going to reverse to any great extent. with the rates of increase and product imports come and even domestic products that have international components that we need to address this coming and we need to create a regulatory system interfaces with partners of similar abilities and desires to work together to try to develop a larger regulatory system in terms of maintaining what's happening. ..

they have to be coordinated. it looking at this is crucial that regulatory systems, the infrastructure and a key indication, the eu, japan, canada cannot do this alone. whitney jet work together to increase our capacity. i think the excellent committee, members who are here, worked on this travel the route and debated in debated and debated on what these recommendations actually could work. the outstanding staff that really has dug into this and determine the facts. so thank you and i guess we will open to questions. >> my name is alan ferguson.

my name is ellen ferguson with congressional quarterly. what role would congress have in any of this in terms of either facilitating things for fda toward directing the state department and other federal agencies to focus and make this a priority in terms of negotiating trade agreements or other international things. >> provided exactly. essentially what needs to be done is ask car race, negotiate trade agree with this congress interacts legislation in areas that relate to this. this is high on our priority list to develop a system in the regulatory system. in addition to that congress has to realize that regular products from fda cannot be broken down into domestic and international.

that works 20 to 30 years ago but does not work now. so the authority has to be granted to fda to have flexibility in moving resources. then the resources. a lot of these agreements are unfunded mandates. what we need to essentially do is not just throw money at the problem. we need to give fda the flexibility to put the money into areas that would actually have impact. for example, it may not be important just to throw more inspectors in the country. maybe important to tell inspectors in the country, but also played to start trading in place and surveillance in the country so that instead of just inspecting your are actually helping to build the system. >> just a couple of other quick points. one of the community members, other things that they certainly could do. certainly they kate grant fda the ability to share data

on inspection reports with other regulators that will allow them to cooperate internationally. this is something that i think the fda has been pushing for for a long time, and particularly in this austere budgetary environment i think it is crucial for fda ability to have this is drop the ability with other regulatory authorities. i no there is -- i'm sorry. >> u.s. or international tour ability to share u.s. proprietary data for u.s.-based companies with other regulators so that they can then receive the same. they need to be able to do this in order to have an interoperable regulatory system. also in the current safety bill pending before congress a provision for end to end supply chain visibility. i think that's crucial. the committee would recommend to

trace ability and having adequate one step back and one step forward. that is a version of that. fda has been starved for resources and its international programs department to engage in this type of regulatory activities in the past. i think that's crucial. as jim mentioned, right now the balkanization of what trade development and regulatory agencies to around food and drug safety, their needs to be an integration of that. at the congress has a big role to play to ensure that what trade officials do is promoting high standards food and drugs and also on the same part with what fda does, the benefits or development and for trade of the countries involved to adopt these high standards.

>> this question will come from amelie walker. >> hello. thank you for taking my question . one quick clarifying question and then another. is it true now that a country, you know, such as japan, i guess, would go and inspect a through dordrecht facility that the u.s. might send an inspector to inspect the same facility? >> yes. >> okay. and my other question, would you say it is a fair assessment? a lot of previous reports have called for inspections. i feel like every that a lot. this report is saying that more inspections is not necessarily the answer because it's deeper than that and the reform of regulatory systems. >> yes. we are not saying we will cut back. more restrictions might be important, but our resources cannot be just spent on

inspections. resources have to be spent on integrating more in trying to change the nature and work with the regulatory infrastructure of the country. >> we did also discuss sharing inspection reports, so it is not just the u.s. ribbing up inspections that have the ability to rely on the inspections of other very well researched qualified regulatory agencies. >> and shifts the burden to industry, to do sharing a much themselves, to basically if we can get higher quality product being generated throughout the whole system then the inspection resources may ultimately catch up with what it's trying to capture. >> the big part is actually improving capacity. much more cost-effective if we improve the capacity of developing countries to actually test and not send it them to the supply chain.

it's costly to do something at the end point and have it rejected. >> from the committee. i would just like to add that we have to be mindful of the flip side of the issue. we are asked what things congress needs to undertake. one thing that was very important to this committee, this is not a u.s. problem but a global problem. even simple things like sharing inspection reports, maybe laws and european companies -- countries and canada and japan that prevent sharing. and these to be a mechanism to influence regulators and other countries to make this a two-way dialogue. >> which is why our recommendation is to bring this to the g20 agenda to get everyone on the same page. >> the good point. this is why the committee took such great efforts to emphasize that there is an intersection of

global health, trade, and development of these issues and it operates but internationally and a lot of this should be important to g20. not just about public health. also should operate domestically as well. we're hopeful that allows the ability to bring together all the necessary partners that you need to bring to bear on this problem. >> thank you very much. once again, if you would like to ask a question, please press star one. >> yes. >> five. global health technology coalition. i'm curious for the second set of recommendations, very clear. for some of the first as well. i'm curious because, as we all know, the challenges and developing kutcher regulators are not waiting for report to tell them that they should communicate more with each

other, but they clearly need to. i'm wondering qvc as a driving force particularly for that recommendation but for the other international recommendations? >> we are looking at is that she tortillas in this to get to u.s. and other areas on the development organization and the world bake in various other groups to essentially put the strengthening regulatory infrastructure as a priority got to start getting that message out. so i tied in with the domestic regulations that fda, bring this forward. question congress to bring this forward. improve public health and go forward. there is a realization. the multiplier effect within those countries. essentially the regulatory infrastructure. >> think that's right. we call for basically did he study to endorse this as an effort -- intersection of global

help penetrate, and development. we would like to do next is what we recommend doing, filtered down to the various initial agencies that a dedicated to those issues. and, you know, of course there is wto. it's committees that work on these issues. codex, obviously regional development. we think these strong regulatory systems, again, receiving global health trade and development of comes. who has activities as well. again, looking for an endorsement hopefully at the next meeting of the g20 which will be in mexico of the intersection of these issues and then to start to build down from there to these topics, specific initial organizations. >> if i could just add on. my experience and of others disagree, please speak up, the

regulators with whom we were interacting in the country's were very enthusiastic about this initiative and are anxiously awaiting the report. so i think there is a lot of recent activity on the part of many of these regulatory agencies. it is not just for g20. although i think it is incredibly important. i think there can be other mechanisms, may be softer, 1-on-1 types of approaches that creativity with the agencies in developing countries. >> one of the things we recommend here again, national standard to make it easy for them. one of the things we found is, as you mentioned, the field visits as part of this committee. we often found strong regulatory systems in the areas that support products for export that don't necessarily extend to the population at large. there is a lot that we can do, but the u.s. specifically by doing more to support international standards and the

participation of developing countries and agencies under development but also internationally to make this easier for the centuries to adopt internationally compatible high standards. >> ultimately you would want spillover effects. >> spillover. you would be improving the health and safety of food and the developing countries. i think there is a clear desire from the people we have been talking to in developing countries, that's what they're saying. [silence] >> any more questions to back

sure. >> alan ferguson, congressional quarterly. he talked about your goal to have the idea of having a food and medical products, safety is a natural part of the g20. what other things are you looking to happen in the next three or 12 months as a result of your report to. >> a share in the immediate short-term is sherry of inspections and really opposed the mice fda and the partner regulators of this really is an important activity for everyone involved. secondly, to push on the industrial sharing for both the food and drug groups to share resources and not duplicate resources. in the third one begins the training. training aspect and educational

aspects could have immediate impact of the year to. even fta domestic regulators realize what is actually happening internationally to the communication with other regulators. and so to assess the share that information. at every level, its dramatic. once when the knowledge is based in individuals go back to the country's products on both sides to quality. >> the only thing i would add to that, one of the things we mentioned in the report that we think would be helpful on a short-term thing that the fta to do is the adoption of the fda version of cdc to the of what back -- the expertise of epidemiology to other countries,

in days international surveillance and seize control. how we see them working in the fda context is, of course there is both in terms of freeing foreign regulators over here to potentially work with fda to encourage that kind of information sharing and mutual understanding, but also to send staff level regulators abroad to work in other regulatory agencies. we have seen this as a way of building a high-profile program, starting to filter out the common regulatory approach to the san persisted challenges on food and drug safety that we face. >> one other thing that we talked about in the report was the issue of metrics. important that we actually start seeing the baseline information so that we can do understand the impact of these training

programs. because you're working with different cultures. and you may not convey something in the wake. >> the only other topic out with at is we do talk about the role of industry in this context. committee members and be able to wheel on this as well. they are certainly the entities closest to the problem and the ones with the shortest distance to controlling their own supply chain and their products. we have a set of recommendations in this report, both about creating incentives for them to carrots and sticks to meet fda standards. we talk about having more programs like the secure supply chain products that the fda has contracts safety. we think that's a very good one and should be evaluated at the conclusion of that pilot and be adopted. but also looking at the issue of

doing more to develop appropriate stage in this context and viability, it can be difficult under some circumstances to hold importers of unsafe food and drug products liable for those activities because depending on where the action occurred, how far back in the supply chain in this report we talk about, potentially improving the ability to hold those entities liable in the united states. >> questions. >> i will say, we took this project, broaden the scope. i really feel honored to be a part of this because we have learned a lot of information and

we have -- i am walking away from this understanding that, yes, there are a few bad actors that seem to cause grief for all of those among the regulators, the patients, the consumers, but also for the industry. i fully believe most of industry, whether it's food and medical products, and vice, or ethical are dealing with these problems, but they also need assistance in helping weed out the bad actors. this really has to be a partnership where all stakeholders are doing their part. it cannot rest on the shoulders of the fda are on the shoulders of the regulatory agencies. it has to be a full commitment by all parties that are involved in this. >> i would just agree with that. i think as a committee we united around the idea that there is an alignment of incentives to addressing this problem on

health trade and development. all those factors that they ideally what. that signature for industry as well. there are little things you can do to make it easier for them to have that alignment and to achieve the safe food and drugs that all consumers want, whether in the u.s. or other countries. we are hopeful the specific recommendations were put forward are undertaken so that can happen. >> and i just would like to finish and echoed those concerns. this is a long-term. this is not point to be corrected tomorrow. there are components we need to share what's already in place. we need to develop the ability. someone asked a question earlier not here but earlier this morning. if this was a recommendation that was in place, with the opposite occurred? well, not necessarily, but the possibility of something like that happening would be greatly reduced. you have to realize there is

always going to be problems. really impressed with in each country, the desire to get rid of the issues and get rid of these. but how do you do it? a large and complex situation. we really, this is to be a constant effort to improve what's happening so that in ten years from now we have less of these problems occurring. >> they do so much for listening to us and i encourage you to look at the entire report because a lot of these issues we have dealt with in great detail. and they keep. [applause] [background noises]

[background noises] >> house democrats held a hearing yesterday looking at the u.s. oil and gas market and whether it has become vulnerable to wall street speculators. gas prices are averaging $3.93 per gallon nationwide according to aaa, up more than $0.65 since january 1st. this is an hour-and-a-half. >> good afternoon, everyone. pleased to call to order this important meeting of the steering policy committee with appreciation to our chair, congresswoman rosa laurel of connecticut who will preside over today's presentations.

