behind those numbers are stories. pregnant mothers who can rest a little easier knowing that their children will be exposed to harmful toxins. young people who can go outside without worrying, or the parents worry about asthma attacks. we are doing our best to make real changes in people's lives. when i was in selma, i borrow some of the words to that effect from the wonderful read and. like much but the reverend said

bears repeating here today and everyday. he said many memorable things but what i'm thinking of ours words at the memorial for rosa parks when he said that we wouldn't do justice to her memory by letting our tribute and in ceremony. reverend lowery said you have to move from ceremony to sacrament. we have to do more than just honor the history. in fact, we do if we don't take action to keep our history moving forward. this is the call to the joshua generation. this is why we have a national action network. [applause] and this is why -- this is why i'm here to ask you for your support. because there are people today who will tell you that the best path forward is to strengthen the protections for the

polluters who make us sick and dirty our communities, instead of making sure that we are protected. there is a large and loud movement of people who seem to think that in order to move ahead economically, we need to be willing to sacrifice our environment, which is asking us to sacrifice our health. in fact, they seem to feel that way about a lot of issues. that you can't move forward, we just need to rollback. but we are the joshua generation and we know better. if we're going to fulfill our promise, then we have to do more for the next generation, not less. in the joshua story, after crossing the jordan river, joshua had his followers gather up 12 stones from the riverbed. remember that collects and establish a memorial, why do you have a memorial? so that children would remember their history.

so i ask you, what will our 12 stone memorial look like? what will our 12 stones be? what will this generation leave behind to let our children know what challenges we took on, and overcame? years from now, will it be one stone for closing the achievement gap in education? [applause] will it be april to lay down one stone kashmir will we be able to lay down one stone for our struggling city? how about one stone for helping african-american families that are still living in an economic recession today? how about one stone for bringing health care to every american? [applause] and one stone for ending the

epidemics of violence and drugs that have ended too many promising lives? [applause] and certainly, we should have one stone to remind us to keep marching until people are focused on passing laws that make it easy for americans to vote, all americans, not harder. [applause] >> the list goes on, but you better give me a stone for environmental justice. [applause] please. i'm asking you and calling on you today to help me in that effort. this month is earth month. nine days on sunday the 22nd, we will celebrate another birthday, and challenge -- earth day, and challenge all of you to take some time, find a way to make those environmental health issues part of your conversations this month in your community. and get involved in the health of your communities.

and i challenge as leaders in your community to step up and raise awareness about what clean air and clean water mean to our children. not to some faraway place, but our children. and challenge us to make a lasting priority in our lives, take action where it needs to be taken. this is how i believe we live up to our title, and our awesome response but as the joshua generation. i look forward to moving forward with you. please invite me back. thank you very much. [applause] >> administrator lisa jackson. [applause] >> before you leave, before you leave, administrator jackson, i want to say two things. one, you know the press search everything so, you know, they will say tomorrow, she came to action network until all of y'all to get a stone and throw it. you know, don't you? [laughter]

but also want her to know that when she said that when josh across the jordan, she said and gathered the stones, she looked at us and said do you remember that? reverend richardson remembers that. [laughter] >> thank you, administrator jackson. [applause] >> part of being chairman is you get picked on by the president. we are happy every year to have our allies join us in the civil rights movement. and there are many that join us, but they are not our allies. some of y'all believe in other things that we believe. you are welcome to come, don't mean we all agree. we don't agree on a lot of tactics. we don't agree on a lot of

inaction. that's what the convention is about. every year we have conservatives. last year sean hannity spoke. the year before it all right. the conservative media never talks about how the conservatives are welcome at our convention, and i don't agree with all of them and i don't agree with all of what everybody in the broader movement does. but we have heard today from ben jealous, and we're hearing today from another three of us have a partnership because we agree, and we work together in unison, because we agree. and they've been with us every year, and i'm glad that the other part of the trio is with us now. it is very important that we have operational unity. we all play different roles, but we play this toward the same goal, in churches, whatever city

you're in, no that in a choir your different people saying different things, different, they have different talents. some baritone, some outcome. some soprano. some can't sing it all. they just move their lips. [laughter] but it takes all that to make a choir. so you have melanie campbell and ben jealous and my next speaker, who we tried to sing in harmony and keep the movement going. and i bring to you one of the tallest trees in our community, a brother who has been consistent and persistent, and plays his role better than anyone i know. one where on the front line, he supports his and he will go on the front lines. he's in the corporate boardroom.

we support them in a broader role. we all know our strength, and we all know how to back up where we are not as strong, because the team wins again, not just a show off player. and he's been the mayor of new orleans. ea has now served -- he has now served many years successfully as the president of the national urban league, our friend and brother, mark morial. [applause] >> thank you. thank you very much, and brothers and sisters and national action network always, i am going to be as brief as possible. i did not bring a sermon, but i did bring a sermonette. [laughter] >> let me first begin by

thanking reverend al sharpton. reverend al sharpton is one of the most influential americans of our times. [applause] and he has been to me a friend, a brother, an ally. because, you know, on many, many issues we just fundamentally think alike. civil rights and economic opportunity go hand in hand. and we live in a time when voices over here and over there, sometimes even in our own community ask the question, why do we need civil rights advocacy in the 21st century. we just witnessed, we just witnessed, we just witnessed in

this nation the reason why the voices of justice and civil rights organizations are as important now as they were 50 years ago. [applause] so i want to thank reverend sharpton for embracing the family of trayvon martin, for -- [applause] for being persistent and consistent, and for helping all of us collaborate and come together. we will not allow on our watch, in this time, any act of injustice, any act of injustice anywhere, to go on responded to. so trayvon martin, we continue

to pray and work and hope for justice. because charges being brought as we know are but a step, but a step along the road to justice. and we must be vigilant and insistent, and persistent along the way. so reverend sharpton, i want to thank you, and the leadership of the national action network, for your voice and leadership. [applause] >> and let me thank the chair of the board, reverend richardson

for -- [applause] for his leadership. he and i worked together on a committee. he's a strong voice, and he always sees very quickly what others do not see. pcs very quickly -- he sees very quickly where something is going and says, let's get there first to head off some foolishness. so i want to thank him for his great leadership of. [inaudible] i have just a few things. first of all, i want to reaffirm something that reverend sharpton said. this joshua generation of leadership, we are determined not to allow heavy jealousies --

heavy jealousies, petty personalities, and old time rivalries to get in the way of operational unity. [applause] and while some may say that this organization or that organization is first or last or in the middle, are more important. when i look at the countryside, when i look at 50 states, when i look at a nation where there are 40 million african-americans, when i look at 13 million unemployed, when i look at all of the young men who are in the

prison cells in america today, when i look at all of the people have lost their homes because of the recession, when i look out and i see foolish people saying foolish things, like the president wasn't born in america, when i look out and i see this, i know that we don't need less civil rights advocacy. we need more civil rights advocacy. [applause] recently, the national urban league released its 2012 version of the state of black america. it was titled occupy the vote, occupied vote. they occupy the vote. >> occupied about.

>> to employ, educate, and empower. because in 2012, we must take a renewed stand. a renewed stand against efforts which have got new momentum to make it more difficult or people to vote in this country. as you look out and look up, 20 plus states in less than 18 months have begun to adopt new restrictions on the right to vote. requirements of the very explicit voter id, cutbacks on early voting, making it difficult for students to be able to vote. all of this is just old-fashioned poll tax is and literally wrapped in new clothing.

[applause] and we have seen it before. and we must applaud the justice department where they have, where they have exercised the power of the voting rights act to invalidate these laws. [applause] but we also, we also at the local levels have to make sure that elected officials ask us for our support do not in any way get close to this poisonous legislation. [applause] do not in any way sanction votes or sponsor this poisonous legislation. so we must confront that in some states will be able to stop these laws from taking effect. in other states, we may have to comply with these restrictions.

in 2012. i encourage each of you as you go back to your state, to learn what the requirements are and to educate through our organizations, our churches, our community, facilities, educate people about what will be required to vote. there was a man out in ohio, went to vote in the republican primary, and 88 year old veteran of world war ii who showed up at the voting for he had voted every time for some 40 plus years. the poll commissioner said, please show me your id. he probably pulled out his veteran the id card, and placed it on the table, and was told that that identification card was insufficient for him to be

able to vote in ohio. because ohio's law required an address match between the id you use and the voter registration roll. we must occupy the vote, push back and resist this legislation. [applause] number two, the trayvon martin case has illuminated and enlightened the existence in this nation of these brand-new -- they call it stand your ground -- i call it kill at will. [applause] or shoot first and ask questions later. wild, wild west is a song.

wild, wild west should not be the law of the land in the 21st century. [applause]friends, there's something that is not coincidental. when you look at the voter id laws and you look at the kill that will legislation, reverend sharpton, they have a common denominator. >> common denominator. >> that common denominator is that they have the same ghostwriting team. that ghostwriting team is an organization called the american legislative exchange council. i'm talking about alex -- not alexander the great. alec. not alexander virginia. alex. this ghostwriting team has

cooked up in the privacy of its offices right here in washington, d.c., poisonous pieces of legislation, and spread it all over the country. we are beginning this effort to shed light and heat. because in the 21st century we cannot remain silent while there is an orchestrated effort to turn time, not back to 1950, but back to 1890. back to some distant past. [applause] finally, i heard secretary donovan, and we work with hud, and i want you to know everything he said was true and accurate. the department of housing and urban development, we have

worked hand in hand because we focus, as you know, on economic issues. and in hand with them. we have lost an incredible amount of wealth as a nation and as a team unity since this recession has taken place. and steps that have been taken at hud, while much more needs to be done, i think reflects efforts in the face of resistance from interest in congress who do not want to do anything. who want to block the president's legislation, and then turn around and say, you haven't done nothing. we are not going to be fooled. we are not going to be tricked. we are not going to be deceived by these weapons of mass deception, weapons of mass deception, that want to deceive

our thinking in this nation about what needs to be done. i want to also, as i close, encourage you. there is a debate in this country about balancing the budget, about cutting back on government. and i also want to be very, very clear that all of us want to see a nation of fiscal health. but we do not want some budget of the united states to be balanced on the backs of the most vulnerable citizens in this country. [applause] it wasn't too much spending on job training or summer jobs that cause this debt. it wasn't too much spending on

aid to children's education that cause this debt. i want to find a person that found the money to spend a trillion dollars in iraq. [applause] i want to find a person that found ways to create massive tax loopholes for the most powerful interest in this country. i want to find them now. because it is those kind of things that fuel this debt. we must be clear. we must be clear and we must be allowed. -- we must be loud. we must be loud at this point in time when this country is changing, we are not going to stand by and be deceived that somehow now, that there's no longer a need for a medicaid program for our poor, that somehow now there is no need for the federal to support public

education in our city, that somehow now the medicare program needs to be turned into a private voucher program, that somehow now when our nation is suffering, that we can't muster up the dollar super young people to work during the summer. we have to understand that this is not a debate about money. this is a debate about choices. so i close by, once again, reaffirming today with reverend sharpton. our commitment to work together, our commitment to act with operational unity, our commitment to push ahead. and ask each of you, each of you, to continue to work alongside of us, to continue to be voices in your local communities, to not give up, to never quit.

we have just begun to fight. god bless you, and thank you. [applause] >> marc morial. [applause] >> all right. we are going to it over now to our executive director as we move for our women's panel, i believe. get a hand to our executive director, tamika malory. let me emphasize that she comes tomorrow 11:00, that's what we're going to do the televised a breakdown all that we're doing, everybody be there, bring your children, la dee da and everybody. i got that from senator young who's in the back. he was ill, but he has risen like he said, larry young speak

we will break we hear from our national action network coverage with remind you can see earlier coverage from this week in our video library. at c-span.org. tell you about other live coverage coming up today on the c-span know. i road to the white house coverage come a life coach continue today when mitt romney and did gingrich address the national rifle association.

>> the pope has a very famous way of being determined to be dead, and that's what the camera linger which is a cardinal level post that the pope handpicks this person, this person decides when the pope is dead. he hits in three times in the head with a silver hammer and calls out his baptismal name three times, which is a carryover from the romans. the romans used that method, younger name three country even today, the pope isn't dead until you cities do. >> saturday night at 10 p.m. eastern on afterwards, dick teresi defines the ever-changing description of death in his controversial argument that the business of organizing is going to blanket also on a tv former pennsylvania senator arlen specter on the split between old guard memos of his former party

and though supported by the tea party. sunday at 8 p.m. booktv every weekend on c-span2. >> for this year's student cam competition with students to submit a video telling us what part of the u.s. constitution was most important to them and why. today will be visiting knoxville, tennessee, to speak with katherine fu, an eighth grader at farragut middle school. good morning, catherine. >> good morning. why did you choose gender discrimination as a topic for your documented? >> when we first start to pick a topic which already noted down to the 14th amendment, but after i read a few articles on gender discrimination, i found a specific article about gender discrimination and how it relates to the equal protection clause of the 14th amendment. i just thought that it was really interesting and we could build upon it because of the controversial topic, the different perspectives that we could use and how it might affect us in the future while shared with the knowledge that we have learned and presenting a

problem that our generation they face in the future. >> the workforce investment act, can you explain what that is? >> the workforce investment act, or the data i aecom is a lot those passed in 1998. it basically helped create new workforce investment assistance and help citizens create job opportunities by educating them. and improved job training programs that are available to both men and women in the united states. >> you also discussed the equality clause of the 14th amendment or can you explain to us what is the basis around is? >> there's so many different interpretations on equality clause. one might be that justice antonin scalia does not believe women are protected by the constitution because there is no mention of it and no one voted for that specific legislation. and on the other hand, some people believe that it says that no state shall deny any person of equal protection of the laws,

that this may mean that there's equal protection of both men and women under this legislation. >> can you don't have the supreme court decisions have affected this issued? >> originally women were excluded from the bill of rights. however, after the reid versus reed was passed, this was extended to women. so it basically represents the mindset of that specific time period and it reflects on how the supreme court justices have voted in the past. >> was most important thing you took away from this experience? >> i learnt a lot of things throughout the course of the making of the documentary, and one of them would be that the constitution does impact me and affects me every day. and that's a commitment that you have to make to the course of a project is teamwork and just we learned about the widescale, not just on one specific group but just on every single citizen in the united states is very

important. >> what you want others to take away after watching your video? >> i guess our purpose was to inform people about gender discrimination, but just to present a problem in the u.s. today and raise awareness that there are problems when they face in the future. >> thank you so much for joining us and congratulations on your win. and that is a portion of her documentary, working women, and equity in the nation. >> how will the lives of citizens be affected. >> gender discrimination -- when i see rows of our loved one they discriminate against based on their gender. >> congress put two loss on a a book to combat such discrimination, title vii of 1954 and equal pay act of 1963. >> although it is uncertain in future legislations regarding gender discrimination, we effective in the future, some

people find it comforting to have centers such as the oed that resolve discrimination cases. >> even though congress has put many laws into action on gender discrimination, the debate as now on whether or not the constitution, or rather they call the clause of the 14th amendment, protects women from gender discrimination. >> you can watch this the in its entirety as was all of the winning entries on our website, studentcam.org. and continue the conversation on her facebook and twitter pages. >> next, a discussion on u.s. relations with turkey, iran and russia and the role of beach in serious as clicking violence. former national security advisor to president carter, zbigniew brzezinski is joined by brent scowcroft. both cautioned the obama administration on u.s. involving in syria and offered advice for dealing with iran. this is just over an hour.

