of things that are appropriate and are needed for recruitment. so, i think we are in a position to do the best job that we can avert routing and i don't know

what would add right now to the basket if you will of things we have to offer. it's a matter of identifying the people that want to come to places like helena, which is beautiful by the way. in an environment where there aren't that many of them. >> well, i just think that it's been an ongoing problem particularly in rural areas like on tan and it's not a problem that i think bodes well for the veteran who has issues around mental health because we all know with professional health and quality-of-life advances in the cost goes down. i want to talk about health i.t. for second. i think we need to be more efficient and effective to deliver quality health care to our veterans however it is my understanding that the exclusion of health care-related i.t. funds have put us in somewhat of a bind. it's hard to deliver care when you can't make corresponding

investments to connect the veterans, electronic health records, lousy veteran coordinator -- pack can you speak about this issue and how the inclusion of health care-related i.t. and appropriations can improve the quality of health for our veterans? >> thank you senator. i would just begin by saying congress provided a very unique mechanism called the advanced appropriation and it's a gift to the va because it really gives us continual opportunity for budgeting. it gives us two looks at our budget so we submit what we understand our best estimate is and then we come back a year later and look at the actual budget and we can make adjustments. the advanced appropriation applies primarily, solely, to health care. and so dr. petzel has his continuous budget. everyone else is on annual

budgeting. under advanced approach, we have the budget for medical services, medical compliance and reporting, medical facilities. and what happens is, when we have a delay, acr, the rest of the budget, where i.t. resides, he has his authorization to start holding facilities in standing them up and then we have to wait, as sometimes happens, more than sometimes, a delay until the i.t. budget gets released so that now they can catch up to him. in a case last year i think the budget cr lasted until april so pretty significant period. a little bit off stride here, i'm trying to figure out how we can get this together and link up the authorities you provide along with the budget to do his business and get give him the tools that allow him to see

patients. there is no separation between medical i.t. and medicine. this is all one treatment discussion. >> i just want to -- let us know how we can help you be more effective in the i.t. area and i think chairman murray and ranking member burr will help too. i think it's really important this day and age. >> can i just follow up very quickly madam chair? i would just add here that what sometimes happens, as happened last year the i.t. budget is now released in april. and it's a big number, because it's all i.t.. you have the paperless system that goes with secretary hickey's operation you have medical i.t. that goes with dr. petzel's. i'm just trying to be clear here. thin