i am also pleased to be joined by a pair of our caucus, congressman john morrison of connecticut and the ranking member on the natural resources committee, former chair of the energy security select committee so please be joined. congresswoman edward maryland, chairman sandy levin of the ways and means committee, bobby's got the viejo, and also from virginia mr. marin. i think about today's proceedings, one title in my mind i give it, the agony and ecstasy. the agony of our consumers and price of the pump. what that means to them, especially people who are having trouble making ends meet and have on high-cost the pump is really an obstacle to them. it's that just a luxury. it's something that we must do

and they have to make ends meet. the agony is for them. the ecstasy is for bigelow. the record profit of $1,307,000,000,000 in profit last year. $261,000 a minute, minute. and on track for another year of astronomical profits. experts have been clear. well street speculators are artificially driving up the price of the pomp and causing pain for millions of americans and consumers that will hear more about from are expert witnesses and from our colleagues. i think my colleagues for joining us. i appreciate the prices and yield to the distinguished chairwoman of the steering committee. >> thank-you. i want to welcome everyone today. it is a privilege. i think you for calling the hearing and welcome to my colleague on the panel this

afternoon. high prices affect every aspect of america is lives, not just the cost of traveling, but home, food, and other purchases. there are many reasons for fluctuations in the price of oil on some of these adjustments and an uncertainty in the middle east the administration is moving forward by working with the engine as a community. as a result last week saudi arabia announced that they would act to lower oil prices. that being said, the cost of gas is also your view of the affected by representative speculation in the oil market. that is something that we can and should do more about. last year at the peak of the last oil price bubble goldman sacks estimated that speculators increased crude prices by run 20%. the price of gas by $0.56 per gallon. even the head of exxon mobile conceded that the price of oil should have been in, and i quote, the 60-$70 range. instead it hovered at $100 per

barrel. it had been estimated that speculators now make up as much as 70 to 80 percent of the oil market. we are holding this hearing to examine how we can do a better job of curbing excessive speculation in the oil market. dodd-frank legislation gave the cftc broad new authority to investigate, -- invested manipulation. last year the commodities trade tuition charged five oil speculators with manipulating the crude prices in 2008, netting them more than $50 million even as oil prices climbed toward record highs. but this house republican majority has tried to get the cftc at every turn. the agricultural appropriation last year, the funding for the commodity futures trading commission is determined, provided only $1,702,000,000 in funding. 44 percent of the president's request, meaning there is about

159 less cops on the beach. we got that up to 205 million. the final 2012 budget. it is still not enough for the cftc to perform as it should. their request was for $308 million. we are here to represent american consumers, not oil speculator. we need to ensure that the cftc has the resources it needs to do its job and is doing it. we should be strengthening its ability to combat rampant speculation, not working to undermine it. i have introduced legislation with commons to provide the cftc with a reliable source of funding. the wall street accountability. this will bring the cftc in line with other federal financial regulators. the sec and the fdic. an authorized collection of user fees to offset the cost of their operation.

in order to decrease prices immediately i and several of my colleagues have as the president to relieve some oil from the strategic petroleum reserve. right now the petroleum reserve holds 696 million barrels, and is filled to more than 95 percent of its capacity. as president on both sides of the aisle have tapped the reserve can attest that even releasing a small amount of oil from some of the reserve can have a huge impact on the price of gas and help to discourage speculation. today i hope we can discuss the best way to continue moving forward against excessive speculation. last month president obama reconstituted the oil and gas price working group to investigate manipulation in the oil and gas market. what should this working group be doing to make a difference and to the current market conditions warrant the use of the cftc's emergency authority to set margins and position limits. the cftc has had the authority from the beginning of its existence, but has refrained

from getting involved since .. i think we are at a very important moment in the united states relationship with the marketplace. right now the national average for the price of gasoline stands at $3.90 a gallon nationwide. within the next week the average american driver could be staring through the windshield that $4 a

gallon. of course the republicans would like you to think that this is all president obama' fault and deflect any blame away from the culprits. they are wrong. the current spike in gas prices is not about obama. it's about opec, oil companies and wall street speculator. we could take steps right now but could address the situation. one, deploy oil from the strategic petroleum reserve as was said. last week when the french government said that international talks with the united states and others were proceeding to deploy the reserves, oil dipped by several dollars just on the mere threat of using this weapon against speculators. the strategic petroleum reserve is to the wall street speculator is what kryptonite is to superman and republicans oppose

this uniformly. they believe that the oil market is a free market. it is not. number two non, we need to stop regulators from their yearly gains that turned the market into a crude oil casino. last year house republicans tried to slash the budget for the commodities futures trading commission. the agency that serves as the cop on the wall street oil speculation beat and the republican majority has moved legislation intended to delay the reforms by the democratic congress the would diminish the power of wall street trading firms to manipulate the market. wall street lobbyists have even gone so far as to sue to block the reforms. we should be fully or when the wall street copps and ensure they can crack down on the gasoline gamblers in the marketplace the republicans are wrong. number three, we should end of

the needless exploitation of american energy resources. last year america's number one export of any kind was fuel. more than 1 billion imperils of our gasoline, diesel and other fuel worth more than $100 billion were sent overseas to locations like china, morocco and singapore. with congressman bill owens five introduced legislation that would stop the export of america's oil and fuel produced from public land. when american families are facing for dollar gasoline we should not be allowing the big oil to continue to export america's fuel and the republicans oppose this amendment almost unanimously. and we must end the tax breaks of oil companies. republicans want to raise taxes on the wind industry that they've been protecting tax subsidies for the most profitable companies in the world.

american taxpayers shouldn't be asked to give oil companies 100-year-old subsidies so they can sell oil at more than 100 barrels a dollar and then make more than 100 billion of annual profits. we should be pushing a long-term plan that moves us away from the foreign oil and insulates us from the price shock of an oil market that is controlled by opec. if we take these steps we will stop the speculators for manipulating the market and rain in the fuel exporters% and our resources to china and we will tell the dictators we don't need the oil any more than we need the sand. thank you, mr. chairman for this wonderful hearing. >> thank you. with that, let me introduce our colleagues. mr. larsen to introduce the guests this morning. >> thank you, chairwoman delauro for convening a year to date. i want to commend the leader nancy pelosi for recognizing

what americans have all across this country the problems they are entering upon, and frankly and home heating oil and air-conditioning as we approach the summer. it's my great honor to be able to introduce genes guilford today jeanne guilford is the president of the independent petroleum association and education foundation. i've had the opportunity to work with her over the years and a member of the steelers who understand implicitly that bill laws of supply and demand has been suspended when it comes to oil speculation and they've been at the forefront of helping us to shape legislation for congresswoman delauro and myself and i am proud to be able to introduce him here today. machine has an extensive background, and i think the

members will find this most interesting that gene was appointed by president ronald reagan and served both in the commerce department, very familiar with import and export of our commodities and also serves in the energy department as well coming and so as firsthand understanding of both the regulation that is needed and also of our marketplace system. most importantly what he understands the need of consumers and a recent press conference with chris murphy and myself laid out for the publicly think is the best case in terms of the need for us to have ongoing regulation and promotion of the cftc and the dodd-frank bill. with that, microopportunity to introduce gene del fer. >> thank you mr. larsen it's my pleasure to introduce to you our other panelists, michael greene brucker his the current professor at the center for

health and homeland security at the university of maryland law school he's worn many hats over the years from acting as principal deputy assistant attorney general at the justice department to the technical lead advisor to the u.n. commission of experts on reform of the international financial system. he also previously served as the director of the trading and markets division at the commodity futures trading commission and served on the steering committee on the president's working group on financial markets and as a member of the international organization of securities commissions hedge fund tax force thank you for being here as well as mr. gillford and we will hear your testimony. >> chairwoman rosa delauro for convening this hearing.

i've worked with almost everybody in the meeting and you have all been great friends of consumers and to have always landed in the year to those of us who don't have the clout of the big wall street lobbyist. many say there's no quick fix for this. i believe there is a quick fix and i agree with many of the policy proposals that have been enunciated but i would prioritize three of them. yesterday i read the financial times that surveys all the world markets, and with an opinion column the thesis was the united states is back. the united states is back leading the world economy. europe is on its back, japan has been on its back, china is decelerating. our policies which have been guided by the obama administration and you and congress have created the embers the first marking the recovery.

the one thing the will damage the recovery is the ever accelerating gasoline prices. the are a burden in a microsense in that people simply do not have the money to pay for four or 5-dollar a gallon gasoline. it is a hardship to virtually every american. but the more importance in the macrosense is this will break the back of the recovery. the president has said that, many of you have said that it with everything going so well for us why can't we fix this problem? many would like you to believe and you have said this is the supply and demand problem, but i cited in my testimony 60 experts from around the world as a supply and demand is an equilibrium. the king and said he would increase oil production by 25 per cent to make up for any boycott of the oil product interference of the straits of

hormuz. the president talked about releasing oil from the strategic oil reserves. but as was said in the testimony the chairman of exxonmobil has said market fundamentals mean we'll prices should be at 60 to $70 billion. they are now approaching 105 committees that to 110. why is this happening if there is no supply-demand problem? with that i would say do not believe those who tell you in the face of the experts and the face of the saudi king and the chairman of exxonmobil davis supply-demand problem. what is the problem? it is gambling by wall street on the price of oil. it is similar to the gambling that wall street did on whether or not people would pay their subprime mortgages in the market meltdown. they couldn't pay off their debts, and all of us were forced us taxpayers to pay trillions of

dollars to make up for wall street' debt that the subprime mortgages would be successful. now they're betting on the upward direction on the price of oil, and again, 60 experts in my testimony have said from mariel who predicted the meltdown, the irony and oil experts, stanford, princeton, mit, the london school of economics, it is excessive speculation which is a fancy word for saying that gamblers wearing of wall street suits have taken the markets over and are controlling the price and create investment vehicles that are designed to push the price of oil up by gambling by placing a bet you do not increase oil production, you don't create market liquidity. it's just like saying it was

less vigorous las vegas create economic well-being? we have a loss vegas exponentially on steroids making bets on the upward direction of oil. dodd-frank made with your leadership a valiant attempt to deal with this, but we were to kind in the way we dealt with at because we delegated the responsibility to the administrative process which is overwhelmed with under their radar screen wall street 24 hours a day, seven days a week, millions of dollars of lobbying. on have three recommendations for congress, and let me say under your leadership to have been bills that have passed in this correction. leader pelosi, when your the speaker, you and congresswoman rosa delauro and larsen,

mr. peterson, on june 26th introduced a bill to stop speculation, june 26, 2008, in the morning it passed the house 402 to 19 that night. when leal goes over $4 nationwide, this will be a bipartisan issue, and it must be explained that this is not a supply problem. the president just said last week we can constrain the iranians for the production because, as he has said and the saudis have said exxonmobil has said, supply is plentiful. we are now a net exporter of oil. it's the gambling that must be stopped. here are my three things. the investment vehicles that have the fancy names of commodity index swaps and synthetic exchange traded funds much like a naked crittenden called swaps that led to the meltdown wall street propagated as investments that were bets on

whether the supreme mortgages are paid off for half a trillion dollars of investment sending signals to the markets, false signals that there's a supply problem. and anybody that knows these markets and its objectives says that those false signals are damaging the supply fundamentals and this market. that gambling must be stopped. it will not have anything to the production. none of that money goes to production. none of it goes to liquidity. it's all casino gambling and nothing productive. the president has now twice wisely said it correctly said it is not a supply-demand problem, but there are manipulations in the market by big financial traders where they are conspiring to drive the price of

oil up. he twice asked the justice department to convene a prosecutorial investigation. he did that on april 1st, 2011. oil was at 110. after he made that announcement within six months it was to 75. but nothing happened. now it is back at 110 again and now the president has asked for the task force. i think all the fuss -- and i know that congressman hollen is gathering a letter all of us have to work with that part of justice who is leading the the task force to explain to them that manipulation of the market is small only a tripling of the american consumer, but if reddens the recovery coming and if we go back into recession there is a to be no safety net. there's going to be no t.a.r.p. the next time. the american people don't have the stomach for bailing out banks and if we don't have a safety net, that means not a recession but a depression.