>> the brzezinski chair here at csis, also director of the mill is program. is a great pleasure to welcome you all here. i want to thank you for making today possible. i want to remind you to please silence your cell phones to i want to remind you, we will be live tweeting from at csis underscore order. we're using hash tag gsf 2012. that must be meaningful to somebody. [laughter] i'm not sure exactly who. following the panel will take questions from the audience so please wait for a microphone, identify yourself, and please be sure to as your question in the form of a question just got to make a statement and then say to our distinction speakers, so what do you think of my statement? lunch will be served during the third session starting at 12:30. this panel on turkey, russia and iran are rises out of a project we're doing at at csis led by

stephen flanagan to look at this part of the world that has been in many ways into related in ways that don't necessary to involve us. you have three remnants of vampires who have been interacting for a millennium with each other, sometimes as rivals, sometimes as partners. and yet it's not really at the center of what we think about. and we thought it would be good as turkey's role changes, as russia's role changes, as the world continues to try to think of what to do with iran and have to deal with iran, that this would be a good venue. two people who i think are unparalleled in their insight into this part of the world and also to questions of strategy, general brent scowcroft, twice national security advisor in the ford and bush administration, zbigniew brzezinski, national security advisor for the carter administration, i think to the washington audience they need absolutely no introduction. there's a tremendous amount of

wisdom on this panel. my children will hasten to tell you that i add to that wisdom not one bit. so let me go right to asking you, general scowcroft, in the last 10 years turkey's role in the world has changed dramatically. in your view what are the most important ways that turkey's role and turkey's policy is changed in the last 10 years? and what are the contents in the way turkey looks at its role in the world? >> i think the chief change has been that turkey is no longer facing 90% to the west. it has turned east, or broadened its scope to the east. right after the end of world war

ii, remember our reengagement in the cold war really began in turkey and greece with aid to turkey and greece. and turkey became a pillar of nato, and a very close in the military since ally of the united states. and they were one of the best members of nato. they helped us in south korea in the korean war. turkey sent troops there. we had a very good relationship with them. it was a surface relationship. they were good allies and we had this kind of comfortable relationship. now, turkey as i said is reaching out to the east, south, in all directions. and their foreign policy expression is no enemies anywhere around.

so it's a very imaginative but very different relationship, and i think we need to adjust to that. and i think while turkey is not the comfortable friend that it was before, its role is even more important than it was before. and i think the relationship between, that has developed between president obama and president -- and prime minister erdogan is very interesting. >> not a comfortable friend anymore, how do we accommodate ourselves to a turkey that is doing more and more things that make some of our policies more difficult? i'm thinking particularly about the growing trade relationship between turkey and iran at a

time when the u.s. has tried to cut iran off from economic support around the world. >> first of all, let me say that turkey is an independent country, right? it has a right to whatever kind of relationship it wishes to have with any of its neighbors. and if we want turkey to follow the path that we favor, then we have to be sensitive also to its interests, reciprocity, even if not totally balance is the name of the game in international politics. i ago with everything that's been said but i would add the following to. turkey's greater scope of reach today is a reflection of its internal vitality, the relative success, continuing success, of

the model that they have now been pursuing for 90 years your in the process, transforming turkey much more successfully than the comparable process of change immediately to the north of turkey, namely and russia. because the transformation of russia began under lenin in the 1920s. the transformation of turkey began in the 1920s. and today, turkey is a more democratic and more stable democratic country than anything that exists in russia. and with much less bloodshed, and the modernization has been far more comprehensive in the style of clothing, and the mannerisms and education of the country. modeled very much incidentally on early 20th century germany. so turkey is in that sense a successful case of modernization

and progressive democratization which still has some shortcomings. its foreign policy in recent years is a byproduct of success, but also something else that i would like to add to what brent said, namely to support. the turks took very seriously the european decision to invite turkey to join the e.u. and they have been trying to meet the very tough standards were e.u. membership, but they have been trying to meet him but in the meantime they are learning from at least two principal european countries, that maybe they are not welcome in europe. that's been a real shock to the turks. and in that sense, that sense of rebuff has conditioned some of the turkish idiosyncrasies that we see on the world sing. second as you know, the turks were not enamored with our decision to go into iraq

militarily and unilaterally in 2003. they weren't enamored of it and they weren't pleased to have their arms twisted in order to get them to join us. that, too, has affected their outlook. so there are a little bit i would say inclined to being more assertive in terms of their independence. but fundamentally one looks at the political map of eurasia, turkey is a pivot state. it's critical in terms of the security of europe, and so far and so far as the turmoil in the middle east is concerned. it's a source of some opportunity for the newsstands in terms of their becoming more part of the world, and less dependent on russia. and on top of it, turkey has pursued a relatively independent policy towards russia in which they have reached an accommodation.

so all of that gives turkey special prominence. all of that, and i'll stop right here because probably will go over some aspects of this very soon, all i will say addition is all about the very badly threatened to do things in syria go bad and if things with iran go badly. and worst of all, if things go bad both in syria and in iran, thereby linking these problems into an escalating dynamic, that would be a major threat to the region, a very, very significant threat to turkey itself. >> thank you. a former army colonel came up to me quietly and said, turkey's policy in syria has been a disaster. >> what? >> a disaster. turkey has been much too aggressive confronting them. how do you assess the way turkey has looked at the problem syria

tried to visit itself both in different and more broadly in the world? >> that's a very interesting examination, because i think it tells you a lot about prime minister erdogan. because five years ago, turkey and syria were very close. their trade across the border was booming. they were very, very close together. erdogan i believe has now decided that assad is a menace and needs to go, and erdogan is now on sort of a democracy kick. i say sort of because you see the results. you don't hear the discussions that much. but i think that turkey has decided that the internal

situation in syria is serious enough that assad can't deal with it and needs to go. and so he has turned from, not an ally, but fairly close to assad to probably his worst enemy now. >> do you think that was the right way to orient turkey? should turkey have been more circumspect, in your mind, than they have been? >> you know, i don't feel like -- first of all, i'm sure they know much more about this problem than i do. i'm very sure, absolutely sure, they know much more about it than the u.s. does. [laughter] so i kind of defer to the turks, and secondly to the saudis in so

far as syria is concerned. i think we have to drop the practice of announcing publicly when things start going badly in some country, that its leader must go, with the emphasis on the word must. these kind of categorical announcements from on high whic are not followed by any action, don't produce anything except more tension in country. it's much better to have some sort of notion of what was going to do before one talks. and in so far as syria is concerned, in my view from the very beginning was that this is not like iraq. assad is not like gadhafi, and the distribution of forces within the conflicted country is very different, in iraq -- in libya, sorry. talking about libya. in libya you had significant

position from a gadhafi from the very beginning. and debate in half the country. if you look at the map of the conflict in syria it is sporadic, it's here, it's there, it's in this town, it's in that town, it's in this region but it is not clearly divided or enduring. basically the country is in a kind of occasional anarchy in some parts of the country, but there are no clear lines. and our ability to deal with it from this area, from here, is relatively limited. so i've been under the view that we should back whatever the turks and the saudis decide. period, whatever. >> what about the russian? >> if they decide they want to go in, we will back them as the british and french and libbey. if they decide they want to play it cool, we should back them. if they want to go to the u.n., we should back it.

what about the russians? well, the turks are certainly sensitive to russia's concerns. we know what the russian position is. it's much more rested sent. it's much less inclined to write off a thought from day one. the problem is, in fact, that while assad has now become the brutal dictator, there is no viable alternative to them. and he seems to have the evidence of power still under his control. so must turkey is prepared to mobilize its armed forces and send them into syria, and i don't count on the saudi doing anything like that. they can provide the money, who else is going to do it and how? so i think frankly we just have to let this problem work itself out with the turks and the saudis and the arabs nearby, basically take an initiative not freezing out the russians or the chinese with condemnations to the effect that their conduct is

disgraceful, disgusting and so forth, which was said probably by senior u.s. officials, but see if we can create some sort of a consensus to back the turks and the saudis to try to resolve this problem. >> general, a number of people talk about the importance of using syria as a way to isolate iran, cut off iran's access to a frontline state again. israel cut off iran's access to the mediterranean. do you see this as a principal way to isolate iran? and if so, what are the policy prescriptions involve? >> i don't see that as a way to isolate iran. i see it, that as a way to prevent iran through hezbollah and hamas in interfering in the palestinian issue. i don't see action in syria

especially as an attempt to deal with the iranian question. and i agree with zbig. there's from problems that don't have obvious solutions. siri is one of the most complicated countries in the region, in terms of ethnic, religious, cultural traditional splits. it's badly fractured. and that's why you have, it's not one center. it's not like the tribal system in libya. and we can't treat it that way. you know, nhl political sense to bring the russians in again. the russians and the chinese abstained on u.n. resolution on libya. and the u.n. resolution said the use of force is authorized to

protect civilians. we use the u.n. authorization to overthrow gadhafi. so to condemn the russians and the chinese for vetoing a similar resolution on syria, well, i found it astonishing. because what they were saying is, you know, you fooled us once you are not going to fool us again. you are out for regime change in the region. and then the russians, for the russians it is as well, especially since syria is their last, shall we say client state, 30 years ago, the u.s. and russia were struggling for leadership in the middle east.

the last stronghold of that was in russia, so that's more what the issue is, and i think if the regime changed in syria, well, i don't even know what regime would follow. if assad left tomorrow, you would not have a peaceful syria. there is no obvious, and as zbig said, the center of powers in syria is largely intact. that is, the military structure is run by assad and the alawites, even though the bulk of the ordinary soldiers are probably sunni, not shia. the business community is hurting, has not fundamentally

desserted. so there isn't anything there to get hold of. >> let me just add to this. we have to think of this, syria, exactly the way brent looked at it in this larger setting. suppose we were to charter, supposed to start seriously disarming the scattered opposition. it's not going to prevent, not in the short run, but it will certainly intensify and tension in the region will grow. suppose in this context the conflict starts with iran. iran gets bombed by the israel israelis, iranians retaliate against us of course because they will view us as having conspired to. we will have to do something about it. so we get in the conflict also with the iranians in this setting. so we are supporting an escalation of violence in syria and now we are retaliating against iran. what do the iranians do? the easiest thing they can do

right now to hurt us is not only to make life more miserable for us in western afghanistan where we are planning to withdraw heavily and peacefully over the next year, but they can destabilize iraq very quickly by in flaming the shiite, sunni connection. thereby, linking that violence with violence in syria. and all of a sudden we have violence that spans from pakistan all the way to the mediterranean. if we are not thoughtful and intelligent and really strategized before we issue some categorical demands to other countries about how they have to run their affairs. now, what happens in that context with the russians? first of all, it's very close to them. secondly, if there is a conflict that involves iran all the way to syria, there is a real risk,

and there's some evidence for not developing, of some conflict between iran and other countries. because the iranians are beginning to blame them for some other subversive activities that have been conducted within iran. and they could lash out, which is a very important source of energy for the west. and then to compound this dilemma, there are some interesting a large developing regarding the situation with the russians. the russians and the last few months have upgraded their 58th army, stations just north of georgia, to the highest level of any one of the russian armies throughout russian territory. and the georgians are becoming very much alarmed, that if there's a conflict between iran, the russians might do something. to take care of this regime, which means that puts a hand

line which is such importance to european energy independence, would be cut. so we could have all of a sudden an escalating conflict as many different ramifications and could have very serious consequences for us. so my sort of basic advice to everyone is, play it cool and think through what this might mean. because this is a very old town region with potential for explosions in several different spots. this may sound terribly catastrophic, but the fact of the matter is that is the actual situation. not to mention of course the problematics of israel, the palestinians for egypt, et cetera, et cetera, et cetera. i think we better be aware of the fact that our dominance to the middle east is rapidly diminishing. and our capacity to influence it simply by verbal commands is close to zero. and we better work with others

intelligently and how to manage this problem. >> general, if we are wise enough to avoid a whole arc of crisis center, but you still have an israeli strike on iran this summer, what do you think that means for turkish interests, both in near-term and in the sort of two to five year time frame, given that turkey has relations with both iran with israel, and also with us? >> let me go back to answer that, and start with prime minister again. prime minister erdogan has had a falling out with the israelis, and i think it's principally stems from the fact that while he was, he met with the israeli leadership shortly before the operation into gaza, he was not told anything about it. and i think as a result of that

and the interception of the ship into gaza, relationships have gotten much worse. and i think that an israeli strike on iran would not be taken kindly by the turks. it would, as zbig says, it would produce almost incalculable results for the united states. it would make the region much more difficult for the turks who are really trying now to play a diplomatic role in the region. and i think it's a role however dubious the prospects may be, it's a role that we should

welcome. because it is fundamentally in our interests. and i think that the turkish role, for example, in hosting the talks with the iranians is a very useful way that turkey can go. and so i think that a, a step of this character by israel would sharply diminish the utility of what turkey can do, and sharply increase the antagonism. and erdogan is a very volatile

personality, and he, you know, he has walked off the stage in a meeting like this, for example, at davos. ..

and almost certainly will be worse should somebody take a turn to strong violence. >> host: you both talked about china's interest in maintaining the status quo. china's involvement in syria. as we look at the relationship between turkey, russia, and iran, dot the rise of china affect that relationship or is it really just an external driver that doesn't affect the intimacies between these three countries? >> it's probably doesn't affect the intimacies, as you put it, between the three countries, but i think it affects the general attitude towards the issue. the chinese, i don't think, have any particular stake in any particular kind of an outcome in syria. they have a stake in the region.

that's a fundamental concern. they are fully aware of the fact that as the regions get ignite. the consequences are unpredictable, they will immediately hurt their own economic interests, particularly because of the dependence of energy from the middle east, but it also hurts the ability more generally in southwest i, including the islamic element that is a concern for them. they do border afghanistan, after all, and they have problems. will not help them in coping with the social and economic problems they confront, and which probably on the political level are becoming more difficult to deal with even wind china itself. not as -- as the society becomes more politically conscious.

the russians don't feel that way. the russias are closer. they could become involved and also see opportunities for themselves if things good up in flame. toso the russia attitude is inherently difference, but the chinese and russias by and large have the common attitude, let's not push the envelope. and this is where i there is an international potential that the united states, i think, could intelligently exploit in order to damping -- dampen down the problems of syria and iran, rather than allow itself to be pushed into a situation, where by late september, early october, well give the iranians of either a humiliate situation

to new demands and restrictions that whoa be imposed on them only and not in keeping entirely within the provisions, or economic strangulation. in which case, you don't know how the iranians might behave. they might even lash out. it's not a terribly well organized or disciplined government. some units are more extreme than others. we could have all sorts of ways the conflict could begin, not only an atalk by israel on iran it in iranians lashing out. but the those countries are saying, just dampen down the pace. don't make demands. don't make extreme threats. don't issue orders from the olympic heights, which you cannot then enforce. just cool it. and i don't think that's necessarily an unsound approach to the situation.