we all have to explain to the attorney general that this has got to be his number one investigative process. where is the fbi? where are the interviews of market participants? where are the subpoenas? president obama has focused on this trip let's get these guys going. and i assure you because the president's threat in april 2011 drove the price down almost $40. if there is a real investigation just for the appearance of it will cause these cockroaches to scatter because the light will be turned on. they don't want to go to jail and if they think they are not going to go to jail, they are going to keep damaging the american economy. finally, you said this may be the hardest thing to do with the american public must understand that the commodity futures trading commission probably few of them know what that is. it is dhaka on the beat that can stop this problem under the

leadership of the chairman appointed by president obama come they've done an amazing job but there are completely underfunded for a multi tralee and other market in the of several hundred employees. the president asked for another 400. another $100 million. $100 million. but if from of the economy spinning into a depression, that's a very small amount of money. the cftc has to be fully funded. if they are fully funded we don't need the interagency task force. they would have the resources to bring these manipulation cases. they are bringing manipulation cases they don't have the fbi, they don't have the necessary investigative power we need to fund the agency. thank you. >> thank you very much,

professor and mr. gillford? >> good afternoon. the speaker pelosi, continent larsen, delauro, my friends from connecticut, thank you for being here and members of the committee i am the man who came from connecticut to say about professor greenberg her i agree. but we briefly to keep through a part of the history we have been going for because it was in 2000 for that we first came and visited congressmen were sent and asked if he would be willing to join with his colleagues in initiating a government accountability study of the authorities of the cftc and find out is going on in the commodity markets because of was by then that we were becoming very unsettled and concerned about what was going on in those markets, the volatility and price increases and was about two years later,, larsen, the dhaka report back that said we think that there's something going on and we think this is important but we can't really tell you because it effectively

has blinded the agencies responsible for enforcing the law. and then in 2008 the leader became reclusive imposing the and on napoleon to be in the bottom of this issue a little further down the road and you remember in 2008 very well because it was an experience that we certainly won't forget because it was at that time the psychiatry of the treasury and the chairman of the federal reserve came to you and said if you don't pass a piece of legislation in a couple of days the american economy is going to go over the edge and it was on the basis of the reason why the was the case. wall street speed of reckless and irresponsible behavior that led to that point we into a moving the policy a little further down the road. where we are today with respect to connecting the dots between wall street and he and the gas pump and is for us a very clear

and i'd like to illustrate that to you in the materials of life and about chia. the wall street now makes gasoline contract increase 80 cents a gallon in the last 90 days to read since mid december, 86 cents more per gallon means that our state of connecticut pays $3.6 million more per day every day for gasoline. $25 million a week that the citizens of connecticut pay more for gasoline today than they did in the middle of december. to put that into context for the charts that we have provided to you, now we are up to 92 cents by virtue of the fact the case 6.6 cents increase just the other night after i had prepared this for delivery today. at 11 billion gallons a month, that americans consume in gasoline, americans today are paying $10 billion, $10 billion more for gasoline than they were paying in the middle of

december. so the context of professor greenberger' steegmans with regard to how much we should be arguing about funding and the agency of the federal government for the purposes of overseas in the market if it's costing the american consumer of this amount of money just within the scope of 90 days, 90 days its extraordinary. what could possibly have happened in the last 90 days? to have caused this problem. did hurricanes coach for the gulf of mexico? was there a massive shutdown of refineries around the world? did israel attack iran? in the absence of anything that anyone can point to come a tax on the american public of $10 billion per month has been enacted as the result of what has gone on in wall street just since the middle of december and was due respect to anyone that chooses to blame this on one india and china we didn't just

discover india and china the week before christmas but that is what has happened since the middle of december. our contention is that the financial industry speculators have overtaken the commodity markets continues to do actual producers and users of energy and agricultural commodities made up 70 to 80% of the market's with only 20 to 30% of the market made up by speculators now mrs. foot and 70 to 80% of the commodity markets controlled by financial and industry speculators and only 20 to 30% of these markets are actual legitimate hedgers of purchasers of energy and agricultural commodities. they brought up the commodity index funds with upwards of $400 billion a strictly speculative investments and commodity markets and that is contributing to the rise in food and energy prices and if i could i would like to read some of the

promotional material from wall street for these commodity index funds. but trading futures you never actually buy or sell anything tangible york contract introduce with a future date you are merely taking a body and were selling position as a speculator expecting to profit from the rising or falling prices taking the commodity were trading with me repeat that, this comes from the people but sell these things. you have no intention of making or taking delivery of the commodity york trading, you're only goal is to buy low and sell high or vice versa before the contract expires you need to relieve your contractual obligation which is where we didn't the business of selling the contracts month-to-month by offsetting your initial position the commodity markets are

overseen by the cftc as you all know and see it here today who put in the limited additions shortly after the first of the year to restrain the strictly financial speculation in the markets and in the eighth of december they filed suit against the cftc and federal court saying that these massive price increases they don't believe that these rules are necessary or appropriate. to the americans who are paying $10 billion a month more for gasoline, tell them these rules are not necessary. the financial service industry drove american yearly into another great depression in 2008 from which we are only now beginning to emerge. congress passed the dodd-frank law to but a responsible behavior of wall street and that law and all of the agencies responsible for implementing that need to be strongly supported. and the law needs to be allowed

to work for the american people, especially before it is tinker with any further. and in the two charts that i provided which i would like to briefly cover, because there are some excuse is going around about this increase in gasoline prices is all over crude oil. if you look at a price between mid december and of the middle of march, from $94 a barrel to 106. it's will dollars a barrel increase. 42 gallons in the barrel, so for every dollar increase in the merrill that yields approximately 2 cents a gallon increase in the refined products. $12.24 to refer to the next chart and you will see what happened between the middle of december and march 28. wind from $2.48 to $3.40 and just three days. if it added 24 cents a gallon to gasoline, then where did the other 68 cents a gallon come from pacs what caused the other

68 cents a gallon to be added to the cost of a gallon of gasoline on the exchange contract? that's the contract. it's gone up every single day. steadily every day since the middle of december. not before december, but since the middle of december. >> personally, with regard to the 28 commodities that are covered by the futures trading commission's limits will be think it is not only time to give consideration to making sure the rules go into effect, but we also think that the energy and agricultural commodities are some important to the people of this country they should become 100% deliverable and that is to say we don't find any reason why this game of wall street placing bets on the movement of these

products you have no intention of making or taking delivery of the commodity that you are treating if you have no intention of taking and making the delivery of the commodity that you were trading shouldn't be allowed to participate in the market and you are talking about the food that americans buy and the energy that we rely on to run our economy. as others have said today we strongly support adequate funding for the commodities futures trading commission and reject proposals to cut the funding which will only felch the agency's ability to enforce the law. we support the efforts of the house agricultural committee to initiate during semidey pluggable the success of wall street speculation that having on gasoline and energy and food prices. remember 28 commodities covered by the provisions decompositions and food to feed and we also further support the revitalizing

of the board of justice task force on speculation the was started on july, 2011. and something that part of justice is indicating it is going to be doing immediately and i share professor greenberger' sentiments with respect to the idea that you shine light on the behavior of something its behavior is likely to change. there is no reason not to be in that today. and i think you very much for your time and attention and the opportunity to be here to answer any questions you may have. >> thank you both very, very much for the compelling testimony, and the clarity of fought and candor. very much appreciative of that and with sat let me recognize the ranking member of the ways and means committee. we're going to hold firm to a five minute rule to get everybody in to be able to ask their questions of the panelists today. specs before. the fact many of us are here as an indication that we may not be

in session, the conagra's should really do so and they support a free market even when it is written so we are here to probe this. with me just ask you because you make such a compelling case as to how much speculation is and both of you have said essentially in terms of the start of its army be 80% speculation and 20% response to the real need. so, let me just ask you, assuming that's true and there is as much evidence as there is, if we ran the show, and i wish we did, how would we pass

legislation that would get at the speculation but per rett there was an effort to hedge against an increased and take control of the product. that's the line you draw. how would you do this realistically? ..

but a smooth functioning market is 70% commercial, 30% speculative. the markets are 80% speculative, 20% commercial. the commercials don't want to be in the market anymore. they have to placed margin. they can't control the price of margin because the contract shoots up in their life savings make out in the margin. so this is all speculation. now, the two vehicles that may be agreed and i provided all the studies en masse that the speculators used that are the quickest, dirtiest way to get into this market are the commodity index swap and the synthetic exchange traded funds don't worry about the fancy title. what does that mean? you walk into your bank and say, i don't want to buy this stuff.

i don't even know what a barrel of crude oil looks like. but your analysts have advised me that the price is going to go web, so here is my money and i want to get dollar for dollar every thing out of upward price. and those wall street operations are like cookies. they have to hedge their exposure, just like a bookie lays off that's when it gets too one sided. what do they do? they go into the real futures market where the farmer and the baker are trying to hedge price is an day by oil contracts so on paper they have contracts that are 33 times the size of the world supply of oil. that sends a signal out that cannot be defeated that there is a supply problem when there isn't. so you can't cut the snake off

at its head by saying no more riding on these markets. these are commercials making these bags. unfortunately, i hate to tell you this. they are pension funds, private equity companies, hedge funds, banks, all they are doing is walking into a bookie shop and save i don't want to own the staff. and by the way, you can only bet the price will go up. you can't bet that it will go down. >> the losers are the better of the american people. >> the losers and are continuously told it's a supply demand problem. when the people responsible for the market, exxonmobil co. ceo says $60 to $70 a barrel. his 105, $110 now. the saudi king said your word about walking the streets up from this? we will make a barrel for barrel everything that will be on.

by the way, in 1973, when opec cut off the west from all its oil, worse than the blockage of the streets, there is a fraction of the volatility we are seeing today and i can give you charts to show that. in april of 2011 it was the arab spring. libya with 2% production of oil is causing this bike and saudi said again, we'll make up to 2%. the president said this is not supply demand. this is market manipulation and he was right. in the final thing i would say is, what are you stopping here? are you stopping money from going into production? are you stopping money from people creating jobs unless you think a casino, which comes to us and namesake goldman sachs, morgan stanley are job creators, and now you are stopping

dieting. if we are wrong about this, if everything we are telling you is a mistake, what will he have done if we start the betting and close a couple of casinos? believe me, every time there has been a threat, to fascinate you guys passed a bill to 88 to 133 to stop the betting. the price went from 147 to 30 and six months. is that a supply demand responsibility? and then when people said we cut the price in that dirty, it shot back up to 75 by the spring of 2009. then you guys said we are going to pass dodd-frank. when it appears not to be working because the wall street lobbying and lawsuits come the price of oil is back up again. stop the gambling. i can tell you you will bring the price of oil down substantially and all your

constituents who are in heartbreaking situations come up with its gasoline heating oil or any terrific april find comfort and we will keep the recovery going and make the united states what it is for the first time in decades a leader in world economic growth. >> thank you very much. >> thank you. let me ask my colleague, mr. miscellany to the next question. >> thank you, madam chairman. this is an issue of great importance to my state. rhode island is the second-highest unemployment rate rate in the country and families are really suffering at the increasing gas prices. to get to work if they have worked around their small businesses, to get to school and a whole host of other issues. when you hear testimony today what we've seen so much in the research, so much of this is stricken by what sounds

dangerously reminiscent of what we heard an attribute is market and the way it brought rsn market to the brink of collapse and heard so many families in the ata this is repeating itself at the same speculator and wall street is really infuriating. for thank you for your testimony. my question is a very prior to go one. there is a piece of legislation introduced on the senate side by senator bernie standard and senator klobuchar and senator franken and i really look at that seems to immediately require the cftc within 14 days to set about both identifying the magnitude of the speculation and also to set about addressing it immediately. and i'm wondering whether that approach makes sense and better the ratio do you speak about that are flipped upside down can be corrected about are the obstacles to that happening at the legislature were not good either congress or the united

states. >> let me say that legislation is the legislation you people passed on june 262,000 oilmen to a world record price 147 which was forcing the cftc to declare an emergency in the market and hoping that they would limit speculation, both by flat limits on speculation and by increasing margin speculators have to pay. and so, i think that it's a good idea. if you guys want to kill the beast, if you want to help your constituents, don't delegate this out to it opaque administrative process, we're wall street areas are meeting, meeting coming meeting. i delay, see if they will meet with anybody, but the consumers don't have the money to go down there 24 hours a day, seven days a week and they don't have the money to fight these things in court for the wall street

artists and hiring the fanciest law firms, the biggest appellate firms and i can tell you and jean gilbert can tell you, we cannot match the money dollar for dollar. so i say to you, don't ask the cftc to do this. they're the very agency you guys know don't have the funding for this. and i would do it yourself. you can pass legislation, banning commodity and back slaps and exchange traded funds and it will remove $500 trillion from the market. and they'll come to you. the bank so come and say you're going to limit production. you're going to limit liquidity. the market is overrun with the quiddity. we have 80%. this is speculation. what you will be doing as stopping gambling pure and simple. my mate only creating homes in the hamptons and yachts in the

hamptons. your constituents should know that every time they break their heart that finds $4 may be $5 gasoline that money is according to production. it's going to help build and enhance tanzania noted in the hamptons. it is not a constructive economic gain. don't stop anywhere, to go to the juggler. and frankly i will tell you something. that bill gates introduced, what is it going to say to speculators? hey, i'll have to get out of the market before there's a panic and no one gets out. i will unwind now. that's what happened to destiny. you guys passed a bill from pda to 133. senator reid got 51 votes in a senate where many democrats were campaigning for and in many republicans and speculators have these guys are serious. the price that for 147 and july 230 and december.

>> thank you very much. >> mr. guilford, let me ask you this, and if you would. >> i think the senator's bill is a great way to start. i agree with her faster greenberger. i think in context, remember the position limits rule at least initially was designed to do exactly what was talking about here today. unfortunately at least initially as limits were set so extraordinarily high as to be not terribly effective and it will take time for them to collect data necessary to make sure they are setting limits in the right place, and the right way and make sure it is the most effect is. that is exactly the administrative process professor greenberger talks about double take so long and coupled with that understand the financial services industry has made it clear it is going to litigate every single one of these rows that comes out of every single agency for as long as it takes

because they know they are playing for time, either for time in the change of the presidency or time in the change of the makeup of this congress. because their intentions are clear, that the agency budgets of the laws can't be enforced and litigate issues as they come out of rulemaking processes to make sure trust them not as fun as possible. so i grew professor greenberger. danny davis is a great way to starting you have unique opportunity to begin a conversation with a letter to several colleagues find calling on the agriculture committee to begin holding hearings immediately. there isn't any reason why that cannot be the centerpiece of a conversation. >> ms. edwards. >> thank you very much in thank you tory witnesses today. i really appreciate that she put into context what consumers are feeling. most of us barring a class or to an undergraduate school or otherwise have no idea about

market economics, the commodities market, how that impacts things like the food we buy and the gas we put in our car. so i appreciate that. it was helpful to hear just a reminder about supply and demand and the relationship between supply and demand and what should be the price. as you stated, professor greenberger supplies are up, plentiful. demand is down and prices really should reflect that and they simply don't. i thought it might take a week and half ago and it was $4.4 a gallon. i filled up my tank after church on sunday this past sunday and is $4.10 a gallon. this was just a weeks time. and here the $10 billion i think mr. guildford equal don't understand the numbers. they are just so incredible for those of us who haven't been privileged enough to win the

lottery. i wonder if you can tell me in the $4.10 that i spent for a gallon of gas on sunday, how much should i have paid for that gallon of gas? >> that's a great question. >> if you follow the logic of much of the conversation you've heard here today there will be widely differing opinions about the degree to his speculation and of itself contributing to this problem. you have a range of opinions from the chief executive officer of exxonmobil between 65 and $70 everything of it that is speculative. two weeks ago yet the federal reserve bank of st. louis indicated to 15% speculation. so even if you were to cut it down the mobile and split the difference between the two and is said is spending $4 you should've spent closer to $3, for your gallon of gasoline, now, $10 billion is a big

number. so let me put it in the context that i think sun they be more comfortable with. congressman larson is familiar to people who work with me and not my school. i have a lady who is a single mother raising two children by herself. she has to come back and forth to work every day. in december, she was paying about $45 a week for gas. now she's paying 70. you all work very hard after the first of the year in what looks like an extraordinarily difficult task to give every working american a payroll tax cut. for the lady who works for me, raising those two children, all of the payroll tax cut that she received now goes into paying only to get her back and forth to work. so for whatever good intention you may have had in helping

people like the people whom i work with, it is now, all entirely for the higher price of gasoline. >> i really appreciate that because that really does say exactly what we are talking about. the single mother pain from what was $45 for a tank of gas coming out and $70 has effectively lost all of the tax increase that we provided for her at the beginning of the year. $4.10 a gallon. i've got to get that correct that i paid on sunday should've been about $3.10 a gallon and that is what americans are paying. so i really thank you very much for being able to help us understand the details and to put it into real context of what it's costing the american people. thank you and i yield. >> thank you. mr. scott.

>> thank you leader pelosi, mr. larsen and others for convening this meeting. gas prices are complicated and it's good to see some good information. both of you have spoken about the legitimate futures market and speculation. that was one of the problems we had with the credit default swaps, where you had insuring against elastin mortgages might be legitimate, but when you allow many people to that on the same package of mortgages, that is just raw speculation. now, we have centuries-old principles of insurance. basically what you are buying his insurance and the two fundamental principles if you have insurance yet to assets to back up and effectiveness you can only buy insurance where you have insurable interests. i can't buy a fire insurance on your house. and what they're doing is letting us in buy insurance and

so we have lost a house and you unload all of these lawsuits. exactly how much of the speculation problem could be cured if we were back to just fundamental principles of insurance and required before you start selling insuring that you can only sell it to people with insurable interest? >> while the gambling aspects of the subprime meltdown of what we see today are similar, the investment vehicles being that used. and what she talked about, congressman scott is something that frank did a good job on because you people like john paulson who placed the tranches of sub primes would fail. he made $4 billion ip will be kicked out of their houses without having lent any of the

money to this evil. by the way, the european union did not in dog franks faced up to gambling. we said make it transparent so everyone can see it and that will be therapeutic. the european union suffered that crisis. angela merkel sarkozy got the european commission to say people were adding a southern european countries would fail without having lent them any money. they had a synthetic that they would fail and the european commission said stop. >> but if they had want the money they would protect against the allies. >> they didn't want to lend the money. that's where the insurable interests would be the hedge. >> that's exactly right.

ironically dodd-frank was working that out. insurance commissioners are meeting in florida to say credit default swaps are insuring somebody else's risk. since 1806 in parliament said you can't do that because people were insuring cargoes and then calling the french navy to bomb the ship sank like in the insuring, they didn't own the cargoes. the commissioners want to put a stop to that. certainly god knows how it happened insurance law was preempted. >> should we go back to back to where we insist on insurable interest? >> frank would ever do is consider at the european did on that front as well to gambling whether greece will fall without lending money to grease does not protect to investment the european commission said no. were not going to do that

anymore. but your approach would be good. the final point is we've got a different problem in this market. this is pure and simple going into the pokey shop and saying i to bed on the upward direction. >> there's no insurable direction. >> can i ask whether or not we are making enough use out of the strategic petroleum reserve, whether or not we are to increase it, use up more and not just on catastrophic national security problems, but more generally for stability? >> first to go back to your early impression if i could just very briefly, i think which are trying to get to if i understand the question correctly as those who have an interest in the actual delivery or can take delivery of the materials being turned back to in these markets

ought to be the one who are the participants in these markets. going back to the material i've read i've read from one of the promotional, what they are promoting are people who will never take delivery, not what they deliver anything into these markets. they are merely placing bets on a daily moving up the prices of these commodities. for those of us are in heating oil country, that those few on this panel, it means instead of a local heating oil retailer of the type that we represent, who goes into the market place and ice contracts so that the retailer can turn around to consumers and offer consumers a fixed price or a capped price plan for the winter is buying his contract or she signed her contract on the market and is taking advantage of the options available in order to stabilize his or her price. as these are being played it constantly it is costing more and more money for small

retailers to be able to teach in these transactions, which means it is costing consumers more money. so professor greenberger is talking about is built to puncture this bubble and bring these prices down. with respect to strategic trolling reserve, i guess i could be counted as some of those because a year ago february i was in representative delauro's office says they're working on the statement anticipation of military opposition that the president's announcement for the potential release of the strategic petroleum reserve at that time and did indeed a strategic win use it for that purpose. you announced your intention. that's not what he was talking about when he said it could have a huge effect on this market at the department of justice to effective is going to undertake a massive and serious

investigation of what is going on in these markets. the threat is that of the is a huge gamin pleased over the street net to wall street. after attacking a year ago, representative delauro come here goes bad that the united states was willing to do whatever to make sure that an adequate amount of crude oil is available at the marketplace each day, including but not limited to the use of the petroleum reserve at that became necessary. petroleum reserve at that became necessary. petroleum reserve at that became necessary. is incredibly important weapon. understanding with another problem with the shortage of crude oil today. if you have gone with the president when he visited last week, pushing oklahoma is a washing crude oil. there is no problem with the physical supply of the product. none whatsoever. >> mr. moran.

>> mr. delauro and the leadership county thank you for having this hearing. i wonder how long this can last and how high prices can go. normally an the commodities markets you have a boom and bust cycle. as basically the orange juice, everything. it must be some people, john paulson of the world, looking for opportunities to sell short swaths and ready to again the volatility of the market is very euphemistic market. i picked to hear from both of you. >> this is a bubble and the bubble will burst. the last big bubble went from 147 to 36 months, but no one saw

that coming. gold was predicted 200 went with it dirty. but i've got to tell you some pain. we don't know when the bubble will burst. in the meantime, as we have said, people are spending money they probably don't even have, not a medicine they need, not paying their rent to pay for gas. that could trigger a recession. if we don't have t.a.r.p. in the front window come which i don't think we can add the next time, we are told economists that could be a depression. so when the bubble burst, we may already be flatter back. the fact that gasoline is down to a dollar 50 that day may mean nothing if we've got in a plane up to 15, 16, 17%. >> i agree and clearly the congress needs to take action and that's not going to happen

as long as the majority in the house of representatives are owned by the industries. i want to ask you another question now because we have a figure here that says that for every penny more we pay at the pump that profits for the five largest oil companies go up by $200 million. is there any kind of collusion going on? i mean we've got incredible figure from the head of exxonmobil, but they are profiting are they not from the speculation? so it's all good for them. and of course when the price per barrel drops, the price at the pump are not going to drop proportionately. they are going to keep a larger and larger share is what happens every time or the profits go up as prices go down. is that not true? >> first as professor greenberg

was getting into a moment ago because i think 2008 is incredibly instructive in this regard. crude was $30, but july was 147. n-november to fall into 30. but but the next question waseca 70. this extraordinary role for $17 trillion economy. 70 to 147 and 3270. no one with a straight face, representatives moran could look you in the eye and tell you that is india. that's china. we have some extraordinary weather. no we didn't. there is some interference that the marketplace posing such an extraordinary circumstance that it needed to go to 147 by july. i'm sorry, that didn't happen either. >> so could only be market manipulation. >> what else could have possibly been. they did not exist. what could possibly be the supply demand fundamentals?