>> the chinese -- we're trying to get the chinese to intervene in a lot of places. that's not their way. this is not their world order. and so they clearly grudgingly reach out. on iran is a special case. the chinese attitude has been, we get about 20% of our oil from iran, they're a good commercial customer. that's all they're interested in. but they're beginning to realize that if something happens and there is a conflict, whether the israelys strike, we do something, there's a conflict in iran. what does that do to their some of oil -- their supply of oil and the price of oil? so now they're beginning to realize, i think, that they do have equities they need to

protect it, but in general, they are very much against the u.s. of force, especially the use of force in situations like syria, because they relate everything to themselves, suppose there is an incentury rex in tibet? those kinds of things. so they're against intervention in anybody's affairs but they cannot avoid in the middle east their critical dependence on oil and the consequences for china if things go badly. >> can i add something to it? it's that very important point. it bears on something else related here. look at who is in an occasionally public, more often private fashion, publishing for more action.

the british and the french. now, from an historical point of view. isn't that feud for thought. hardly do anything, the problem is solved. >> when you're in government -- the chinese would be the status quo powers. it seems to be the place where

he is -- should we be hoping for a change in government in iran, and should we be pushing for a change in government, and you were in government when soviet union disappeared. what does that tell you how we should treat these changes. >> color to a relationship that is very bad. when we, for example, said the solution in north korea is

regime change, that's what the chinese clear out. regime change scares them to death in north court ya, the consequences, and now we're working together because we have abandoned that in iran, i think one of the things that most -- is most disconcerting to the iranians is our implicit regime change policy, and it seems to me that if we were to go to iran and say, look, your regime is what it is, we're not trying to overthrow it. we understand you have secure problems and we're prepared to sit down with you and look at a security structure for the region in which you'll feel

comfortable. so you don't need to good this route, this nuclear route. indeed, if you do, your security situation will be worse, not better. and give the iranians a way out other than abject surrender or conflict, and that is not all that clear to them now, and i home that in these meetings, that will sort of show the way. the iranian government is a very complicated structure. there is the formal government itself, which doesn't have any fundamental power. there are the -- there's the religious structure, the mullahs, who do have the ultimate political power, and then there's the revolutionary guard. not the army. the -- i mean not their formal mill terror strange. the revolutionary guard, the force who are the enforcers.

these three have a relationship with each other we don't fully understand. but playing around with that and deciding who is the bad guy, is, i think, beyond our intelligence capability. >> sounds like -- >> a what? >> an accord plus. we want to intervene and we would help establish a security structure in the region. should that bet the goal of the policy. >> the goal of the policy right now ought to be an arrangement which is in keeping with prevailing international norms and the obligations of the nonproliferation treaty. the fact of the matter is that the united states right now is under considerable pressure to demand in the negotiating process things which go far

beyond anything -- which impose farley more restruck and truly humiliate conditions on the iranians. more or less to put them in a cage. i think that policy, if it's pursued by the united states, would have the effect of not only promoting regime change but regime reinforcement. the iranians are proud people, 80 million, with one of the several impressive histories, and they happen to feel strongly they're entitled to a nuclear program which most of them, i assume, think is not a weapons program. it may be a weapons program in some respect, if they have even been an actual weapons program several years ago. right enough it's unclear as to what it is. but in terms of the iranian

perception of the issue. it's their right to have a program which meets their needs. so we ought to be negotiating, my view, on behalf of the international community and not just on behalf of ourselves and israel but on behalf of the international community, that the iranians are fulfilling all of the restrictions and obligations of the treaty. if that is the case, i think we perhaps can have accommodation that meets our needs and in my view, promotes political change in iran because it reduces the collision that brings the regime together. but we repress in these negotiations -- that is to say, they'll submit to restrictions which no one else is subject to it's going to fail. and then -- brent and i have

tried to present what the consequences might be. i don't think they are in the american national interests. i don't think they're in the interests of the region. >> when it comes to changing the nature of government, you talked about how you feel something is germinating in russia, something political is germinating that there is a nostalgia in the current russian government but your feeling russia in the future, as you have written in your recent book, a country we should try to bring into the western alliance. what is the timelines in your mind, for changing russia? what is a different kind of russia mean, both for east-west foreign policy and also south and east. >> i write in my book that both russias -- countries we seek to

engage -- i said deliberately diversified. they don't have to join the eu, but some -- it is my argument that turkey is meeting the standards of what this community embraces in terms of political values. russia culture historically, religiously, is a part of the west, but one aspect of russia history, in terms of win collection, and that is political value of rule of law, supremacy of law, over the state. that's missing. but it's beginning to emerge. this is the most interesting aspect of recent developments in russia. you have an apex, a political leadership personalized by putin, that is nostalgic for the recent past. he said the latest calamity of

the world was the separation of the soviet union. the -- and he wants to recreate as a eurasian union, which is he pushing now, but much more important than that is the fact that within russia there's now emerging an internationally-minded middle class composed of the younger members of the middle class, located in the big cities, both only of whom who have continuous exposure to the west and the world at large, and travel to the west, who study in the west in many cases, and are are park take can of the notion they're a civic society, a society entitled to have the same rights the democracy has. this is utterly new in russia

and is getting stronger and stronger and it is accompanied by something without precedent. the fact that someone now dares to go out on the red square and hold up the plaqueard is almost unthinkable. a person doing that 20 years ago, 30 years ago 4 , years ago, hold up a sign and was shot probably within a day. the new civic society that is emerging is politically fearless, and that's a new reality, and, therefore, i think both russia and turkey can gravitate to the west if we're smart, but if we draw categorical lines and look with indifference at something that could erupt into really significant violence, we can play the game of being basically

indifferent to it, i think these possibilities could fade away and we be plunged into a period of uncertainty on the international scene with essentially unpredictable dynamics at work. one thing you know about a war is, it's easy to start it, you never know how it will end, how long it willing take, and what might be some of the internal manifestations. >> i want to open it up for questions. we have microphones. if you would identify yourself. and only ask one question because we have a roomful of people and also form your question in the form of a question. dan is coming to you, sir in the front.

>> hello. i'm james farwell, a special operations command. first, thank you for your remarks. i wonder if both of you could -- you all commented on this in december at atlantic conference- i wonder how well you think -- i'm not asking for a partisan comment but an assessment -- how well the administration is doing and fulfilling the types of policies you are both advocating here today? what could -- do you think they should be doing next? >> i don't really know how to get my arms around a question like that. the kinds of policies we adopt and how the administration is doing them. let me just say that i think the

administration is facing a very different world, and i think we see it, we see it in the arab spring. i think the arab spring and its consequences in russia as described. the reaction happens almost away it happens and i think fundamentally we have to be agile, thoughtful, and broad-minded. the atmosphere in washington today is none of those. and that worries me. i think, for example, in russia -- i agree completely big bief and we don't always agree on things relative to russia.

putin is not a dumbie. putin is resentful of the west because he thinks we walked all over russia at the end of the cold war when they were weak. but he is knock a dumby, and i think he sees in the six years where medvedev was the president, he got a lot of things done that putin couldn't get done because he had a different atmosphere. he is not nostalgic for the cold war and so on. putin -- what he said, well, they're going to shift and now i'm going to be the president again and he is going to be the prime minister -- was actually surprised at the reaction inside russia because he just said, that's the way russia works. well, it doesn't now. i don't think he is a dumby. and i think you may see a

different putin and a different russia which i think, as zbieg says, is, i would say, over maybe a generation or more, going to fill in what has been missing in russia as a european member, and that is rule of law and civic government. >> i would just add this. i think it's unfortunate that we are confronting this very complex crisis, which i have no doubt the president, secretary of state, secretary of defense, understand well. it's unfortunate that it is compounded by the simultaneous presidential political process. that affects everything in the very, i think, complicating fashion. that makes clearcut response and

a highly focused response much more difficult for us to mount. so i think that is a timing problem that really is a negative complication in all of this. >> question right up here. >> flannigan from csi. dr. bries any ski you talked about the post-american withdrawal from afghan. i wonder how you assess the interests on the these countries, turkey, rich, and iran, in central asia and the caucuses and contrast their ability to -- and trouble in those regions particularly given the shifts we see. >> russia, turkey and -- >> and iran. >> and would you do that in two minutes? >> yeah. well, i would put it this way.

as long as the situation is not explosive, the interests -- are not incompatible entirely. there's a kind of event between turks turks turks and the russians and certain to some extent between the russians and iranians, not necessarily liked by all of them. i think the russians don't like georgia and are minded towards us. but if the situation deteriorates and the conflict becomes explosive, i think the antiballistic interests of the states will surface, and this is why certain things would happen in the caucuses that -- in which there are some indications of islamic extremeism gets

stronger, and i think conflicts between them could become even sharper, further contributing to the negative consequences of an eruption. this is why the stakes are so large and this is why i do deplore the kind of limited sloganeering taking place in the region, and why i don't sense sufficient serious strategic analysis of the potential for realistic negative turn of events in this region and our political approach to these issues. >> let me add one thing. one thing we have put book -- back in i our mind is the historic relationship between russia and iran. during world war ii, russia occupied the northern half of

iran. we used iran as a major conduit for military assistance to russia in world war ii. after the war, iran was probably our first crisis with russia, where iran wanted to -- excuse me -- russia wanted to put a satellite regime in iran, and he said, no, absolutely, no. and instead the shah moved in so there's a lot of history here we forget about completely. >> that's a good point. we must not forget a huge slice of the very land is in turkey. excuse me -- is in iran, and a large number of iranians are -- but we're living in an age of

nationalism, and nationalism for use of state identities that is sometimes in conflict. the potential here of this problem, should not be underestimated. >> right there. >> my name is -- i'm a student at john hopkins university and i want to ask if you can speak a little more about turkey's strategic stand with iran and the iran nuclear program. >> i didn't hear all that. >> the question had to do with turkey's position toward the iranian nuclear program. >> what do you think turkey is trying to do as it engages with iran? how large a piece of its

strategy is dealing with the proliferation challenge? what are its goals when it comes to prolivation in iran? >> i don't really know. turkey has not pronounced itself on the iranian nuclear program. i think turkey and iran have a sort of a miennuet about -- turkey is dependent for energy resources, among others. i think -- here are the two pillars of the region, if you include russia, but for centuries the iranian empire, the aliman empire and the russian empire, and these sort

of relationships go back and are intuitive in people's minds and attitudes and the way they think about these. i -- my guess would be that turks are not so concerned about the iranian program as we are, but i think one of the consequences, if iran proceeds and develops a nuclear weapons program, would almost certainly be that turkey would follow suit. so, that would be my answer to that question. >> i would just add this. we do have some indications of what the turkish attitude is toward the iranian nuclear problem, because the turks and the brazilians team up with a would-be solution to the problem, and they negotiated it on the basis, initially, of not

instructions but the right from us what they are to think and they came up with a solution, and we changed our minds on the subject and decided that wasn't good enough. it involved essentially systematic effort to put iran within the npt box, no more, no less. >> thank you. mentioned the possibility of its new russian, georgia world on some circumstances. how serious was threat? >> i'm sorry. how serious -- >> the threat -- of a russian georgian wore.

>> without some sort of conflict erupting it's not high but if there is a conflict that escalates, that possibility rises. >> sir? >> thank you. i'm with the american bar association on law and non security. what is sort of conspicuously absent from the remarks, as always very thoughtful, other than the mention by dr. brzezinski -- are there regional organizations are they not going to play a role as you see in the relationship between the power negotiations on avoiding and managing conflict in the region? >> well, i would say that it

depends a great deal on how powerful the forces that are colliding in some sort of a conflict. if they are of secondary or tertiary importance, i think regional or international organizations can be quite influential, and i think the best example of that pertains to several instances in which international regional organizations are playing a constructive pacifying role in africa. what we're discussing today involves powers with more regional scope of influence or potential destructiveness, and that means in turn that the sort of resolution of these problems not only come from the major powers -- and this is why it is so important that we and the others work with us -- have some

sort of shared strategy for coping with the problems we have been discussing today, because i don't think we can impose a solution, and i'm not sure we even have the right approach towards the problem. others, like the chinese, have the right solutions, but from more distance and less engagement. so they can't resolve the problem, either. but if we can contrive a process in which the five-plus-pun in negotiating with iran, and we talking to the turks and the saudis regarding syria and engaging the russians and the chinese in the background of that, perhaps we can cope, but unless we do that very systematically, with a larger concept in mind, i think the situation there will slide out of control, and then secondary participants in the problem will set the pace.