would be almost as if someone were to say to you everyone in china or india decided to drive their car in july. that drove it up and then they park their cars by the fall and that is why appoint down. it is absurd. now with respect to your question about profits, first of all, every single day do you hear a report on the news about what happens on the commodity markets, every single day, by that evening for publication the next morning, the commodity market movements get trained waded into what happens on the physical markets, the wholesale prices are people pay follow almost in lockstep. so there is no question that what goes on on wall street as a direct causal effect on ultimately what is made a virtue of the discharge to the general public in the price of the products that they paid. that's absolutely case.

there's a direct causal relationship between the commodity markets in the prices charged at the physical markets. we watch them every day. and the absurdity of some of this, you know, should be lost on anyone and opaque on heating oil again. we just came through heating oil season with virtually no winter, right, representative markey? golf courses were open all winter long. it was extraordinary. the measurements of overuse, which are degree days was down by 25%. the volumes that were sold to your heating oil retailers went down by it third. extraordinary. an extraordinary weather events. then wide under those circumstances with the commodity cost today the $3.22? you can't give away heating oil. you can't. 70 degrees and most of february for god sakes. we are talking about the

difference between the price of a barrel of crude and heating oil. the price of crude is 104. the price of a barrel of heating oil is 135. now how would there be such a huge premium for product no one is using because it 70 degrees? it defies logic for anyone to say it's supply and demand. to your point, representative markey and the remarks you made in your opening the statement for the first time since harry truman was president the united states has become a net exporter of refined petroleum products. extraordinary. most people think where a net importer as everything. crude imports are under 50% we make so much of the refined products that we have enough to export to foreign markets. and heating oil commodity cost is $3.22 in a season with no winter and the price of a gallon of gasoline on the castling

contract has gone up 92 cents a between the middle of summer and the end of march at a time when americans last year reduced their consumption of gasoline 2.5% and have reduced it by an amount more than at any time since world war ii just over the last three years and the economic contraction. if there is anything but underscores for professor greenberger said today about what the actions you should take in these markets, it is the fundamentals of supply and demand do not seem to count. americans have sacrificed. they have sacrificed and they are not getting the benefit of it. >> compelling insight. thank you. >> extraordinary. i now recognize the vice chair right democratic caucus, mr. javier becerra. >> thank you, and chair. thank you very much for being

here. by doing california we are paying wal-mart for $4 a gallon for gas. we are paying upwards of 46 t. and more for regular gasoline in los angeles. gentlemen, we have seen this movie before and it wasn't very good the first time. we sat with the so-called enron energy prices in the early to mid-2000 space odyssey mentioned before with the housing bubble in the late 2007 what happened with the wall street bulk down. and so, i think we hear you loud and clear. but there are still folks out there saying no, it is not speculation. it is not that you are saying. so that they give you another chance. is there another explanation for the steep increase in petroleum prices today? is there anyone out there in the world that has some credibility thing to do something other than speculative squier's

>> there is in many people's financial interest to propagate, which is when people don't let the market to see the prices going up like this it must be supply and demand. that's what we all were taught in economics 101. we didn't know that these markets would become gambling casinos. that is what is happening now. and there may be some worry about the straits of formulas. there may be some transportation problems that are causing this. but i will tell you it didn't go from 147 to 30 accidentally. house of representatives passed bill to 88 tubac 133 to start gambling. senator reid, by the way you also say should have here in spirit june 20s is to decimate the leadership routability that fuller introduced that they do password or two to 1990.

senator reid did not waiting to does need to go to games. he introduced in his own name baby out the cockpit one votes to start gambling. he couldn't vote cloture. but if prices stayed up, he might have a vote cloture. precious one more thing i want to say. people were saying the republicans will never get their support. i will tell you in gasoline goes up, we've got their support before. >> immodest work on that because i think it is absolutely true that it's almost impossible these days in the house of representatives to get a hearing to have you officially testify to essentially convey which you have just announced today and that is principally speculation. let me make sure because i do wonder what grief with in the series and have someone say there's credible folks out there saying it's simply supply and demand. is there anyone out there you know that since we have a supply problem? we don't have enough production? and i don't want to go into the dynamics of this and marketing

101. actress whining. is there anyone i can turn to sign up for this person is coming from to say there's a supply problem? >> and honesty we have to say there's this great professor at texas university. i know a professor at the london school of economics. but if you wait, it is like 60 to two or three. >> is there anyone saying there is a demand problem that we just increased consumption? >> you just mentioned was actually seen the demand drop? >> absolutely. and to that point, there was a great story in the news that when i get home i will forward to you and other members said the committee where there was a news story and i forget which of the news stories the west but the department of energy produces the statistics and the headline was americans reduce gasoline consumption. wall street doesn't believe it.

so, at some point i guess you could have a debate with someone about whether the statistics are right or wrong. the fact of the matter is that i think this is borne out by whether it is the mastercard figures on credit card purchases or whether it is the department of energy or even the petroleum statistics on gasoline. very clearly over the last two years americans have decreased their consumption of gasoline. so it is not a demand problem. there may be countries were were dislocations of products at time to time. there is no questions about that. >> by the way, i was interested to see your background. you are not coming from some left wing think tank. if i understand you served under president reagan? >> as chief of staff to the department of energy for a while could not withstand that i appreciate you letting me in the room today. >> we thank you been here and for your testimony. last question. so the back is pocketing the $10 billion a month than

americans are having to pay for overpriced gasoline? where is it going? >> a quarterly reports will burn noninformation because there's still question the profitability of those who refined gasoline and who marketed throughout the country are going to be benefiting from this. there's no question. everyone knows that. also, those making these investments in these gasoline contracts are profiting rather handsomely. i think if you pay very close attention to what goes on between wall street and the physical markets and making this is incredibly important thing for the commodities futures trading commission because it's not about monday's markets but it's also about commodities and physical markets and how one tries the other. you'll find the american people pay a very hot to go for what is going on. >> tenney both for your testimony. >> it is also wall street. this is how they make their money. there are two things getting a

them indirectly. one is the so-called poker rule, which means that they can't trade their contracts for their own book. they have to be an intermediary. and there is the site, interestingly enough has clearly learned their lesson from the meltdown is telling these things. get out of these commodities. you are not buying oil. for not selling oil. finally with regard to the physical markets, and to decimate eight the largest oil was morgan stanley. if you can drive the price up after futures markets, you would want to buy physical and you're not going to want to sell the physical because it is like an appreciating asset. why let the american consumer habit? let's keep it until we hit the bubble peak. >> thank you both. that is correct. the largest supplier is morgan stanley. an oil company appears that even some of you which talk about big oil, it's actually wall street

that is controlling most of our oil. >> revelation after revelation. but that, the question of my colleagues from massachusetts, the ranking member mr. markey. >> thank you, madam chair. climate change, new england is now four degrees warmer than in the 1970s. we still have philadelphia's weather in 1970. people for opening day and of insects are planning on white short sleeve shirt giveaway or, rather than which combination of sweaters and flannel shirts they are going to wear, which is a change from past years. it reflects this downward pressure on home heating oil. but let's be honest, the price of home heating oil to somehow or another was hit by the market. people in new england and all across the country just got hit upside down by morgan stanley. so let's go to -- let's go to

what is happened in this market since 2002. we had done a stellar or better markets testified before the natural resources committee two weeks ago. and here's what he told us. in 2211% of this oil market was controlled as speculators and 89% was controlled by airlines. trucking firms, shippers who had to basically place bets to protect them selves. now when 2012, it is 63% are speculators and only 37% are truckers and shippers and airlines. putting them at the mercy of morgan stanley in terms of ensuring that this oil product is sold in the large supply and demand. is this the heart of the issue? the people who have been owning

oil products in ensuring the price is anywhere but a then they will hold it because it's never physical transfer. they just hold it because all it is for them is cash. is that what held new england hostage this winter and people across the country? >> yes, i agree that absolutely. and and a supply and demand scenario given the weather we had a home and just parenthetically since i'm a red sox fan, we are worried who will be pitching a close where we are at. but back to morgan stanley. >> i didn't mean to start a major league baseball war. to the point of anyone's rational concept, anyone's rational concept to supply and demand, when you have a one

third decrease in a demand for your product and supply is adequate for the market for the imputed demand, it supplies ever undertook in econ 101 class could look at the circumstance to the pressure do anything other than go down. >> you don't have to beat it tracy to figure out why wall street is taking the cftc another.frank rolls to court. they want to start putting a cop on the beat. they want to make sure that these regulations are there so they can kind of cornered the market and create artificial volatility in the market. that easy connection. morgan stanley controls the market. they then go to court to continue that wall street regulations that dodd-frank revelations are put in an congress doesn't put the hundred million dollars worth of extra cops on the beat to go up there

in scare the living daylights. produce simple. you can summarize this nefarious activity and not simple form. and let me go to a couple pieces of information that came out actually today. one according to the energy information agency, the united states crude oil inventories increased 16 million barrels over the last two weeks. inventory of oil in the united states and up 16 million euros in the last two weeks at a price for a gallon of gasoline went up 7 cents a gallon. there seems to be a little disconnect there in the market. and this morning the department of energy announced that u.s. crude oil production last week rose 228,000 barrels per day to 6 million barrels per day altogether. the highest oil production since 1998, those two combos of higher

productions, more oil reserves in the price of gasoline went up 7% in the last two weeks. so why would that have been the last morgan stanley and the other scam artists aren't out there trying to manipulate the market to keep it high so they can read structure and project because of the extent of our economy and at the expense of ordinary consumers. you agree with that summary? >> yes i do. >> professor? >> absolutely. >> let me then, professor, let me just go through this litany you want us to go through. one, you want the $100 million for the cftc and you want to make sure the republicans can't cut it a million dollars from the cftc budget, so the cops are on the. is that right? >> that's right. i would add a footnote because you are also proposing that the fed does not come to you every year and ask for money. they get money from the bank.

the cftc should have frankly 100 million is the limit. it should be -- there's $100 million difference the toilet became a president of bob wants to get them. >> they're getting 205. they need to get two away. >> my view is they should get far away. >> 303 is already $100 million in mr. gilford is talking about the consumer being built $10 billion because there's no cops. >> to begin the investigation they have an immediate impact on the market. and on the question of the investment vehicles, named the ones who want it right now. >> commodity 5 cents embedded trade funds. >> how much money will that take out?

>> possibly have a trillion dollars. >> that's the gambling money. >> you take that out most of the drop in oil prices. >> when they see any of these things will be a trap. the three of them together will cut the snake, the head of the snake off forever. >> do you agree with that? >> absolutely. >> thank you, mr. marquis. thank mr. markey. mr. larson. >> it's always informative and good to hear you, professor. i have the benefit of the wisdom and knowledge of gene guilford, but i especially want to thank you. when is the tendency inherent site is not to bring it down to how it really impacts the mother of two and especially you, mr. guilford, thank you for that scenario. it is those compelling stories that bring home the issue to

everyday americans in terms of votes where the problem is in the impact that this has and how we go about doing it in the case of home heating oil as well as prices noted in new england at a record low to see nose changed and in fact to see the prices of home heating oil for the consumer croat. this is what it is all about at the end of that and we cannot thank you enough for your testimony and also for backing up what we think is an important agenda to accomplish in the united states congress. >> thank you, mr. larson. i'm going to -- quick answers if we can because we are coming to the 3:30 mark. professor greenberger can be asserted to allude to this, every president since ronald reagan s. proposed offsetting the cost of the cftc operation of user fees. we have legislation that is out there at the moment to authorize

that. i do other colleagues. a question for you, quick answer, professor greenberger and professor guilford. with this small usurper daniel burton on market participants? >> the market -- the cftc market is increased by $42 notion by market to $300 trillion notion by an market. if you took a little of that, he would not be noticed at all. but wall street will not give an inch am not. even if it is cynical, but i want to give the american consumer nickel. >> so would not be a burden. >> mr. guilford. >> -- pennies per transaction. so most of the intestinal because it's so small to large numbers of transactions. >> but that would alleviate the problem in funding and would you

be on the appropriations, but would alleviate the funding problem for the cftc to do their job. >> professor greenberger, the current market conditions warrant to use as cftc current emergency authority to set margin and possession limit to curb speculation in the oil market. >> yes, that we are members that cftc, which is heroic in its efforts is being starved to death. that is why the president was so smart, that an interagency task force at the fbi and married with the brains of the starved agency. so that would be my answer. >> that is the story -- >> they are understanding as you know, i would like to get more direct and hit harder. >> just quickly, released to consumers once the definition of a swap is finalized, what

concerned you both have with regards to the last i've regards to the rule? >> i am very worried the lawsuit is going to kill whatever dodd-frank did. dodd-frank set the ship right. the hearing, those who attended and i did not, but people who respect did not go well and i was in front of a judge is probably going to be rejected as in the d.c. circuit has dirty been the first dodd-frank provision. >> what that i'm going to turn it over to the leader for a close. i'm going to akamai colleagues. i want to thank my colleagues for their time in the question to thank you for that is an unbelievable, revealing hearing from what our can country technical issues that my colleague, mr. larson said that allow you now speak for myself to understand clearly what is

going on. i wish we could take you on the road and let the american people hear from you about what is going on. it would be critical to do that. i thank you for the clarity, candor and for your commitment to the american public in the american consumer at an unbelievably disastrous time economically and their lives. they are really -- they are on life support and this -- addressing this issue is crucial to their economic world. many, many thanks for your contributions today. not a leader. >> thank you knotted chair. i want to thank you for bringing us together. u.n. chairman larson for bringing forth these excellent witnesses to shed light on an issue of great significance to all of the american people. all of our members as i said to you earlier, when we had a session in so many members are present for a hearing, it speaks to the urgency of the matter is

an exploitation of excellence we had from our view, which was certainly realized. at the end of my remarks i talked about the agony and the ecstasy, the consumer to pump in the ecstasy being the oil companies. but it is recognizing the $137 billion in profits last year, $261,000 a minute. but it is clear that some of the ecstasy is shared by speculators , excessive speculators on wall street. and this is a very big deal. and i brutally injected that they don't want -- maybe about the nickel or maybe it's about the money, but i think it is more about that don't want the supervision that the money will bring. but this is a very valuable hearing. again, i wish you would be the

full house of representatives and the bipartisan way would have such a hearing, listen to what you have to say. the answers you are supplied to us, the documentation of the challenge that we have. but having said that, i am pleased that this is a matter of public record, did she stand to be an intellectual resource on this issue to the congress on this issue in the range of opinion for a dr. greenberger and his academic world and dr. trent three who has served in more than one capacity. so the validity that she bring to it as wide ranging and we are most grateful. again, i thank you my colleagues and the ranking member on the natural resources committee every day and he has spoken so highly of what your testimony would be. again, thank you.

and thank you again, congressman delauro for your leadership. thank you. hearing adjourned. [inaudible conversations] >> former senator and u.s. special envoy for middle east peace, george mitchell discuss current developments and challenges in the middle east when they had a government security prints. he talked about the israeli-palestinian conflict in the threat of nuclear weapons. his remarks are just over an hour. >> and create uncertainty for the u.s. economy is security.

these paramount threats along with the acts of domestic and international terrorism combined to emerge and remain constant in challenging our security policies and taxing the resiliency of our nation. it is my honor and privilege to introduce our keynote speaker today, senator george jay mitchell. senator mitchell served as the u.s. special envoy for the middle east peace under the obama administration. and before this, distinguished physician began his career and the military. serving a synopsis or in the u.s. army counterintelligence corps. senator mitchell practiced law in washington d.c. and main before he was appointed as the u.s. attorney for maine and the u.s. district judge for maine. shortly thereafter, he was appointed to the u.s. senate and served in the senate for 15 years. in 2008, "time" magazine named him one of the most influential

influential -- pardon me, 100 most influential persons in the world. in his keynote this morning, senator mitchell will discuss the current dangers in the middle east and the effect on our nation's security and shares his insight on how america can effectively counter terrorism from hostile governments and radical terrorist groups. please give a warm welcome to senators george mitchell. [applause] >> thank you, ralph. thank you very much, ralph. thank you, ladies and gentlemen for the warm reception and for being here. it is a pleasure for me to dissipate in this conference. i didn't hear the remark about the mood. someone said to me back there, he wants you to move in them.

[laughter] i said well, i signed up for a lot of things, but not for that. as you heard in the introduction, i entered the senate under unusual circumstances. i was a sitting federal judge in my home state of maine when a vacancy occurred in the senate, when one of maine's senators was appointed secretary of state. and i had thought about that when deborah lovell invited me to address this conference. and i asked her to describe the audience and the subject matter. and when she told me there'd be a lot of experts in the audience, i hesitated because i've always been reluctant to speak to audiences in which the members of the audience know more about the subject than i

do. but then i reflected on my first day in the senate. after the vacant the, he announced that he was going to make a quick decision because it is in the middle of the legislative session and he didn't want me to be underrepresented in the senate. so in the middle of the week when all this broken the news is that i'm going to hold a press conference at the state capitol to announce my choice. so for a few days there was intense speculation in the media about who is going to be appointed. where the former governor, former senator, a cup of former congressman, all of whom were well-qualified. i had been appointed a federal judge the previous year. and so my name is not mentioned and it did not occur to me that i might be under consideration.

and on that sunday night, the day before the governor's announcement, like everyone else in maine, i went to bed early and wondering what the governor was going to do the next day, about 11:00 that night, the phone rang. it was the governor calling. he said i would like you to come down to the state capital tomorrow so that i can announce that i am going to point you to complete the unexpired terror of senator muskie, who had been appointed secretary of state. i said she governor, this is a big surprise. this is an important decision. i need time to think about this. i've got to call my family, friends. i just last year became federal judge in nasty note that is a lifetime appointment. he said i'll give you one hour. when i protested that it was an adequate come he said look, if you call me back at midnight and

some you can't do it, i've only got 12 hours to find someone else, most of them in the middle of the night. so be thankful for an hour and then call me back. .. the one who isn't any good. as you might expect, i developed a massive in iriarte complex, and a highly competitive attitude towards my brothers,

which continues to this day. so on that night, after getting the governor's call, i called my three brothers, ostensibly to seek their advice, but i confess that there was a note of triumphalism and my voice when i informed them that the governor wanted to appoint me to the senate and i asked, what do you guys think of that? well, the responses were predictably negative. my brother johnnie said, everybody knows you are a born loser. he said you couldn't possibly win a statewide election. no one can understand how you got to be a federal judge, let alone a senator he said that you had better call the governor and decline. my oldest brother, somewhat more moderate, thawed to elevate the level of the discussion and he likes to practice what he believed to be the socratic method, so he said well look,

let's take a look at this from the standpoint of the people of maine. aren't they entitled to have a qualified person representing them in the united states senate? and then he said, isn't it obvious that you are not one of them? well, after about 10 minutes of this i hung up and i called the governor and i said governor, i don't need an hour. i have already received all the reassurance i require. [laughter] my ability to serve in this mission and i accept and i will be down there tomorrow at noon. so i went to the state capitol in the governor announced my appointment. i then flew from maine to washington. the swearing in was scheduled for the following day, tuesday morning. but i landed at national airport and it was late afternoon. on a whim i decided that i would go up to the senate, meet made the senate majority leader, and

kind of get a feel of the senate chamber before the swearing in the next day, so i did. i took a taxi to the capital. i made my way and and was introduced to then senate majority leader robert work. the senate was in session and was debating a bill and an aide took me right down onto the floor of the senate. center byrd was very busy. he at first really didn't know who i was, and then being distracted said, well okay, are you here for the swearing in? i protested because the ceremony was set to the next morning. i thought, abc, cbs, nbc would all be carrying it live and they didn't want to disrupt their schedules. he said no, no, look young man, we are very busy here and we will swear you in right now so he and directed the debate that was going on, swore me in,

literally less than 10 seconds. nobody knew what had gone on including senators who were standing just a few feet away, and then the senate resume debate and two minutes later, a vote occurred. those of you interested in political trivia, i hold the all-time record in american history were having cast a vote the shortest time after becoming a senator, two minutes. that was the first of many informed judgments i made on your behalf. [laughter] and on behalf of other citizens. well, so i stood there. now i was a senator. i didn't know where to go or what to do and tango going to sig young man came rushing up to me a few minutes later and a bunch of papers in his hand. he introduced himself to me as my administrative assistant. i had never met him before.

never heard of him before and it turns out he had been senator muskie's administrative assistant and now that i replace muskie, he was mind. he began by berating me for committing myself to be sworn in and ruining the party that was set for the next day. then he read off a list of instructions and he concluded by saying we have got a very nice introduction for you to give a speech here in washington tonight. it's really -- what is it? there are 3000 certified public accountants at a convention here in washington, and they just saw you being sworn in on tv, and they called and asked if he would come down and deliver the keynote address at their convention this evening. i thought to him -- i said to him, gosh this is really something. i always knew cpas were smart but until yesterday i myself didn't know i would be here.

to think that these guys held this important speech open for me. i said i'm really impressed he said no, no it's nothing like that. he said they have had for last-minute cancellations. [laughter] he said you are the only member of congress they could think of who might not have anything to do tonight. [laughter] and they want you to get down here and give the keynote address. i said, what do they want me to talk about? he said, the tax code. i said, wait a minute. you've got 3000 cpas every one of whom knows more about the tax code than i do. i can't do that. i can't talk to an audience about a subject in which everybody knows more than i do. he straightened himself up and in a voice dripping with sarcasm and condescension he said listen, you are now a united states senator. you will regularly be called upon to speak in public on subjects you know nothing about. [laughter] and so you had better get

started and if you want to be a good senator you go down there tonight and tell the cpa's about the tax code. i went down and told the cpas about the tax code and here i am telling a group of experts about threats to our security. i could speak in general terms, which i will do on the subject overall of security, our national interest, and some of the areas in which we face serious challenges today. in the 20th century, democracy faced three major challenges, depression, fascism, and communism. and the ultimate and most meaning of that century was the triumph of democracy. the aftermath of the second world war in an effort to secure

peace and to promote stability, the united states led the way in building new international institutions and alliances. the united nations was created. nato was established. the european union was founded. germany and japan were rebuilt, and they became resurgent. what started as the north atlantic alliance became one of the most successful collaborations in history. the intention was, and is, to embed the nations of europe into political, economic and military alliances that would make it less likely that their long history of warfare would be repeated. recall if you will that into three-quarters of the a century between 1870 and 1945, europe

was devastated by three major land wars. in the second world war, countries whose populations were smaller than they are today, between 55 and 60 million people died. large areas of europe including many major cities were laid to waste. but in the three-quarters of a century since then, europe has been largely at peace. there continues to be some regional and local complex, but measured against the modern history of europe, the absence of a major war, even of its possibilities is heartening. it represents the success of an american vision and american leadership. and that is why it's so

important to us that the european union's current financial crisis be resolved in a manner that does not undermine those impressive political achievements. the north atlantic alliance and what flowed from it is an example of extraordinary leadership and collaboration at a turning point in history. we now face new challenges, but we still need extraordinary leadership. one enormous threat that is new to human history is the potential proliferation of nuclear weapons. the united states lead the world into the nuclear age and has led the effort to contain these highly destructive weapons with some success. many countries with the capacity to develop nuclear weapons,

dozens of them all around the world, have voluntarily refrained from doing so. but north korea has raised the number of countries with nuclear weapons to nine and i ran is moving to make it 10. iran's program in particular could trigger a collapse in non-proliferation and result in a large increase in the number of nuclear powers in a relatively short period of time. that would dramatically increase the risk of a terrorist or other nongovernment group gaining access to nuclear materials and a nuclear weapon, which would have course increase instability and threats to our national interest so it is of the highest importance that we sustain and intensify the effort to limit

the spread of nuclear weapons. human history is in very large part a tale of conflict, how it began and how it ended. what is different now is that every previous conflict came to an end and life continued. an all-out nuclear war would not only be -- and and come it could be the end to civilization as we know it. so there is greater urgency now for that and a number of reasons. among them, the number of people on earth is increasing rapidly. i will address that in more detail in a moment. the number of nationstates continues to grow. the number of nonstate organizations, which rely on acts of terror initiate or

extend conflict is also on the increase. rapid technological developments make it easier to start and to conduct complex than it is to prevent them. as the circumstances inequality, injustice, the absence of freedom are still a reality of life for a vast number of people all around the world. poverty, famine and disease continue at appallingly high levels. it took 18 centuries following the birth of chris for the world's population to reach 1 billion. the most recent billion was added in 15 years. think about that. 1800 years for the first

billion, 15 years for the seventh billion. although the rate of increase as -- has recently slowed, the credible estimate is that by the middle of this century there will be between 9.5 and 10 billion people on earth. most of the growth between now and then will take place in poor and less developed countries. that means more competition for land, for water, for natural resources, for economic growth, for political power and therefore inevitably more conflict. all of this at a time when technology has enhanced the human ability to kill ever larger numbers of both men and women and at a time when the number of terrorist groups is increasing. some national intelligence agencies have expressed concern that there are now many more such groups.