iran gets attacked. not by us but the consequences are felt by us. the situation in syria deteriorates, and someone overreacts. that gets out of control, too. and this is why a really serious approach based precisely on the so-called five-plus-one, has to be pursued but with a sense of collective responsibility, and not only one country, perhaps just our own, interests being upper most in mind, particularly the time when our policy is bound to be influenced by the presidential race, which gives them the particular short, term -- >> do you think we need more international organizations? >> i don't think we need more but we ought to push much harder

to make them more viable. we live in a much more interconnected world now. but the international organizations are not resilient. the u.n. is the best we have, but it needs a lot of help and needs restructuring and needs the efforts of the united states, and i think there we could get russian support and chinese report. the african union, for example, played a useful role in -- fur and so -- role in darfur, but our support for them has gone away. the arab league, and the gcc played a key role in the success of the libyan operation. those are things we should build on. to use regional organizations

for the kinds of things that aid and abet what we're trying to do but they have the expertise and the local feel that we don't have. so i believe that's a good question, and we need much more efforts in that direction. >> my last job was the american ambassador to denmark. turkey, the largest muslim country with -- that's secular, but has shown some tendencies to move away from that, do you see that being a concern and the influence of egypt -- could egypt become -- i mean, turkey is such a good role model in that area -- do you see that changing? >> well, i am aware of the

shortcomings of egypt. there are political trials involving the military, which may be justified. i do not know. but there has been a history of mill slobodan milosevic -- -- military coups and they all reflect certain inadequacy on the democratic political process. having said this, i think an overall assessment of turkish secularize yeah, dem breakization, and the persistence of the turks is impressive. so on the whole the -- it

behoffs the west to encourage it so i deplore the europeans against turkish participation in the eu, but we can be a supplement, if the welcome in the larger concept that really that embraces them and embraces russia eventually as well, and i would give the turks who want to play a local role but who live in a very dangerous neighborhood, greater sense of security and participation in something larger than themselves. i think that is the kind of policy that would in effect, i think, reinforce a constructive turkish roll in the region. that's the challenge we have. the fact that president obama and 'turkish president have a good relationship is a major

asset and -- but we're now being tested in this regional contest, and a great deal hangs on how we conduct ourselves over the next self months, literally. a conflict that could erupt and become very large, but the time frame which will determine whether the match is being set, whether the fire is being ignited or not, it is relatively short, term so very important to watch carfully what is being done and how to conduct ourselves and how to avoid the danger we will be, for a variety of domestic reasons, abdicating our global responsibility in the short run with much less consequences in the long run. >> i think there are questions about the direction turkey is heading. it is probably slightly less

than it was in ten years ago, less secular. but it's ironic, because ten years ago, turkey undertook a series of deep economic and political reforms, and in response significantly to the attempts to get into the european union, which zbieg discussed before, the consequences is that the central and eastern part of turkey is now a part of turkey in real sense that it wasn't before. turkey used to be istanbul primarily, western oriented secular. now turkey is more representative of the whole of turkey, and that is a less secular move. so you can say that is a natural

evolution from the harsh secularism to break the power of the ottoman, or you can say it's the new islamist movement. i don't think we know but as zbieg says, it's up to us to encourage the evolution of turkey in a way which is natural for them, and the harshness of the arab-turk reforms maybe don't need to continue so long, because they've been successful. now it's tone 90 years, as zbieg says, for turkey to evolve from the ottoman empire to a modern secular democratic state, but they've done it, and i think we should be relaxed about the things we see in turkey.

they're all perfect, but i imagine the turks are not all relaxed about what they sigh in the united states, either. >> we just have a few more minutes, as a closing thought, you both talked about the importance of a more modest u.s. foreign poll circumstance less demanding, more oriented toward international institutions. politically you talk about the evolution turkey has been through. plate clay, -- politically, hoy how do you get the united states to have politicians support the kind of policies, have the republic support the policies you advocate. >> you say more modest. it should not be more modest. it should be more strategic, more visionary, more comprehensive. that is to say we're living in a world in which turmoil is becoming more pervasive.

we're living in a world where global cooperation is necessary. so and you have larger units cooperating together so that spills into the world at large. global problems are not going to -- are going to be solved when different entities of the world can cooperate and that's why our policy has to be one in which we create a more stable indian the far east, not injecting ourselfs into the problems of the far east, particularly on the mainland, but by trying to balance and manipulate the they the british did european politics for a century, but both entanglement and promidnight james-chinese reconciliation, mediating the indian-chinese rivalry, but not becoming a collaborator and not

demonizing china, because china and we face an unprecedented challenge, mainly, can two major powers coexist without antagonism, which has been the predominant historical experience. we both realize we suffer because of the conflict but we tend to demonize the other, and in europe, since the other half of eurasian, my view is that turkey and russia in a larger eurasian framework in which we work together to resolve the problems of that region, but engage also the asia provinces affected bit. so dealing with the problems we deal with -- of the future, our central priority is to work with other instability are not --

without thinking of the larger consequences of the use of force. the use of force should not be something that is left to do. wilful decisions of individual states. but it should be something that takes place only in concert with powers that share an interest in suppressing the degree of stability and enhancing cooperation with each other. >> can it be solved politically? >> at the end of the cold war, the first reaction of the united states was one of relief. no more problems. just relax. let the world go. then -- >> i almost didn't have a job, you know, because of that. >> that's right. then came 9/11, and we thought, well, we're the only superpower. we'll make the world and if you're not with us, you're

against us, and it was a unilateral rush to do a lot of things which didn't work out too well. but i think the united states remains the only country who has the ability to mobilize the world on behalf of the kinds of things zbieg just described. not to direct it. not to run it. but to get together the kinds of policies, the kinds of things that people can resonate to around the world. that's a tough role, but no one else can do it. the europeans eventually may be able to do it, but certainly not now. the chinese can't do it. the russians can't do it. we're the only ones that can but it will take a farsightedness and it will take the best

instincts of the american people rather then the worst ones, which seem to be prominent at the most. >> we're ending on an optimistic note. thank you for coming. thank you for participating. [applause] >> we have ten minutes, 12 minutes. time for a break and get a coup -- cup of coffee and then we'd start with the second session. thank you. [applause] [inaudible conversations]

april 15, 1912, 1500 perished on the ship called unsinkable. >> once the lookout bells were sounded. sighted an iceberg ahead. the struck the bells three times, ding, ding, ding, which is a warning saying that there's some object ahead. doesn't mean dead ahead. then the called the officer of the bridge to tell them what they saw, and when the phone wag finally answered, the entire conversation was, what do you see? and the response was, iceberg right ahead, and the response from the officer was, thank you.

>> the truth and myths of that night. part of american history tv on c-span 3. >> i walk out after the iowa caucus victory and said, game on. i know a lot of folks are going to write, maybe even at the white house game over, but this game is long, long way from over. we're going to continue to go out there and identifying to make sure we defeat president barack obama, that we win the house back, and that we take the united states senate and we stand for the values that make us americans, that make us the greatest country in the history of the world, that shining city on thehill to be a beacon for everybody for freedom around the world. >> with that announcement, rick santorum ended his presidential bid, process he began in 2009. follow the steps he took to the

white house on line at the c-span video library. with every c-span program since 1987. >> as husband, fathers and mothers of working women, i believe we all recognize the gross inequity in discrimination and pay-based gender. >> what is gender discrimination? >> the fight between the -- >> some examples might be the difference of pay between men and women and the did rates of promotion. >> it's important we equalize the disparities especially when there's so many women working. >> the equal protection clause of the 14th amendment states no citizen bill we restricted from due process of the law.

senator -- are working on passing the work force investment act. it helps unemployed women find jobs. perhaps there will be more federal legislation regarding gender discrimination. >> gender discrimination was struck down -- >> congress has put two laws on the book to combat such description. title 7 of the civil rights act of 1964 and the equal pay act of 1963. >> all though it is uncertain, in future legislation regarding gender discrimination will be effective in the future, some people find it comforting to

have -- even though congress has put many laws into action against gender discrimination, the debate is now on whether or not it's part of the 14th 14th amendment protects women from discrimination. >> supreme court justice antonin scalia does not believe women are protected by the constitution. >> scalia shares business viewpoint during an interview with the magazine "california lawyer." he quotes, certainly if the constitution does not require discrimination on the basis of sex, the only question is whether it prohibits it. it doesn't. nobody ever thought that's what meant. nobody ever vote for it. >> i want to be protected by the constitution because when i have to apply for a job or college, i don't want to be discriminated against because of my gender. >> there are questions whether women are protected by the constitution.

>> equal protection of the laws saying that every man and woman should be equally protected. >> there are over 20,000 gender discrimination cases filed each year. >> a few famous cases are the lawsuit focused on pay discrimination. >> the wal-mart lawsuit started in 2001 when bet duke filed a claim of discrimination. >> one thing in general. >> gender would be the gap in pay that men earn -- money that men make in relation to the money that women make for the same work. >> the bureau of labor statistics itself says factors explaining earning differences.

studies show if you factor no observable choices, such as parttime work, seniority, and occupational choice, the pay gal stand between 5 to 7%. >> how much is the average fulltime and parttime work make the average man? >> women still earned only 77 cents for every dollar earned by a man. >> in 2010, the weekly median earnings for full-time salary women was $669. however, the weekly median earnings for men totaled $821, making the women's age an proximate 81% of the men. >> what is the effect of the pay gap? >> i think that often times womens are in a job that doesn't pay as well as a revenue generating position. >> sheryl barts, irene

rosenthal, and -- they the ceo0s of yahoo. >> only 2% of the fortunate 500 ceos are women. not 50 but 2. there's only ten of them that are in the senior executive ceo level of a fortunate 5. there's got to be some barriers somewhere. i debris, though, it's not nefarious ceos are board of directors are certainly executives keeping women down. i believe a lot of -- some of stereo type but we as women are not putting ourselves in the positions we need to be in, in order to move into those levels. >> however, while the average earnings over men still lag behind those of men, in 2009, female ceos received raise 30% and male ceos 15%.

>> what has happened over time is the ability of government to make sure that justice is done. i'm proud to have supported the proposals that allow women fair day's pay for a fair day's work. >> which ail affect both women and men. >> there are still barriers that affect men and women. one barriers is the, quote, up clot, glass sealing. that's a metaphorical term to describe the up seen barrier that prevents women from reaching the top of the corporate ladder and can be used to describe barriers for women at all. >> seems to be a thing of the past, some people people believe it still exists today. >> findings you are receiving today reveal that the glass ceiling exists. >> however, there are still contrasting viewpoints on the glass ceiling. >> but what i have found is that it truly was just a met afor and

there's no glass sealing. you look before you and you see a ceiling but it's not made of glass. so there's not a glad ceiling in reality. >> glass ceiling is not affecting women. the real glass ceiling is the choices men and women are socialized to make. >> the glass ceiling is just considered as the term, met afor. there are barriers for people of different genders? >> sure there are. for white men there are barriers to success. >> if there are existing barriers today how can they be prevented some future generations can enjoy equity? no matter what, one thing is for sure, no state shall make or enforce any law which shall abridge the privileges or traditions of the united states. nor shall any state deprive any person of life, liberty, or

property, without due process of the law. nor deny to any person within its jurisdiction equal protections of the law. >> go to student cam.org watch all the winning videos and continue the discussion about the documentary on facebook and twitter pages. >> next more from a recent bookings instance constitution conference looking at the u.s. housing market. representatives discuss the potential impact of a mortgage principal program. this is 40 minutes. [inaudible] [inaudible conversations] >> i am very happy to introduce panel of experts to dig deeper

on this. i will gave short biofrom my left to my right. on the far left we have mark fleming, a chief economist for core logic. he leads the risks and economics tome. next to mark is paul, the executive director and head of mortgage credit research securities international, and previous lay senior mortgage credit strategist at goldman sachs. ...

you can take it away from there. >> i need to apologize. my colleagues are the source of 11,000,023% $700 billion problem that is encircling us here. the real issue of this concept of principal forbearance and forbearance focuses on that $700 billion number and what do we need to do about it? and very eloquently describe these issues. it is not really a problem of $700 billion. folks are delinquent somewhere between when we looked at notices of a default of $750,000 of the $11 million. when you are talking about delinquencies it is a few

million so significantly less. we are not talking $700 billion but a couple hundred billion dollars of those who are delinquent and the truth is the vast majority of these individuals do continue to pay their mortgages. also this accountability and willingness to pay. with looked at this analysis carefully to understand the willingness component and that is the key. how do we in sent individuals to continue to pay on their mortgages. negative equity is not going away anytime soon. someone mentioned nevada has a problem five years out. negative equity is not going away and las vegas in five years or ten years. we studied the concept a couple years ago, view assumed house price forecasts. let me be the first to say what house prices do in the next ten years. we are pounding a question on that and reverting and getting into 3% growth a few years from

now. many of these markets that are deeply underwater even ten years from now the average underwater borrower will be under water. this is a problem not just about dealing with those who are struggling and delinquent but negative equity is a problem for a quarter of all homeowners out there. what happens five or six or eight years from now when the borrower to has been paying needs to move for a job or something? it has implications that are hard to measure. i don't think any of us have a handle on the impact of mobility and the influence of creating stickiness or high unemployment rates in the labour market. is having an impact on the mortgage markets themselves. we see such a low volume of purchases and a lot of people can sell their house to buy another one. the market is much lower. it does get back to this concept of willingness.

we find willingness is an important factor. much of the research does show it makes a difference. for that research was done on a paradigm that is different from today. we are in very uncharted territory at the moment in terms of how people behave but we conceptually get the idea that someone so deeply underwater has less willingness that is where concept of shared appreciation and all of that comes into play. the point is it is a big problem. the delinquency problem we are trying to address and making great strides. we publish statistics on completed foreclosures and saying foreclosures are down. we ran 60,000 foreclosures in february this month and that is the run rate similar to last february but a run rate of annual looking at 900,000 foreclosures in the course of the year down from 1.1 two years ago. why we not foreclosing on more people? there are a lot of people out

there in the shadow inventory and why aren't these people being processed through foreclosure? when we look at foreclosure and liquidation which could be anything. could be a foreclosure or deed in lieu or short sale modification. many of these have been put in the process of foreclosure by servicer. the relative share of liquidation is rising. they have been trending upward for a number of months. we are doing less foreclosure and more foreclosure liquidations in the form of all these things we are talking about. things are getting better slowly but such a large mountain to climb that this will take a long time. we should look at addressing the concept and willingness of those who are in delinquency and willingness for those who are current and not in sending them to go delinquent. we don't want that to happen and in the long term what are we going to do about those who behave as we went and paid those

mortgages but 12 years from now are still under water? >> next up is paul on the historical performance of loans and principal modification and give some investors feedback on various principle modification programs and proposals and a few slides to draw your attention to as well. >> i am going to quickly address the data we have seen in the non agency market where i focus the performance of various drivers of modification performance. first of all in terms of historical performance review attendees -- the top part of the slide on the screen and take a look at the performance of principle mods versus rage mod. do they perform better? the issue with this approach is we only have 12 to 24 months of different data. modification programs picked up recently. the statistics we show,

twelvemonth default rate in some prime on the left and primacy on the right or rate mod's in red and principal in gray and you see principal modifications performed better. the difference is much bigger because it tends to be a greater share of strategic default but in the sub prime sector where borrowers for affordable reason there's a pickup in performance or performance borrowers with the principle -- principal modification. these principal modifications the majority of principal modifications are forbearance rather than forgiveness and it is impossible to differentiate the performance of forgiveness versus forbearance other than tell they are better. anecdotally in conversations with various mortgage servicers and looking at specific deals that report this information we do see a modest pickup in performance of loans forgiveness versus forbearance. it is not minimal but there definitely is a noticeable difference in performance over

the next 12 months. there are other factors that drive recidivism rate for borrowers in addition to principal modification. as i was saying before the timing of when the modification takes place also makes a huge difference so if the bar where did not make a difference for two years or more there used to making zero payment so even if you cut 90% of their balance they have to pay more than zero. the success rates are much greater regardless what kind of modification is offered to the borrower. the payment cut is a big driver of performance and cuts greater percentage of the payment and borrower is perform better. we have a lot at the bottom of the slide to show two of these dimensions. the balance reduction which is a different role and depth of payment cat and payment reduction in different columns. the point to make here is both of these matter quite a bit but