they are less centrally controlled, making detection, infiltration and prevention more difficult. added to that is the concern about the return of islamic fundamentalism. it has recurred regularly in the 13 centuries of islam's existence, as has internal division and conflict. the dispute is now exacerbated by very rapid population growth and the muslim world, stagnant economies, the absence of opportunity, and deep and widespread feelings of humiliation and alienation, all of which contributed to the revolutions now known collectively as the arab spring. what the islamic countries need is what people need everywhere, the organization of their

economies, the widespread acquisition of knowledge and technical skills, economic growth, job creation and to help achieve all that, the strengthening of moderates in their societies. there is of course no single act, no one policy which will enable us to deal with all of these challenges. but some needs are clear. one is for a more effective counterterror program. if we have learned anything in the past several years, it should be that military force, although a necessary component, is by itself insufficient as has been made clear in recent years throughout the middle east and was made clear in northern ireland. overwhelming conventional military superiority does not

guarantee victory, because these conflicts are not simply conventional wars. so, our effort must include more effective and cooperative police work, diplomacy, economic and financial interdiction, much more that is not primarily military in nature and especially better intelligence gathering and analysis. recent technological advances have dramatically increased our ability to gather huge amounts of information, but we need a major effort to enable us to improve our capacity to interpret, analyze and use relevant information in a timely manner. that is easy to say in a single sentence, but very difficult to do in the complex circumstances in which we find ourselves, and we also need to restore a better

balance between technology and human intelligence efforts. it helps a great deal to have technological advances like satellite photography and telephone interception, but they should supplement, not supplant, eyes and ears on the ground in clothes and daily proximity to our targets. we have been engaged now for decades and what we have constantly called the war on terror, but terror is a tactic, not an enemy. while the use of terror is widespread, there are many differences among those who use that tactic. some have specific political objectives, some do not. some are coherent political groups with whom dialogue is

possible. some, like al qaeda, are not. for such groups, the response must be total opposition and their total destruction. but, it simply inaccurate, unhelpful and self-deluding to lump them all together. a more effective counterterror program must include the common sense needed to discern the differences among the many users of terror and to adopt responses that are suitable to the particular challenge. i would like, if i might, to mention briefly my experience in northern ireland. i spent five years there cheering three separate related discussions. the main negotiation lasted nearly two years. in the end, we were able to get a peace agreement thanks in large part to the courage of the political leaders of northern

ireland. they are ordinary men and women and they have spent years and conflict. many of them had been personally injured in an assassination bombing attempts. some of them had been in prison at long period of time for the violent activities. and yet, in a critical moment in their nation's history, they rose to the occasion and came together for peace. under intense criticism from hard-liners on both sides, who regarded any concession as a sign of weakness, those leaders made principle compromises that put at risk their careers and their lives. for some of them, their lives were brought to an end and their careers destroyed. but in the process, they brought

peace to their war-torn land. that was political leadership at its most courageous. that is needed everywhere now, including the middle east, where the situation is especially volatile. the arab spring represents a turning point in the history of the middle east. while the countries involved are predominantly muslim, and most of them are arab, each has a unique history. there will be uncertainty and instability. some steps forward, some backwards. there'll be different outcomes for different countries. there will be some good results and some bad results. history tells us, among other things, that revolutions are unpredictable and often require years and sometimes decades to play out. in our own country, in a much less complicated time and

circumstance, seven years elapsed between the time the fighting ended and the establishment of the united states. unfortunately, it has often been the case that very bad governance that was removed by revolutions were followed by governments that were even worse. the most obvious example of course is russia, where life under the stars was with hard and oppressive for most of the people and very few would argue that traditions under communism and particular on the -- underscore's murderous regime was better. so we must be patient, and we must be realistic in our expectations, even as we do all we can to support the transition to democracy where possible in the middle east. we must also bear in mind that

these changes came from within. these were indigenous revolutionary movement and they will succeed or fail from within. now we must also continue our effort to help end the conflict between israelis and palestinians. even though pessimism is very widespread right now. and there are many many reasons for that pessimism, many reasons to be skeptical about the prospect for success. the most recent of which is the arab spring itself. the upheavals across the arab world, especially in egypt and syria, have created anxiety and uncertainty among both israelis and palestinians, making progress in resolving their conflicts more difficult than ever.

even before the arab spring, the conflict has gone on for so long, it has had such distract the defects. the level of mistrust and hostility between the parties is so high that many regard it as unsolvable. but the pursuit of peace is so important that it demands our maximum effort, no matter the difficulties or no matter how often we are set at. the key is easy to say, but difficult to achieve. it is the mutual commitment of israel and the palestinians and the active participation of the united states with the support and assistance of the many other governments and institutions who can and want to help. the task is to reconcile the palestinian goals of a viable,

contiguous, sovereign and independent state based on the 1967 lines with the greek swaps and the israeli goal of the jewish state, with secure, recognized and defensible borders. just before he left office in january of 2009, president george w. bush in jerusalem said, and i quote, the point of departure for permanent status negotiations is clear. there should be in and to the occupation that began in 1967. the agreement must establish palestine as a homeland for the palestinian people, just as israel is the homeland for the jewish people. these negotiations must ensure that israel has secure, recognized, and defensible borders, and they must ensure that the state of palestine is

viable, contiguous, sovereign, and independent. it is vital that each side understands that satisfying the other's fundamental objective is key to a successful agreement. security for israel and viability for the palestinian state are in the mutual interest of both parties. taking office just a few days after that speech, president obama publicly reaffirmed that policy. but it seemed seems then that the culture of peace, so carefully nurtured during the oslo process, has largely dissipated, replaced by a sense of futility, of despair, of the inevitability for conflicts. the conflict in gaza had just

ended four days before president obama took office. the palestinians were deeply divided, and israel was in the middle of the general election. do you then believe that there was any chance for restarting peace negotiations, let alone achieving an agreement to end the conflict. unfortunately three years later, that remains largely the case, despite an intense effort. a solution cannot be imposed externally. the parties themselves must negotiate directly with the active and sustained support of the united states. this will require of them compromise and flexibility. most of all, it will require leadership by all concerns, leaders especially who are willing to take risks for peace. i still believe that this

conflict can be ended in part because they think the very real pain that they will endure from negotiating an end to the conflict will in fact be much less than the pain they will endure if they do not. there is a lull now that has created a false sense of comfort, but if history is any guide, that won't last. if the conflict continues, both israelis and palestinians face a dangerous and uncertain future. that includes of course the possibility of renewed violence which we hope and pray will not occur, but if it does, it will spread in unpredictable ways. there are other dangers for both. we mentioned just a few. for the israelis, first, democracy. there are now just about or at

little over 5.75 million jewish living in the area between the jordan river and the mediterranean sea. in the same space, there are just over 5.25 million arabs, including eight israeli arabs, palestinians on the west bank and in gaza. the arab birthrate overall is much higher. within just a few years, they will be in the majority. israel will then have to choose between being a jewish state or a democratic state. once the two-state solution is lost, there cannot be both. this has been widely discussed in israel, most recently and forcefully by ehud barak, prime minister and now the defense minister, who has said that this is a painful choice that israel

should not have to make. the second challenge arises from technology. to keep out suicide bombers, israel built an enormous wall, but the real threat now comes not from suicide bombers, but from rockets. hamas has thousands of them along israel's southern border. they are crude, lacking in guidance for destructive power but they do create fear and anxiety, and no no one can doubt that over time, they will have more and better rockets. on israel's northern border, hezbollah already has tens of dozens of them. the public estimates range from 30,000 to 50,000. they are somewhat more effective and although limited in range, hezbollah is engaged in an effort to upgrade their rocket

systems. finally, and most ominously, i ran now has rockets that can reach israel from i ran itself. they don't yet have the position weapons that are needed to strike very specific military targets, but they can cause enormous death and destruction in cities. the united states is fully committed to israel's security. that commitment is firm and unshakable and will not change. we have provided enormous financial and military support to israel, most recently in the development of an effective antimissile system. but, it is unknown whether that or any system could intercept the large numbers of missiles that could be launched in the event of an all-out war. israel's very existence would then be threatened.

the palestinians also face serious problems, especially the indefinite continuation of the occupation under which they do not have the dignity that comes from self-governance. in 1947, the united nations proposed a plan to petition the area and create two states. israel accepted it. the arabs rejected it. the first of several wars began, all of them one by an increasingly strong israel. every sensible arab leader today would gladly accept that u.n. partition plan, which they rejected in 1948 if it were still available. but, it is not and it will not ever again be available. because circumstances have

changed so dramatically. since then, the plans offered in the palestinians have been less attractive, and they rejected them all. but as i told chairman arafat many times, and the current palestinian leader, president abbas, many times directly, there is no evidence to suggest that the offers are going to get any better in the future. so they have got to sit down, participate in, and state in direct negotiations to get the best deal they can, even though it's not 100% of what they want. that is the way they can bring the occupation to one and. and they really have to do it if they want to be successful in gaining their own state. once they get their state, they can build on it under the

outstanding leadership of the palestinian prime minister, salam fayyad. they have demonstrated that they can do it at laying the foundation and building the institutions needed for a viable and independent state. unfortunately, that state-building effort cannot be sustained in the absence of progress on the political side. they are inextricably linked so there must be progress on both, or both will fail. it's a daunting challenge to rebuild trust not only between the political leaders but also between two peoples, two societies, with a long and bitter history of conflict. but they must find a way to renew hope and see that peace can prevail, because it's very much in both of their self-interest and we must do all we can to help them. well, before i take your

questions or want to close with a personal story. as i mentioned earlier, and as ralph mentioned in the introduction, before i entered the senate, i had the privilege of serving as a federal judge. i enjoyed it very much, especially when i presided over what are called nationalization ceremonies. they are citizenship ceremonies. a group of people who come from all over the world, who have gone through the required procedures, gathered before me in a federal courtroom in my home state of maine. there, i administered to them the oath of allegiance to the united states and by the power vested in me under our constitution and law, i made them americans. it was always very emotional, because my mother was an

immigrant, my father the orphaned son of immigrants. and no education. my mother couldn't read or write and never went to school. or her entire adult life, she worked the night shift in a textile mill. my father was a janitor, but because of their efforts and more importantly, because of the openness of american society, i, their son, got the education they never had and became the majority leader of the united states senate. after every ceremony i made it a point to speak personally with each of the new americans individually, or in family groups. i asked them how they came, why they came. i asked them to tell me about their hopes and their fears. their answers were awe-inspiring. most of us, americans by

accident of words. all of them are americans by an act of free will take and at great risk and cost to themselves in many cases. although their answers were as different as their countries of origin, there were some common themes and in they were best summarized by a young asian man. when i asked him why he came, he replied, very slow and halting english, i came judge, he said, because in america, everybody has a chance. think about the fact that a young man, who had been an american for less than 10 minutes, who could barely speak english, was able to sum up the meaning of our country in a single sentence. america is freedom and opportunity. although we now face serious

challenges here at home and abroad. i am confident that we will meet and overcome those challenges, and as we have in the past, emerge a better and stronger country. thank you very having me and i look forward now to taking your questions and comments. [applause] >> thank you for that and i'm going to ask the first question, because a lot of these people are having to deal with the craziness that goes on, i guess both sides of pennsylvania avenue these days including not getting budgets on time and sometimes months in and how many potential shutdowns and we have last year, five? how do they do their jobs in that type of environment?

>> that is a question i am asked literally everywhere in the world. americans don't understand what's going on and people outside the united states really don't understand what's going on. let me try first to establish some context. most human beings look at the past through rose-colored glasses and imagine it to be better than it was, and most looks to the future with blinders and imagine did worse than it will be. there was never a time in american history that was free of political conflict, partisanship, criticism, convective. now, go back to the time of thomas jefferson and read about the things said about him and the things that he said and did about john adams and his other

political opponents. back in the time of abraham lincoln and what was that about him. franklin roosevelt. now, so, the first thing to do is to put it in context. it is bad now. it has never been a rose garden. that doesn't excuse what is going on now. it puts it in some context. secondly, i don't want to sound too much like i am defending politicians, which is an unpopular position in america today. this is a divided country, split about 50/50 down the middle and you just look at the last several elections and see how they have gone back and forth. as a result, the elected

representatives of the people reflect the divisions among the people. let me give you one example of the proposition that people like political leaders can and do hold an advocate contradictory views at the same time. in 1990, i was a majority leader in the united states senate, a democrat. president george h. w. bush, a republican, was president. we had a very tough time with the budget. it seems so at the time and it lasted for months, a lot of back and forth and a lot of public criticism, just like now. you can go back and look at the papers and much of the current criticism was made then.

i used to go back every weekend to hold open town meetings and after about three months of this budget battle back and forth, i went back, had a town meeting on a saturday morning, a big crowd. as they all worked disproportionately elderly because they had more time to attend these things. i got up and i didn't make any comments. i would invite people to make statements, give speeches, ask questions, whatever they wanted. the first guy gets up, and he strongly denounces, harshly criticized me for what he termed my excessive partisanship, the problems we are having with the budget. why don't you go down he said, president bush has a palm a few miles away. why don't you go down there like a gentleman and settle with him and he when he finished the scathing denunciation that

view -- the crowd stood in -- back and forth, we don't even know what you guys are fighting about. way you explain the issues? well, life goes around. the big issue is medicare funding. the president proposed a series of cuts that we felt would change the nature of the program. we have proposed some cuts that he didn't like and we were fighting over that, so when i explained this, the guy got up and said senator you represent us and we are telling you, you go back and don't give an inch on medicare. and the crowd stood up and gave me a double standing ovation. [laughter] so that is the second . there are divided points of view. everybody says, hate negative political ads. why do you think negative political ads run all the time? because they were. everybody says, settle it. but settle it on our terms. and our terms mean one thing to this half the crowd and all of

that explanation being said, it is really bad today. and it is unnecessarily bad today for a variety of reasons. it doesn't have to be this way. i was a democratic majority leader in the senate for six years. bob dole was the republican leader. not once, never, to this moment, has a harsh word ever passed between us in public or in private. we disagreed every day on the floor of the senate and pull -- in full public view but we never once tried to embarrass or demonize or personally criticize the other. we had dinner at couple times a week and we talked about the issues. we understood that while we had a loyalty to our parties, we had a higher loyalty to our country and to the institution of the senate. i am sorry to say, that is what i think is happening today for a whole variety of reasons.

that's another long speech to tell you what to do about it. i think ultimately, it will be solved if at all, by the american people. if the people decide that they are sick of this, they will change it. there is no other way to change it. the members of congress are elected by the people and they represent the people and the way it's going to change is if the american people say, we have had enough of that. we want something different, and that means a willingness to compromise. i actually read about one member of congress who got up and said, i'm opposed to compromise in any form. compromise of an issue. this is a country of 310 million people. this is the most diverse country in all of human history. we have people from virtually every other part of the world, every religion, every language spoken in this country. the notion that this country can

be governed with no compromise of any kind, that any one person or anyone is going to give 100% of what they want as opposed to the other is simply divorced from reality. the challenge of leadership is to do i think what's senator -- and i did, too vigorously advocate our positions but be prepared to make rentable compromised when necessary for the common good, which means you don't get 100% of what you want 100% of the time. you have to recognize that the other guy is just as sincere in his or her views, that disagreeing is not un-american or criminal. it just reflects a different point of view and they have to be reconciled for the good of the people. in the end, it will be the public the changes it, not the politicians.

[applause] we all love changes long as we don't have to do anything differently, right? >> hi. >> hello, israel has been identified as the probable source for very effective computer virus that was sent out to affect iran's nuclear plants or nuclear processing. could you describe the u.s. response to that and how we feel about that? >> in cybersecurity overall we are always talking about cyberwar. first i have to make clear, i do not represent the united states government. i am a private citizen. i once was -- i did serve in that position but i know longer serve now so i do not purport to speak for the united states government and my views, my statement should not be regarded in any way is attempting to do

so. secondly, even if i knew exactly what was going on, i wouldn't answer your question. [laughter] but the truth is, i don't know, because i have been out for several months now, and i think there are some things that simply are not and should not be discussed publicly. that having been said, it is a matter of public knowledge that both the united states and israel and indeed many other countries, conduct covert operations to achieve their objectives in a manner short of overt public conflict, and there has been a great deal written about much of that speculation,

some of the grounded in facts about the types of covert operations that have been conducted with respect to iran's nuclear program, so i believe i should leave it at that for now. but the term cyberwar, there's a little debate going on whether this is helpful to the overall debate or whether this ends up sort of blowing cyberout of proportion and it doesn't really make much difference in the end. how important is this terminology? >> i believe that the technological and communications revolution through which we are now passing will ultimately in historic terms, be seen as a turning point in human history

on significant equal to a threat greater than the industrial revolution, which of course began in england and which has transformed history in a way that anyone who prior to it could not possibly have imagined. so i think the subject -- i'm not going to talk about the term, because it's beyond my scope and i shouldn't be commenting on things like that but the subject matter, methods of communication, methods of compiling and transmitting data, have become so significant, not just in individual relations but perhaps in a way that most people don't think about or comprehend in terms of government policies and actions, and so what you are talking about is of truly enormous significance for the future.

any other questions? thank you for making me get my exercise. i am exhausted. hi. >> good morning. >> mentioned in your discussion about a better balance between technology and in activities. the whole idea of the information age that you mentioned has the connotation of being short. everything done more efficiently, everything done more quickly, but a lot of the issues that you discussed about the arab spring and the problems that we face in the developing world, you have to approach it with a long-term view in mind, and sometimes, whenever we invest, whenever we try to do work in the developing world, it's kind of hard to go into it with a short-term view in mind, because a lot of the time you have to bring resources to bear,

you have to bring capital into most of the investing, most everything. but whenever you go into it, you have to go with the long-term in mind. do you think that going forward, even though we have to do things mark weekly, or are able to because of the age and times in which we live. we still have to have a long-term view in mind whenever we do anything that involves our country as well as doing work internationally? >> how do we think long-term in the age of twitter? we do have to, but it is extraordinarily difficult to do so when you are beset by so many current contemporary problems arising. one of the reasons we have to do so is in the fact that this in part follows from my prior answer about the significance of

what is occurring, is that our capacity to absorb and act upon the massive increase in volume of information we receive doesn't keep pace with the technology, and let me tell just a couple of short stories to illustrate that point. before i went to northern ireland in the middle east -- and the middle east i spent a lot of time in the balkans during a period of conflict there. i visited a small town and the north of bosnia which had been half serp and half croat before it did war. they seized the town, burn down every building in the town owned by a croat. the reverse happened two years later so when i got there almost every building had been destroyed. i said to the mayor, when do you

think serbs and croats will begin be able to live side-by-side in this town? he said, we will repair our buildings long before we repair our souls. we are the product of many thousands of years of human development. we have evolved slowly and we are not able to keep pace with the rapid change in technology that is evolving now, and we are beset by a constant and unending flow of information that is difficult for us to process. i've got two young kids in school. my daughter does her homework while she is listening to music on her ipad, ipod, and watching television at the same

time. i said, how can you do three things? she said, daddy, it's different now. we can do that now. you can't. [laughter] i don't think that's true, but it's something a person thinks that they can do three different things at one time and do them all well. so, we do need more long-range thinking. we do need more thinking beyond tomorrow. i was told about -- i raise this issue with people from the middle east and i was told one of the problems is that some of the leaders there, short-term is the morning paper, long-term as the evening news. we have got to get past thinking that we can make decisions based solely on the morning paper. i agree wholeheartedly with you and it's one of those things as a remark to my comments, that it's easy to say, and easy to

get agreement on, but then once you're in a position, when you are beset with all kinds of different issues at once, with claimants in demands and so forth, it's hard to do, but it does require the kind of concentration and focus that is very much in our interest that we act in the long-term. one last question. a lot of these people and government, they are serving the government in some way, shape or form. they are told that they are underpaid, overworked and under qualified and anything you can possibly imagine. we are may key a king for the day. what one thing would be you like to see happen that would enable them to do their jobs better, that would make for a better government? >> well, first off, i spent a good part of my life in government service, and a good part out. i don't know about the rest, but i have done much better out than

in terms of pay. >> don't tell them that. [laughter] >> i did and enter government because it was an increase in pay. i take a big kid decrease in pay. i did it because i believe very strongly in the notion of public service. i described my personal history in my comments. i feel i have been very lucky. i support the american dream because i think i have lived it and i can imagine not doing public service when the opportunity arose. so i think if you enter public service, think it has to be with the proper frame of mind, that you are serving. that is what the word means, services serving others. you don't do it exclusively for financial security reasons although obviously, everyone is interested in a proper compensation and gaining security to the extent possible.

secondly, i think a lot of the criticism is simply not -- simply unfounded. for example, one of the common charges you here today is that the government doesn't do anything right. well, it's so easily disproved. was the g.i. bill the wrong thing to do when franklin roosevelt signed the g.i. bill. 4% of americans had four year college degrees. today, 25% have college degrees and to a significant degree, because of the consequences that flow from that enactment was that a failure? the answer is, of course not. that was a very good thing to do and everyone tends to agree with that. so i think that some of the criticism of government and government employees is vastly overstated and erroneous and

undermining. although it doesn't apply specifically to government service. i think one of the problems in our society today is the undervaluation of teachers. people talk about all that is needed in the system of education, and i'm not an expert and i don't pretend to be, but i know my life was changed by a few inspirational teachers. i'll but that is true of a lot of people in this room. one of the i believe, one of the great failings of our society has been the extent to which we do mean, under value and insult teachers and we are now seeing that going on right at this very moment in the debate in public institutions in our society. if we really want to have the kind of knowledge and skill and wisdom for future generations, we have to do better at recognizing the immense