if you look at the right half of that charge borrowers have 30% payment reduction you'd see any additional reductions in principal balance through forbearance or forgiveness do not have a meaningful difference in helping the performance of borrower is. affordability is of much bigger deal for borrower is but when you cut the payment you perform similarly regardless of the amount of principal reduction. how do these borrower is performed over the long run? that is the key to the question for bondholders and taxpayers but we don't have specific data to tell whether this affordability issue will drive performance three five years down the road and whether these borrower is will refinance or move. if a borrower receives a principal mod and pay down principal it is easier to refinance in five years. that will decrease lifetime

losses. if the borrower has 121130 ltv who knows what their incentive will be. the other thing to point out is over the last year the market pay a lot more attention to rental growth. in a lot of cases we are hearing from servicers that the borrower's modified payment is less than the borrower would pay if they rent equivalent property. they did a study for sub prime borrower is looking at the average payment in different cities and comparing against average proxy's for rent in different cities and average we find modified some prime borrowers are paying 10% or 20% less than equivalent rent if they were to get kicked out of their homes and forced to rant and grants a growing 3% to 5% with greater disincentive for borrower is to default in some ways if they think about what they have to pay in rent after they get kicked out of their homes. this is another fact we are hearing from servicers or providing a greater disincentive

to default even with great modification. it is possible the rate modification allows them to lock in lower payment. i would say in conclusion just to sum this up we definitely see some cases where principal forgiveness would make more sense compared to a forbearance ma or rate mod but it is a small step forward. you have to target the borrowers earlier in the delinquency cycle and look at the borrower's underlying credit to make sure you're not cutting too much principal. we have not seen a huge pickup in moral hazard risk when different modification programs were rolled out. the principal -- principal reduction program and principal modification program but these modification programs were very specific and impossible for borrower is to tell what modification -- the very subject was servicer specific policy. as i was saying before this is not necessarily extrapolated to

be tse's modification programs where policies are more institutionalized. the same time we do see a number of principal modifications being in tp negative pump compared to not being not foreclosing on the borrower. thank you very much. i will turn to andrew to make the case for principal reduction and put it in historical context. >> be glad to. i brought one of these. and so director demarco talk about the fairness structure. the way it has developed borrowers have no control over their servicing rights. to control their mortgage. the way we pull out of the other modification efforts is heads you win tails you lose but no way of knowing when you go into a mortgage with the exception of at h a what will ultimately

serve as your note or the rules of the road are being consistent across the board. talking about fairness we have narrowed the broader conversation for the policy perspective, needs to get to the point of if i'm look like tony here with a little more hair and gained several inches of height, the difference between borrowers if he got lucky enough to end up in a note held on a bank portfolio, the bank basically has unlimited access to whatever decision they want to make to modify that note. if i end up in a note that is private label security and investor is willing to do principal reduction maybe i will get it. of participating in hamper our will get it and i have a participant -- i put my coin back in my pocket but effectively 31 flavors out there and the idea that from a pure

policy perspective that we will incentivize or disincentive buys borrower is to access or start strategically defaulting six years after house prices have peaked nationally overstates the likelihood that we will see significant changes in borrower behavior. rather than a categorical approach to the question of principal reduction versus forbearance i think the individual approach of flying through the analysis makes a lot of sense. the ntb, far more complicated than the average borrower can unwind given transparency in the process. there is strategic the fault -- is clear half a million borrowers may relative to the other waterfall test get access to some degree of reduction rather than forbearance as opposed interest-rate reduction. if we build the principal

reduction the way it does exist for other servicers focusing on behalf of thousands of investors the operational complexities again is overstated given there is transparency around h.a.m.p. in general. the model itself is not public but the fact is that going to the decisions are made known that there is enough that is proprietary in prospect of borrowers who have not been strategic or suddenly become a strategic because there is additional incentive component in a waterfall that is not optimizing anyway. it missed the point that there is a tool that is available. deegan the current analysis demarco provided shows there is benefit to the surprises should they do principal reduction in sir instances. not to have that on the table we

know that in fact private lenders and servicers are doing it for an increasing share in their business when it makes sense and so to say we do an analysis that is ntb -- n tv positive and make it less positive to give you a slightly less valuable to us alternative doesn't make a lot of sense from a conservative's perspective and the implications demarco was talking about the stability of the housing market the idea that you are dealing with underwater borrower is post modification as opposed to principal reduction where the borrower doesn't go back to the lender for approval for sale. the idea that you will basically stagnate the housing market in places like phoenix las vegas over the long term as opposed to allow them liquidity when you come back in and allow people to move in the mobility and allow the next generation of homeowners to buy. has broad implications over the long term. forbearance may have short-term

benefits that may outweigh forgiveness out right in your taking a long-term view of the stability of the housing market as a whole. willingness to pay certainly creeps in and thinking about what the markets might look like in five years is part of what any long-term strategy for the enterprises should be. i have been a supporter of principal reduction the last four years. it should come as a surprise. i am advocating for it but if the g s es are not willing to do it, there are investors buying these notes and full disclosure as a non-profit part of the consortium of other non profits working in illinois would fund, that is beginning to acquire notes on the open market and doing steep reductions because economically it makes sense with a lot of upside where these notes are trading and so g s es don't want to capture that value and folks would be happy to take that off of their hands.

but overall investors are starting to see the opportunity to buy these things at a discount and doing the reduction because the long-term performance of these notes with the principal forgiveness make a lot of sense marking properties to mark and in the historical concept something we did during the depression. as a matter of course, refinance borrower into loans 80% of current ltv and really had a read default rate of 1% and rented those properties out before selling so that is another historical nod to the work being done by gses today in the rental program but historically we have done this. has led to additional strategic defaults. there are ways to contain it by capping the start date so no new borrower is get in and you're dealing with delinquent borrowers. this is to see with your analysis shows if you do not the 5% roll rate but anyone who is

60 days delinquent as of january 1st of this year you are dealing with a finite pool rather than an infinite pull. those other questions i love to see as you make your full analysis available to the public. >> we will wrap up with tony on his opening comments and the problems of principal reduction. shared appreciation. >> the problem with being the last person on a panel is everyone has done via points. these points were exhaustive but having said that we will continue on anyway. i'm the one person in the room who was relieved to hear mr. demarco say we need more analysis of this. what i want to guard against and a host of you want to guard against is anecdotal economic policy. the fact the we hear tales. i have heard them all. this will die down salvage the housing market. principal reductions will end up helping out households which of course it would. the problem is we don't have

enough observations yet. mr. demarco touched on it. we talk about looking at the h.a.m.p. programs that you the ticket take a few years to see these things work. we have no idea what this looks like. we are guessing. what i am saying is this is a major shift in economic policy. keeping it fairly small. do we really want to go out on the harry edge based on a few anecdotal assumptions that this might work? i would argue no. we need more studying. let me also pause that something else. i agree with mr. demarco and forbearance which is dominated by will take a marginal over the zero. the point is it is not really just that comparison. there are other ways to get around this problem.

i meant to share appreciation mortgages which demarco deflated rapidly by began the of that. is the fence. i did a study of bank of scotland share appreciation mortgage programs over revers and the problem with those programs is the forecasts -- if you forecast 2% rise in housing prices they go up 20% or down 20% the game is over and everything turns on its back. there are problems with that. one reason they're hesitant to do that. there are other programs like bank of america's pilot program or mortgage to ranch where they are trying to let households that are in trouble on foreclosure actually transition to the rental market. the bank of america keeps assets on its books for two years and sells it out in the market but there are lots of approaches that are different from doing principal reduction. principal reductions rank last.

loan modifications, forbearance, programs like bank of america and freddie and fannie do those as well. principal reduction should be the absolute reduction of last resort. here is the other problem. pandora's box. we opened this up. mr. demarco will thankfully keeps the lid on it. suppose every time the stock market crashes and pension funds and retirees are in deep trouble the administration comes along and says stock market h.a.m.p. for bailout everyone who lost money in the stock market. what kind of behavior would that breed in the stock market do you think? i will take wild risks because i will get bailed out. even if this is constrained to fannie and freddie i can picture if they start doing it here and suddenly we will make all private lenders do the same thing or tribe. reduce principal even though we

have no evidence in the long run that it works but we will force companies the personal private entities to do this still. it is dangerous policy. even if it works, by the way. even if he thinks it works. we know each other as talking points quite well. even if it works it is a dangerous precedent. i ask you to carefully consider -- mr. demarco stated a number. it wasn't $7 trillion in household equity losses. it was $7.4 trillion. my last point is whatever we did to lose $7.4 trillion in equity and get into this disastrous mess we are in can we change whatever economic policies we had to push this down this cliff? thank you very much. >> thank you. i will sir with a few questions and open it up to you guys. i want to start with something that talk about with mr.

demarco. this gets into the size of the question. the change of behavior, the way to deal with that is based it on historical delinquency. if you were delinquent there will be an announcement. people who made their mortgage payment -- i get an implication they might be beyond help so we don't want to incentivize too much because there might be a payment from gone for nothing. i am wondering for all the panelists does that leave us with that many people? if you restrict the people, fannie and freddie mortgages. secondly they have to be delinquent as i say, as of yesterday which gets rid of 75% of those and they are not going

to help people who haven't paid in six months or in some cases 40% of them haven't paid in two years. how much of an effect does this have? >> they are the ones with the numbers. just structurally it still make a lot of sense. we need tools to solve this problem. borrower is run into problems for a host of reasons. for as many reasons as there are people we need as many solutions. to simply categorically say principal reduction will not be considered under any circumstance seems unnecessary. we are sufficiently sophisticated to be able to cross these solutions that take ntv tests into account and the value of principal reduction relative to forbearance, the end of the waterfall. if there are half a million gse

borrowers who might be helped in the aggregate on this at the end of the day will be 50,000 qualified for principal reduction than those 50,000 people who are better off because principal reduction is offered an alternative. you get a performing asset on the gse's books relative to default rates and all the things baked into the ntv model that everyone is looking for h.a.m.p. so to say everybody has to use their numbers but we are not going to also is somewhat problematic but it gets back to this basic notion of fairness. every other servicer has access to offer principal reduction where it makes sense. i want to use as much transparency on investor decisions and when servicers participate in h.a.m.p. of allowing them to use the principal reduction to the waterfall. you can require the same of gses without radically shifting behavior is in the marketplace.

>> i am looking for agreement. tell me if i am wrong. it seems neither of you would say there are no circumstances, there are circumstances principal reduction on an individual basis might be the right thing to do but can policy given the share of the market the gse has can it be nimble enough to distinguished that you pick the right ones, maybe 50,000 but not doing principal reduction for an enormous amount to change behavior to incentivize them. if it does change behavior it would be a lot less for some of them. can we eat quick policy easily enough? give me your critique. there might be someone we should have that option for if we could only target it well. >> it has come out previously fat there is a whole host of households that this will not work. people currently making payments on their mortgages and no reason

to write those down. people who are unemployed is difficult and competing programs that allow them to forebear payment. a little ledge where it might work. the problem is it is so small. 14 programs for modifications and those are just administration programs. it doesn't include bank programs or fannie and freddie programs. none of these have worked all that well. when we are saying this time it will work, no. >> i ask you to do more studies which mr. demarco said he was going to do. how big is the wedge and how effective? is government nimble? that's the honest. the federal government is as nimble as a slugger. they're well intended but move very slowly and i worry about

that. >> i would add that i think there is some growing consensus for all of this. there is a time and a place for all of these choices. principal reduction is one of many choices. there's also the ability to develop present value based tests that look at what of data and do things in objective fashion to begin to try to make those decisions. are the perfect? know. is there any such thing as a perfect model? i would like to find one if i could but it doesn't exist. it shouldn't be excluded. it should be used as one of many things. we are saying there are great benefits that have come out of this. in the old days was there such a thing as a net present value the servicer was running? there was one choice and one choice only and what was it? take it to foreclosure. we didn't do short sales or

consider rent back programs or significant amount of modification. it was a very simple world. the world is more complicated in response to what happened and that is a good thing going forward for the industry that will lead be better about addressing the best way to handle these things. i don't know there is a multiple set of policies that can solve such a big problem we have other than time. one of the best policies we have is time. the economy will get back on track. and comes will grow. what do house prices do when incomes grow? they grow too. these will aid themselves out and time has two unique benefits as a policy. first benefit it is free. the second benefit is you can't go wrong. right? these are two themes that hinder us in developing policy today. how much does it cost and what if we go wrong?

>> i will open up for questions. keep in mind this is extinct -- succinct. there's a microphone right there. >> i am an independent journalist and author of ten million foreclosures. no saving private ryan this time. dennis schnittker fully. there's a gentleman from the chinese embassy listening carefully as well. i hear microanalysis to try to solve a problem that is on several scales as difficult and deep as the great depression in terms of the loss in the gap and the number of potential for closures. what i don't hear is any thinking and i don't know -- i am asking for macro numbers sins we backed off addressing

unemployment. intervening in the mortgage market and putting people back to work. i tend to think that is where the answer is and the political economy doesn't allow us to get to anything-self healing and time won't work. >> comment on that? >> i'm would say we have done nothing on the macro level. the employment to population ratio have stalled at 58.4% and been that way since september of 2009. something needs to be done. the keynesian versus austrian. different strategies how to do this. the fed or federal reserve and ben bernanke has been very active in trying to help this problem out pushing interest rates to almost japanese levels

getting your zero and where liquidity -- nothing seems to be working. i caution you that the fed is throwing everything at the kitchen sink in this problem and nothing is firing of. i am not sure what other macro policies will do the same thing. >> somebody in the back over there? >> thanks for your comments. there seem to be some consensus that principal forgiveness should be at least one full in the toolbox. should this tool be subsidized? should be used more frequently than other tools? >> to the extent that we now have some analytics and we will disagree how good that bottling capacity in the current time point is. the numbers themselves will bear

out when it will make sense and when it wouldn't make sense. unfortunately h.a.m.p. is not an optimization model. it is a waterfall approach and you could decide to make principal reduction first and foremost. reduce principal and let it go. no one is advocating for that but after you reduce the interest rate and extend terms of what other options might you do with the residual amount of the value or size of the note with principal balance relative to the property you simply forebear or forgive. that is where the policy decision comes in but to say we will only forebear is shortsighted. from my perspective given the existing waterfall and existing operational comfort that exists with the h.a.m.p. process it should be fifth in line if you are for a or b. putting it after these other things that are less costly but

potentially as the effective or slightly underwater borrowers snakes sense. figure out where it fits in the process from a purely operational and ntv analysis. >> since we talked about error models and keynesian versus austrian economic approaches, welfare economics, we talk a lot about what these things cost and we paid for the fact that there are benefits out there. we get the idea that fewer people get foreclosed upon and those homes are not less vacant and that is good around the foreclosed property. in theory, subsidy should be equal to the benefit of society.

the same for any modification or disposition tool that prevent foreclosure from happening and should be welfare benefits. stimulating the economy is about saying we believe there is a benefit to doing this. the problem we land on is we often don't talk about or measure these benefits instead of including them in calculations because it is extremely difficult to know what they are. we want to talk about trying to get a better handle on measuring what the benefits of these programs are to the welfare economic framework. >> one final question. >> i want to ask how this may play out in this political season. for example there appear to be

republicans against any loan forgiveness. let the market work and probably against a lot of other programs and some democrats in favor of at least some democrats in favor of loan forgiveness. does anybody want to give a conjecture? >> the only thing i will say is related to my problem that i discussed before is the banner headline, the administration forces demarco to do principal reductions even if there are five of eleven million households. no one will read the second line in the story. the headline which they wouldn't do. >> alternative headlines? >> y -- [talking over each other] >> their editors write their headlines. the stories are right. you have to read a little bit of detail and that is the challenge in all of this we see from a variety of opinions.

housing is complicated as are the solutions. the differences -- he is on the far right and i am not quite as far right. >> i voted for carter. [laughter] >> the real issue is as you can see it is not that far apart. the number of folks we are talking about is not staggeringly large but to the extent there's opportunity to provide meaningful relief that was previously unavailable is worth getting it right most of the time even if we are going to make some mistakes. the debate is are the mistakes too great for too frequent for us to go down that path? the answer is no. >> i want to ask everyone to remain in their seats. director demarco, we want it to exit first but i want to thank

director demarco for speaking here and also for all the comments and thank my panelists for the conversation. thank you very much. [applause] [inaudible conversations] [inaudible conversations] >> this afternoon on c-span2 we are taking a look at some of the hearings of the house financial services committee over the past few months looking into the mf

global bankruptcy. in a moment you will hear testimony from the company's former chairman jon corzine and a panel of the company's chief risk officers and chief financial officers will testify. the company filed for chapter 11 bankruptcy protection on october 31st, 2011. the eighth largest bankruptcy in u.s. history. shortly thereafter jon corzine stepped down as head of the company. most of the questions surrounding the bankruptcy are about one$.2 billion in customer money that has gone missing. members of congress have asked company officials about that missing money in a number of hearings as you can see here. both the house and senate agriculture committees held hearings in december and the house financial services committee held three hearings so far. those are the ones we will look at today. we are about to look that some of jon corzine's testimony in front of the house financial services committee and joining us on the phone is hill mattingly. what did jon corzine tell the

committee about his role in the demise of mf global? >> jon corzine has been clear with lawmakers and the committee. in terms of customer funds which has been the focus of lawmakers he did not direct anybody to transfer customer funds. he had no role in the disappearance as far as he knew of customer funds. this has been his primary message. while the firm collapsed and he feels terrible about it anything that illegal happened primarily what happened to the $1.6 billion in funds he had nothing to do with. >> what about the politics of this? as a former senator do you think his treatment has been different than that of another c e o in the same situation? >> spoken to lawmakers and staff and they don't think that is the case. it is an interesting thing. not only is a former senator and former governor but an enormous fund raiser for democrats including president obama. what this hasn't turned into a legally big political affair of

people being the table and yelling at him. he differs affiliation for the money he has donated for things he has done in the past as a senator. the politics remain an important thing and helped him as he testified. he knows what to expect. he knows the process and the rooms but in terms of this turning into a big issue of favor being shown or having a harder time i don't think there has been evidence of that. >> as the former ceo could he face criminal charges and what could they be? >> certainly he could. what government officials are looking at right now is if they are able to prove that he deliberately intended to miss use customer fundss. currently there is no evidence of that but we noticed the big breakthrough a couple weeks ago according to an e-mail of a staffer he directly ordered a transfer of fundss. his people say that was just an order not to move customer funds but a general order. the person who could best answer

the question, edith o'brien pled the fifth. that is what people are focused on right now. if there is an answer to that it will shed light on what is going to happen going forward. >> we have been focusing on jon corzine's role as ceo of mf global when it collapsed last year. who are the other key players? >> lawmakers and investigators in the government's both focus on edith o'brien, treasurer in the chicago office. she is a dissenter of any of the major money transfers we have seen that one in particular seems to have involved customer funds. the congress has looked at the chief risk officers. one that they believe was pushed out by jon corzine and one who came in that was there when it fell apart and they brought in the general counsel. it has been an intensive process in terms of folks they have brought in from around the firm

and to the firm was dealing with. j. p. morgan which is one of the banks it was dealing with. cme, another firm they were dealing with. they have gone across the board and brought people forward. one thing they haven't done is figured out what happened to the money. it is still missing. >> phil mattingly is finance correspondent for bloomberg news. thanks for joining us. >> thanks for having me. >> here's some of jon corzine's testimony before the house financial services committee. this portion of the hearing is about a half hour. >> i will introduce our first panel. jon corzine leave personal former chief executive officer of mf global and bradley abelow. your bid statements will be made part of the record and we ask you to summarize testimony in five minute. with jon corzine, you are

recognized. >> before you do that i ask both of you to stand. i'm going to rescue to raise your right hand. do you solemnly swear or affirm the testimony you are about to give will be the truth, told truth and nothing but the truth? please be seated. without objection your written statement will be made part of the record and you are recognized for five minute. jon corzine, you are recognized. >> mr. chairman and distinguished members of the subcommittee, let me begin as i said in each of the congressional hearings. every day i think about the fact -- >> i am going to interrupt you. is your button on? >> it is. >> you may need to talk just a little -- >> i recognize my concerns about their anguish. are you hearing now, mr. chairman?

i recognize my concerns about the anguish of those provide no solace for their losses and hardship for those hurt or customers, employees or investors. the chief executive officer of mf global, i truly apologize to all those affected. as you know i have provided a written statement to the subcommittee and previously testified before the house and senate committees on agriculture. i am here to answer your questions as well. i wish to make a few additional points in light of my earlier testimony. first i have been repeatedly asked over the last week whether i direct or authorized improper use of customer funds. i tried to answer those questions to the best of my ability. once again let me be clear. i never gave any instruction to miss use customer funds. i never intended anyone at mf global to miss use customer funds and i don't believe anything i said could have been interpreted as an instruction to

misused customer funds. as i have repeatedly stated i was stunned on sunday night to learn that there was a problem with many hundreds of millions of dollars of customer funds. after i testified on tuesday mr. duffy suggested he recently learned he heard someone else say, may have been improperly loaned the mf global of joliet with terms of the operation. the source of the suggestion, let me be clear. the last few days at mf global were chaotic. i did not instruct anyone to lend customer funds to mf global or any of its affiliate's nor was i told that anyone had done so. third, mr. duffy's suggestions about j. p. morgan chase about which i testified i became aware of the situation on the morning

of friday, october 28th. at that time are was trying to sell billions of dollars in securities to j. p. morgan chase in order to reduce our balance sheet and generate liquidity. j. p. morgan chase hoping they would not engage in those transactions until overdrafts in london were cleaned up. i contacted the firm's back office in chicago and others and asked them to resolve this issue which i understood they did. later on friday j. p. morgan chase contacted me again and said they needed assurances that the transfer of funds did not violate cftc rules. since i had no knowledge of the issue i asked senior people in the back office and the legal department to become directly involved in responding to j. p. morgan chase's request. the back office in chicago explicitly confirmed the funds were transferred and ice understood j. p. morgan chase was satisfied sins they executed billions of dollars with mf

global. fourth, i obviously share many of the same questions you have about what went wrong at mf global regarding our controls on segregated accounts i did not have such concerns prior to sunday night. during my tenure with hundred -- hired many people. highly regarded back operations. and prominent outside auditors and attorneys to make sure mf global operated lawfully. we were subject to reviews, audits and inspections by internal and external auditors, consultants and regulated. to the best of my recollection none came to me with any major issues or concerns about the quality of our people, systems or procedures. finally before i respond to your questions i want to offer two apologies. i want to apologize to the

subcommittee in advance because i have not been able to review many relevant records. cannot be as helpful to the subcommittee as i would like to be. the second and frankly more important, i want to apologize to our customers or employees and investors, my pain and embarrassment do not blind me to the fact that they bear the brunt of the impact of the firm's bankruptcy. i look forward to your questions. >> thank you. mr abelow, you are recognized for five minute. >> thank you, mr. chairman and members of the subcommittee. the bankruptcy of mf global was a tragedy for our customers, employees and shareholders. for many of our customers including many of your constituents who have been unable to retrieve funds that are rightfully theirs it has imposed tremendous hardship. 2500 employees have lost or will soon lose their jobs through no fault of their own.

shareholders have seen the value of their investments reduced to almost nothing overnight. as president and chief operating officer of mf global holdings i am deeply sorry for the hardships they have all endorsed. i know nothing i say can ease their pain i hope that through my testimony today i can help this committee understand what happened at mf global and how we are attempting to unwind the company in a manner that provides maximum value for all parties. i joined mf global in september of 2010 as chief operating officer. i was given additional title of president in march of 2011 and served in that capacity through the bankruptcy filing of this october. after the filing the firm's board asked me to rain -- remain in my position to work with trustees and administrators to close the firm's operations which i have attempted to do over the last six weeks. from my perspective based on what i was able to observe at the time there were a number of factors that led to mf global's

demise. first appeared by mid october of this year the market had been increasingly concerned with the firm's exposure to european sovereign debt. second beginning in late october the ratings agencies rapidly and repeated the downgrade the firm's credit ratings. third the company reported disappointing earnings on oct. 25. the combination of those events increased concern about exposure to european sovereign debt. a series of ratings downgrades and disappointing earnings created an extremely negative perception in the market's resulting in a large number of the firm's trading and financing counterparts pulling away from mf global which dramatically reduced the firm adds liquidity. that reduction in liquidity, classic run on the bank to lead mf global to attempt to sell all or part of the firm to provide liquidity and protect the interests of our employees, shareholders, creditors and customers. when those efforts failed mf

global file for bankruptcy on october 31st. i know this committee is interested in finding out what amount of segregated client funds went missing in the final days, how it happened and where those funds are and what might eventually be returned to the firm's clients. i am deeply troubled by the fact that customer funds are missing and i can assure you that i share your interest and the public's interest in finding out what happened. at this time i do not know the answers to those questions. they are seeing investigated by the trustees who have taken over management of mf global and have control over its records and accounts and a host of regulatory and investigative agencies. i do not know what they have found the right to know all of the parties are working hard to find answers and i hope they're able to get to the bottom of the issue as soon as possible. since the company filed for bankruptcy i have focused every day on minimizing the effect on customers and employees. there's no way to turn back time

and undo all the damage caused by the collapse of mf global but in the last six weeks i have worked day and night to reduce costs and maximize remaining value in the business. because mf global was the global for with operations on exchanges sins of the country's their separate entities with separate systems and folks around the world. i worked to foster cooperation and communication among those entities. there are a number of parties now responsible for unwinding the firm's operations. it has been an enormous effort to coordinate with them to generate maximum possible recovery of assets. only small measure given the number of people who lost their jobs, doing whatever i can to help former employees find new employment. it is important to examine the issues that led to mf global's demise and the firm is attempted to be as open and transparent as possible. i hope i can provide some assistance to the committee today in its investigation. as i said there is no way to undo the damage that has been

done by mf global's to bankrupt the but it is my hope efforts such as this one to gather facts and provide a clear picture of what occurred will assist policymakers leaguers regulators and participants in the financial service industry in avoiding such tragic events in the future. i look forward to answering your questions. >> i think the gentleman and now go to question and answer period. jon corzine, you mentioned efforts to clarify some of your previous testimony, and this will be your third time testifying. we have been collecting a lot of information and talking to a lot of different people and i want to see if some of the fact will help you with your recollection. it appears in early morning hours of october 31st mf global's treasurer and cfo of

the global north american operations informed the cme that deficiency of customer accounts not in accounting but $700 million in customer segregated funds have been moved to the broker-dealer side of the business to meet the liquidity needs of the firm. were you aware of that transfer? >> i am aware of the phone conversation with regulators that i think you are speaking to, roughly 2:30 that morning of the 30 first. i am not aware we use the terms you used. i am where -- i am aware there were unreconciled imbalance in segregated funds. i thought the number was higher than the 700 also. >> in the same meeting was represented at $175 million loan

advance was made to mf global uk. were you aware of that loan? >> i am not aware of that conversation as a part of that meeting and it is possible for two things. first of all, we were operating very late in the day and after many days, i also say i stepped in and out of that on a regular basis of the to consult with counsel and also speak to the board. that may have been said. i don't have a recollection of that. >> two hours later, in a separate conference call, it was represented you knew about the loans from segregated accounts. this was the ceo of mf global's north american -- stated in a conference call that jon corzine

knows about the loan. >> mr. chairman, as i said very clearly in my opening remarks, i did not in any way know about the use of customer funds on any loan or transfer. >> you knew you were having liquidity problems. is that correct? >> we knew we were in a difficult position. >> did you say we got to fix this? we got to find the money? >> i am responding. you are quoting back to me something that i said at the time when the cfo of the global entity in for a group of us that we were both a party to that there was unreconciled

difference with our segregated accounts. >> one of the things that is perplexing is mr. jon corzine, you have been with goldman sachs, you have been governor and a senator, your recollection of these events or lack of recollection is puzzling to a lot of us because you had to know that things were not going well. and these positions were unraveling and all of a sudden you all of a sudden just find out that there is money missing from customer accounts. you are the ceo of the company. you are chairman of the board. how is it all of a sudden these people acted out of your instruction to make these transfers? >> we had policies, procedures and i believe quality personnel who had the responsibility to

make sure customer funds were protected. >> were these competent people? >> from every element room, the information that i had gained that to this point, i put that in my oral statement, there was no reason that i could think of no reason that i could think of that they weren't competent. i rely upon them. >> i am troubled by that. when you look over how the company got to this point basically you had a chief risk officer telling you that these trades could cause a liquidity process for this firm. and you were told repeatedly that and you disregarded that. that gentleman was replaced and the position doubled. when you talk to me about you had procedures in place to protect the interests of the company yet in many ways there

was no fire wall built in place for the transaction that you were actually the primary trader on. i have a hard time believing you were relying on a firewall when basically you were operating without a fire wall. >> mr. chairman, the issue with regard to trading positions was fully vented with cardboard of directors, with risk officers. ..

>> i think it's indicative of the corporate culture that is people were taking money and sending it around without your authorization, i mean you've got the chief financial officer, the treasure of the company, they don't know about money being transferred around? that's a little perplexing to me. >> mr. chairman, i know that we had policies, procedures, and people -- >> obviously they were not being followed, i mean, that's what we're all trying to figure out is if you had competent people in place, you had the top people fear saying that, you know, we took money out of customer accounts and we have people saying that you knew that they taken money out of -- >> first of all, as i sit in my opening statement, i don't know how to respond faster as i said in my opening statement, to somebody else that is unidentified, and i can't speak to. i do know that i never

authorized anyone to use customer funds, to make a loan or a transfer of funds. i never intended to, nor do i think i said anything that could've been construed to do that. >> i yield to the ranking member. and after ranking member's questions, we will recess for these votes. >> thank you, mr. chairman. mr. corzine, i'm going to take at you what you never gave instructions to miss use customer money, because again that we some else who makes that decision whether that is active or not but it will take you that you would. my concern is exactly how did you get to 40 to one leverage in the first place? whose money was it? >> as i think i have conveyed in my written testimony, that we were bringing down the leverage -- >> how did you get to 40 to one? >> first of all, that was the number we were at before a joint

mf global. and i think as you will see, e.g. look at the reporting on quarterly filings, we were closer to 31 or even sometimes in the '20s. >> i know where you were and i know you're coming down but you're still at 30 to one ratio when he left the firm as well. whose money was it like somebody had to loan this money to you. >> well, there are -- >> or to your predecessors. >> many different ways that a firm goes about financing itself. probably the most important element with regard to how those kind of leverage numbers can be produced is to repurchase agreements. >> in house repo for the most part, is that accurate? >> more of it was likely done with repurchase agreements from the broker-dealer side of the firm with clients, where proprietary positions that the firm had --

>> repost to maturity? >> not repost of maturity. repose of inventory position -- >> i guess i'm getting at as i understand not just, this is not just mf global, as i understand, under the rules of the capc, a week ago, two weeks ago, whatever it was, everybody talks about segregated funds. some of the customers money is locked away never to be touched the yet under the cftc rules for 10 years or eight and a half years, that's not true. for all intents and purposes as long as you went to a few steps and put a piece of paper on the books is that i promise i will pay you back, here's a piece of collateral that i claimed to be right, you actually could legally, under current -- not current, under recently passed rules, basically invade those funds of customers and not break any rules doing so. is that an unfair statement? >> it's not an unfair statement. >> that's what it wanted to kn

know. and you were not doing anything other than what anybody else was doing. >> rule 1.5 -- 125 set out by the cftc designates or identifies specific -- >> that's exactly what 125 said you could do. i'm not blaming you for the. the rules said you could do it. but by doing that, i guess the next question is okay, you do we repo, move custom money out, perfectly legally under then-current rules, and then as i understand you move that money to the uk. and the uk within put it on the street for additional repurchase. now again i'm kind of jumping around you because i'm trying to follow this as anybody else, and am not suggesting up to this point to anything wrong or illegal or against the rules was done. is that a fair way to put the? >> i would be speculating if i tried to say that money produced

by repo, legitimate 125 collateral, was moved to london. it could very well have just been a financing vehicle for the securities themselves. >> is my distinct the reason it would be moved to london, i want to be very clear i'm not suggesting you did anything different than anyone else, which i'll get to in a minute, atticus dr. lund because the rules in england are significantly different than here. you are allowed to take larger risk, allowed to do different things with a repo. >> to the best of my recollection, that is not what we were doing. >> it's not what you were doing, but let me ask another way than. to the best of your knowledge, were you doing anything differently than most people in your business were doing? >> congressman, that's a very broad question. we clearly had repost to maturity in our broker-dealer on

european sovereigns that seem to be different than some of the other firms. but the kind of repo financing, general repo financing, matchbooks are relatively common -- >> relatively common, bingo. hence the problem. and by the way, am i wrong to think that cftc for all intents and purposes just shut down his rhetoric common approach to its borrowing customers money? >> congressman, i believe they have narrowed the available assets speak so you can't use foreign debts and can't use and how? >> we are not able to use foreign debt before unless there were deposits of foreign currencies. >> one of the reason why the money would be moved offshore, because those roles were different. so that's i guess one can't get at as i said earlier, if he did anything wrong, the criminal investigation will find that. i won't.

i'm trying to find out, and my concern is the things that you were doing, by your own statement, nobody intend to misuse anything. again, i'm taking you at your word on the. to think you were doing were relatively common in industry. the 30 to one ratio is relatively common in the interest. the regulars didn't find a real serious problem. a little bit of a problem. talking more than 16 to $17 billion of exposure and the regulars told you to put up 200 million, a mere pittance. so you're doing at the time at least as i read it, pretty much what anybody else was doing but i guess my question which i know you will be able to answer, who else is doing this? how much is at stake with because if it happened to you and you did nothing wrong, then it could happen to anyone, tomorrow, and maybe up until this point they are not doing anything wrong. and that is the problem, to me. i'm less interested in one company, although you have customers who are serious or her, than a minute system.

and whether this is a systemic risk. if one company doesn't that mean that the systemic risk, but if everyone is doing it and the regulators allow it and the people who are enforcing those regulations think it's normal, the credit rating agencies think it's normal. accounts come up with rules and able to the loan basically booked as a sale, that opens up this whole thing to a massive mess. and by the way, the company that you're looking at to buy your company at the end, aren't they deeply involved in the same types of activities? >> sir, i could not respond to it. i don't know their balance sheet. >> so you're going to the cell or company to accompany you did know anything about? >> there would be a period of due diligence as it was an agreement if the were a standard merger agreement spent i think my time is expired. thank you, mr. corzine. >> jon corzine was ceo of mf global for just about a year and a half.

before that he served a term as governor of new jersey. in 2009 he lost his reelection bid to the state's current governor, chris christie. he was the senator from new jersey for one term. he left a post to run for governor in 2005, and he was ceo of the investment firm goldman sachs, for five years in the 1990s. both of the investigation into the mf global bankruptcy next as a panel of the companies chief risk officers and then chief financial officers testify before house financial services subcommittee. >> the pope as a very famous way of being determined, to be dead, and that's a cardinal level post. the pope handpicks this person and this person decides when the pope is dead. he hates them three times in the head with a silver hammer and

calls out his baptismal name three times, which is a carryover from the romans. the romans used that method of yelling your name at you three times. even today the pope isn't dead until he says he is dead. >> saturday night at 10 eastern. also this weekend on book tv, former pennsylvania senator arlen specter on the split between old guard members of his former party and those supported by the tea party. sunday at 8 p.m. booktv every weekend on c-span2. joining us is phil mattingly, finance correspondent with bloomberg news. look in the financial firm was mf global and what was jon corzine tyrol? >> mf global was a new york-based broker that dealt primarily in derivatives, and actually ended up filing for bankruptcy at the end of october. jon corzine was governor of new

jersey, democratic senator from new jersey, was plugged in as ceo in 2010 if there was a lot of fanfare and was leaving the firm. prior to his political career he had been the chief executive officer at goldman sachs, and was leading the firm at the time of its failure. >> what specifically caused the collapse of mf global? >> lawmakers and investors have a deep kind of one major problem, and that was the firm had a massive debt out on the european sovereign bond. so basically the eurozone, the countries that are in so much trouble right now, greece, spain, folks like that, company had over $6.3 billion bet on the bonds in europe. unfortunately, they ended up not being able to cover as the situation continued to worsen over there, and they felt short in october. >> will take a look at one of house financial services committee hearings on mf global. the house and senate held a number of hearings on the issue. broadly speaking, what were

members seeking to find out? >> the biggest thing that lawmakers have been focused on is there is according to the trusty a shortfall of about $1.6 billion in customer funds. this is pretty unheard of. most important i think from a lawmaker perspective many of these funds, mf global worked heavily in futures, money and accounts for farmers, ranchers, constituents and a lot of these lawmakers, especially in agricultural states. this has been the primary focus, almost the one and only focus for some of the kidneys. what happened to this money and where is it now. >> financial services committee, what's next for them? are they issuing a report? >> they are issuing a report. they hearings that were held in the summer of last year, which jon corzine testified that, were largely informational hearings. the committee has its investigations subcommittee, convinced that it commenced a full on investigation of the. they have held three hearings over the a couple weeks ago,

we're not sure there's no inherent schedule but we certainly are not done. >> the expectation is there'll be a full investigation report released sometime in the summer. >> how about outside of congress? are there other investigations underway? could there be both civil and criminal charges be? the federal government is looking into. the department of justice is looking into. the regulators, the securities and exchange commission and the commodities futures trading commission are both looking into this. one of the most interesting things we found out at the hearing that the financial services hearing is the department of justice has most of the senior executives, mf global, cooperate with acoustic have released anything yet, or if charges will be filed, but we do know that they're in the room and they're working actively on this investigation. >> phil mattingly is the correspondent for bloomberg news. thanks for the update. >> you're welcome. >> for now, looking at the mf global bankruptcy. in this next portion you hear from the former and current global risk officers your this

is about an hour and 45 minutes. >> now i will introduce our panel today, mr. michael roseman, former chief risk officer at mf global holdings limited, and mr. michael stockman, global chief risk officer, mf global holdings limited. gentlemen, before we proceed i would ask you to raise your right hand. [witnesses were sworn in] >> thank you. without objection, your written status will be made a part of the record you will be recognized for five minutes to summarize your testimony. mr. boozman? >> chairman neugebauer, ranking member capuano, and members of the subcommittee, my name is michael roseman and i was former chief risk officer of plymouth global group from august 2008 until janet 2011. thank you for the opportunity

testified today. i hope that my comments will help you continued to build on your knowledge of events that led to the collapse of mf glob global. >> mr. roseman, i would ask you to put a microphone although closer to you. >> is that good? regarding my background, i started my professional grid as an aerospace engineer after graduating from university of delaware. as an aerospace engineer. in 1994 i received an mba from the kenan flagler business school at the university of north carolina and pacific are in financial services. i first joined sanwa financial products with response with a risk analysis function. the following year i moved to the trading team and comanage the u.s. dollar otc option portfolio for a number years before returning to risk management as the global head of market risk. in 2001, i joined the bank of

montréal as the head of the u.s. risk oversight for all trading, underwriting and investment activities in the united states and with a mandate to strengthen the risk management activities and capabilities in the u.s. then in 2004, i joined new edge is a chief risk officer of the americas, again with a mandate to elevate risk management capabilities to fully support the growing brokerage business. in each of these experiences, i lead and coordinate significant efforts to implement new best practice policies, systems, analytics, and controls in support of the businesses and to bring full transparency to, and governance of, the risk across the organizations. in august 2008 i joined mf global as the chief risk officer reporting to the ceo responsibly for this department worldwide. i also had a mandate to elevate the risk management capabilities to support the strategic objective to address the risk management recommendations made

by two consulting firms that had been hired by the company. as a seer oh i provide leadership for and oversaw the leadership for the framework across all categories at risk. including sharing of the monthly enterprise risk committee. further, i was a number of executive management team and provide regular see our own reports. over the next two years i coordinate closely with executive management and the board to implement a new, comprehensive and enterprise risk manager framework, including establishment of new risk management committees, enterprise risk policies, and a board approved his appetite statement with delegations of authority across all categories of risk. among other things, i coordinate the efforts to enhance the risk system, and some new risk measures, strengthen the 24 hour global risk monitoring and implement comprehensive enterprisewide controls across the organization with a ceo, to

establish culture and sound risk management throughout the company. as a key part of my see your own responsibility, i refute mf global firmwide exposure involving risk. i resent these exposures in the context to executive management into the board. as cro i also presented the board limited requests from executive management along with the associated risk. regarding the sovereign depositions, mf global have both country level credit limits and specific sovereign limits in place to control the exposure of all activity in all countries, as was to control specific sovereign exposures. with respect to italy, spain, portugal, ireland and greece, there were sovereign limits in

place to support the european brokerage activity prior to mr. corzine joining mf global. these limits were well within the company's approved risk appetite, and i believe the positions of march 2010 or less than $500 million in total across these issuers. in june, july of 2010, i received requests to just be up in sovereign limits for business units. i review the positions and limits in detail with the business heads and with mr. corzine. i express my cautions on the request. outlined potential capital risk applied by the credit default swap market, along with continued political and financial uncertainty in the relevant country. while mr. corzine and i had different views on potential sovereign to default risk, we agreed upon a $1 billion total them across the named sovereigns. by mid-september, i recall that

the positions limits have increased to some 1.5, to $2 billion. during this time period i express my increased concerns with regard to the potential capital risk associate with the growing positions and begin to express caution on growing liquidity risks. additionally around this time the strategy significant increased to the repo-to-maturities rates being evaluated, given a profitability profitability of the transactions, and the importance of generating earnings. at this point, i indicated to mr. corzine that we would need to consult the board for improves -- sovereign limits as later to the board's approved risk appetite. as such, a decision was made to consult with the board to discuss the strategy, the risks and sovereign limits and subsequent thought sovereign limits were presented to come and approved by, the board. by late october, we're approaching some 3.5 to $4 billion. and i was asked to visit another

request to the court on behalf of executive management to increase the total sovereign limit to four points $5 billion. at this point, not only was i concerned with the capital risk, but given the size, i was now concerned with the liquidity risk relative to the risk appetite and taking into account the liquidity risks presented by other positions held by the company. i again discuss my concerns about the positions and the risk scenarios with mr. corzine and with others. however, the risk scenarios are presented were challenged as being impossible. at the end of 2010 board meeting, at the end of november 2010, board many, i presented the new request along with a detailed analysis of the potential liquidity risk stress scenarios. these singers include potential variation margin requirements from price changes of the securities, and as well as potential initial margin calls from the repo counterparties. these singers were presented at

both individual sovereign levels as well is at the core related double across all sovereign and all repo counterparts. they highlighted the significant capital risk given the sovereign default risk associated with the unresolved issues in europe. during this meeting, all the risks were debated, and in particular, liquidity singers were discussed and challenged by summons of the board as not being plausible. ultimately, the board approved the requests, condition on the limits being evaluated again in 2011. which is when i left the company. i'd be happy to answer the committee's questions. >> thank you. mr. stockton, you're recognized. >> thank you, sir. chairman rockefeller, ranking member capuano, and distinguished members of the subcommittee, thanks for the opportunity to make this brief statement. i am deeply saddened at a

bankruptcy of mf global and its impact on its customers, shareholders and employees. although i is only at the company for approximately nine months, i hope my testimony today will help the committee contain a clear picture of what happened at mf global during my tenure at the company. i have worked in the financial services industry for more than 25 years, a particular i serve as a risk officer at ubs for over a decade, eventually rising to the position of chief risk officer for the americas for that institution. since 2006 i've been a member of the advisory board of the dartmouth college were also served as a visiting scholar the fall of 2009. i begin interviewing for the position of chief risk officer at mf global in the fall of 2010. during the interview process i was informed that mf global is in the process of transitioning

its business model from a traditional commodities brokers to a full scale investment bank and that the company was seeking a new chief risk officer with expense, and skill set to assist in the transition. in or about january 2011, mf global offered me the position of chief risk officer, and i joined the company in that capacity, reporting directly to the chief operating officer. my responsibilities included, among other things, assessing market and credit risk for the company. i provided analyses about these risks to senior management and the board, or use this information in setting the company's business strategy. i was ably assisted in the performance of my duties by strong staff of approximately 60 dedicated employees, located in company offices around the world, including the u.s., europe and asia. although the chief risk officer did not have a responsibility for managing the company's

liquidity risk, my staff and i perform numerous analyses measuring the company's potential liquidity needs under various stress scenarios. my understanding is that my portfolio of responsibilities as seattle was largely the same as that of my predecessor, mr. roseman. there have been substantial discussion about mf global's participation and transaction involving european sovereign debt, known as repos to maturity. the company's european sovereign debt trading strategy was from in place when i joined the company in late january 2011. as mentioned by mr. roseman. at that time, the board had approved sovereign limit of 4.75 billion. after i joined mf global risk department, brady analyze the companies sovereign rtm positions. for the first of months of my tenure, based on analyses performed by my department, i

believe that the risk profile of socio- with the company softened that position was acceptable in light of the then prevailing market conditions. among the many metrics supporting this assessment where credit ratings, credit spreads, and probabilities of default, among other things. in addition, the risk department, under my direction, analyze potential liquidity needs associate with these trades under stress market conditions, and had received information from other departments that the company possessed adequate liquidity sources to address such potential needs. as the credit market deteriorated in the summer of 2011, i came to the view that it would be prudent for the company to mitigate the increased risks associate with its european sovereign debt trading positions, and to consider entering into hedging transactions to reduce the company's exposure. and july 2011, i initiated

several discussions with senior management to express this view and to explore such risk mitigation strategies. i also highlighted the increased default and liquidity risks associated with the sovereign rtm's in written and oral presentations to the board at the august 2011 board meeting. in my view, the board and senior management were highly sophisticated. the strategy was in place, they knew and understood how the rtm's work. they were well aware of the increased risks caused by weakening market conditions in the summer, as highlighted in my reports to the board. to the best of my recollection, following my presentation in august 2011 board meeting, the board and senior management made an informed business judgment to cease adding to the company's long position in european sovereign debt and to allow existing long positions to roll

off as the underlying securities reached maturity, thereby reducing the company's exposure over time. it's my understanding none of the sovereign debt securities underlying the rtm's has defaulted or been restructured, and al all of the securities and the rtm portfolio that reached maturity have been paid in full. i am, of course, aware and deeply saddened about numerous press reports of the more than $1 billion in customer funds that are missing and uncounted for. i have no personal knowledge of any missing funds or unreconciled customer accounts. while at mf global i did not have responsibility for treasury functions, such as funds transfers and the maintenance of segregated customer funds. like everyone else, i am truly hopeful that all the missing customer funds will be located and promptly returned to their rightful owners. that concludes my statement. i look forward to being as

hopeful as i can today. >> thank you. now we'll go to questions. mr. stockman, in a march 2011 memo to the board, you highlighted some of the market risks associate with the firms, and under the heading market risk you identify liquidity risks that are associate with potential haircuts from mf global's counterparties. one scenario i think that is in that report requires that if that scenario were to play out, the company would have to come up with about 761 million additional dollars. are you from her with this memo? >> yes, sir. >> and do you agree with the conclusions that you reached in that memo about the market risk and liquidity risk associated with the european rtm trade? >> yes, i think that was a fair

representation of some stressed market conditions that we should analyze. >> and then you then and i believe in october, then you produce a document which is i think we call break the glass seniors, and i think in this particular document you said that you don't forget scenario one and two, we're not in a different environment now, and so you outlined additional scenarios where additional liquidity requirements would be needed, based on some additional scenarios, is that correct? >> was that august the? >> no, this is i believe october. >> stress scenario analysis. down great mf global, potential impact of mf global. >> icy. the scenarios referred to in the march memo are specific to the sovereign risk, and the break

the glass scenario, albeit may have some similar numerology, i have not sure that we're talking apples and oranges just yet. spent let me just ask you quick. did you prepare this document, the october document? >> sir, i did not prepare the document. that was the work product of finance and treasury group. i had a senior member of my staff assist the preparation of that document, and while i was at the company i actually did not see a final outcome of the document or that you are referring to speak so they're doing a stress in your analysis and to the risk management officer, and you didn't see this document? >> i did not see the final outcome of the document while i was at the firm. >> so the stress scenarios that

you were familiar with were the ones that were done in august, is that correct? >> correct. >> and you had a different scenario in your august memo then you had in your march memo, is that correct? >> agreed. >> what was the difference? >> the difference in moving from the march scenario to the august scenarios were, as the market conditions had changed over time, my risk department and myself always tried to keep pace with updating the market conditions and stress scenarios, as the market conditions changed. and so -- >> mr. chairman, could you have them pull the mic just a little closer? >> i'm sorry. so the scenarios that you are referring to, scenarios one and

two in march were effectively updated to incorporate more recent market conditions, and the different numerology. but the basic point was those updated scenarios were to capture some of the more recent market volatility and so forth. >> did you have greater concern about the liquidity to market risk in august than you had in march? >> as a general matter, that's correct. >> did you express that to mr. corzine and to the board of? >> yes, sir. in a series of meetings as i became more concerned, in particular in july. >> in that scenario that you did in august, did you still feel like the company had the ability to meet the liquidity needs, should the scenarios play out? >> at the attachment i apologize but could you just ask the

question against? >> so scenario three and for that you did in august, you know, requires, use the additional liquidity requirements should the scenarios play out. were you able to validate if those seductive out that there was sufficient liquidity for the firm to sustain those scenarios of? >> i hear what you're asking, sure. eventually these various discussions about risk mitigation and in particular increased liquidity scenarios were discussed and debated at the board. so i would have to suggest, that suggests that was full information to senior management and board members. and with the understanding that the scenarios could play out and that liquidity, potential liquidity would be available. >> would be available. and -- >> to the best of my recollection. >> you just reported. you did not verify whether the

liquidity was available, is that not part of irresponsibility, or or was it part? >> the actual liquidity function is part of the cfo and treasury area with respect to sources of liquidity. as it relates to various discussions and information that i was disseminating in july. those people, those individuals responsible for ensuring that liquidity was available saw this information, they made an informed judgment. >> so i just want to go back here. in march, you said to the board you were concerned, and previously mr. rosen said he was concerned about these positions. in august, you become more concerned about these positions. and then in october, the company puts together a break the glass thing, much more aggressive

scenarios. and then on october 24 during an investor call, mr. corzine, seven days before bankruptcy, stated that mf global's rtm positions are relatively, have relatively little underlying principle risk come and the structure of these transactions themselves simply, essentially eliminates market and financing risk. do you agree with that statement? >> i apologize, could you just want a statement by me against? >> mr. corzine on october 24 said, again, a statement with, investor, said mf global's rtm positions have relatively little underlying principal risk and that the structure of these transactions themselves essentially eliminates market and financing risks. >> i had no reason to doubt mr. corzine's comments at that point. >> you wouldn't doubt it, is that your testimony?

and seven days later the company goes bankrupt? how do you justify that? >> well, sir, the downfall of mf global in those final weeks was a very complex issue, and contained the confluence of at least three challenging events. one, the negative earnings related to attacks -- tax-deferred right off. second, the downgrades that were happening at that point in time. third, the perception in the marketplace regarding the riskiness of the sovereign strategy. all seem to come together in a very short period of time, and

so that the outcome unfortunately was unpredictable, as we walked through the challenging period of time. >> i see my time is expired, and now, mr. capuano, recognized for five minutes. >> thank you, mr. chairman. mr. chairman, thank you and i think my colleagues that are here for a limey to run in an epic i apologize but i never know the market down the hall on a very important bill i will be in that all day. mr. rosen, i would ask you some questions based on your been dismal. i was going to ask them in the order that they appear. on page do you make a statement overtime stakeholders include the rating agencies et cetera, et cetera gain confidence in mf global's improvements. i've got the record of both s&p's and moody's rating of mf global and the only time that there was i guess you could

consider it an upgrade was friday july 18, 2008, when all he did was just take with a negative outlook. a cap the triple berating but only to a state with a negative outlook. that was before you took office at mf global it am i missing something? life in information that i -- am i missing information i should of? >> during a discussion with the rating agencies and myself and others and executive management, they did continue to express their interest speed but they didn't take action on rates. they said good things but then didn't take into account when it came to rating? >> then i may have misstated in my testimony. >> that's fair. i guess from your testimony, it certainly seems as though, presuming in june or july -- i'm sorry, may 2010 you agreed on a billion dollars nominal limit across the board. and yet by mid-september only a few months later, obvious he the people that ran the bases have

completely ignored that board approval, your agreement, and a blown through almost to the amount of $2 billion. and then later on, one month after that they doubled it again. there's no indication here that support taking action action in between that time so that those who is an agreement at a billion they ended up at 4 billion by october of 2010. i'm just -- am i reading this right? >> no, you are not, sir. >> okay. >> when the billion dollar limit was approved, that was taken under management delegation of authority risk from the board. so that approval did not have to go to the board of directors. subsequently, any other limit increases before the $2 billion was also taken internally and approved by myself and mr. corzine. they did not pose what i consider a material issue relative to risk appetite, per se. >> you are saying you and

mr. corzine were authorized and did, in fact, degree to go to $2 billion? >> up to 2 billion when it became -- >> what about the 4 billion but october 20? >> so when it got to some to burn, i don't member the exact number, then i indicated to mr. corzine he would have to approach the board of directors for approval for further increases. >> so he went to 4 billion without your agreement and without board approval? >> i believe at the time, i recall going to the board and discussing the strategy and the limits to get further increases, and there were a few periods in between my written statements where there were meetings with the board, executive committee, to approve the limits. >> so again, their investment is not that clinton did your telling me now at no time did the investment limits exceed what was agreed to by you and/or the board of?

>> that is my recollection, yes. >> fair enough. the state in my opinion is it's not that clear, because if they had, i guess during that time, did anybody know you are doing that? were you telling -- i guess the board did obvious. were you telling the general public works we telling your investors? were you telling the credit rating agencies? >> prior to that time, within the 2 billion number, in my opinion, because the risks were controlled, positions were controlled, maturity buckets and three-month, six-month, 12 month periods. they did not pose a material risk -- >> that's not what i asked. i asked were you telling the credit rating agencies? were you in forming your investors you had indeed hit that number? >> i am not aware of myself notifying, the answer to question secular, the rating agencies. and i'm not aware, it's possible, that others had notified them of those positions. but again, we had to keep

account the mature reality of the positions and the short date in the positions. >> so basically you think there was nothing wrong going on up until $4 billion when the board that approved of to what, 4.7 the five, if everything is currently? >> i with him a comfortable level the board risk appetite started getting exceeded around the approved risk appetite at the time, to clarify, that exceeded around $2 billion. that required to go back. >> so around 2 billion you and the board were both getting uncomfortable? >> its relative to the stated risk appetite that had been approved giving the prior strategies of the company. at that point, because the strategy was evolving, was escalated to board for additional, for approval, and other specific limits, control the risks. >> i missing something. i'm asking simple questions.

you're telling me the board approved up to $4 billion, and you're saying you and the board were getting uncomfortable with the $2 billion range? >> no. i specifically started becoming more uncomfortable at 2 billion, and i felt there was an excess of the approved, boards approved risk appetite statement at that point in time. >> did you tell anybody that? >> yesterday i presented to the board. >> did you tell the credit rating agencies that? >> at that point in time, that was, i don't think an issue to bring to the credit agencies until after discussions potentially with the board. well, they were rating you this entire time. they had to add a pretty good watch. they kept either affirming or downgrading you pretty much repeatedly from 2008. i've never seen this many credit ratings of a firm by two major credit rating agencies. so frequently. it seems like every couple of

months somebody was rating. >> you have to remember, keep in context to mf global's history. as you know, in february 2008, shortly after the ipo, the company suffered a week trading incident. >> i understand that but that's a separate item. i will give you the benefit of the doubt that you addressed the issue. that's why you are hired, okay. that was a problem, that was a minor problem you to care. i'm wondering going forward as you get credit rating agencies interface every couple of months, then we telling them that you are uncomfortable at the level they were at? >> first, sir, i didn't meet with the credit rating agencies regularly. >> so the credit rating agencies were rating with you without talking to the risks major? >> periodically i would, about every three-month, every month. but i was on the record basis maybe once or twice a year. >> when you talk, did you tell them you are uncomfortable? >> having said that, sir, up until that point in time i

firmly believe they have a strong transparency on the risk of the organization. >> so you never told him that we're over 2 billion, i'm starting to get a little nervous? >> i did not say that. >> that's what i was trying to get at. mr. rosemond, dashed the i'm sorry, mr. stockman. when you took office in january 2011 were you aware of your predecessors concerns of $2 billion limit? >> mr. roseman and i did not spend a lot of time together in the overlap, and as a general matter, we are in a large position but i was not specifically aware of concerns at that point on joining. >> so as he was leaving neither did he tell you know is any documentation that you came across during your period of time that indicated she, once they hit 2 billion my predecessor got a little nervous, maybe i should think

about this? >> i explored upon arrival a couple of board meeting minutes that covered the period, the best of my reduction, november-december, before i joined. and to try to find, to explore a little bit what i had undertaken before i joined. and in those minutes was no specific indication of concern but it certainly did highlight -- >> so you didn't find anything that basically said, a bell went off, when you can there were four and a half, give-and-take, billion, and it didn't get you nervous, you thought that was acceptable to? >> what i'm saying is a little differently. in those board memo minutes, there was an indication certainly that the risks were discussed and highlighted by mr. roseman, and, with the board.

and that gave me some confidence that there was a full understanding. >> i apologize but i'm way over my time but i appreciate the generosity of chairman. one last question and don't just jump to a. at the end you see of no personal knowledge of where the money is or what happened. you think that maybe this excessive risk and the pressure that might have caused the losses that were seen in these excessive risks might have maybe encourage some of the employees there to either banned or stretched or even possibly break rules? >> sir, i don't think so, and it would be very hard at this point on, and i hope i hope at some point do we really do understand the details of that situation. and in particular, as it relates to the sovereign risks, the analysis that when the last chapter does come through, i think we'll be able to see with a bit more clarity what in fact

the -- >> mr. chairman, thank you very much for your indulgence. >> i have one quick follow. mr. stockton, i want to go back to this break the glass report on october 13. it says this report was prepared by treasury finance and risk teams. that would be your team, is that great? >> correct. that's what he mentioned before, senior member of my team provided assistance on those scenarios. >> and so, this is a plan where these people think they are about to go under. i mean, this is a break the glass deal. you are the chief risk officer, and you're not a part of this plan? >> as i said, i had a senior officer doing some of the risk analysis, and as it relates to the production of that, that particular document, i was not part of the specific risk team that contributed to that.

and that treasury and finance area really drove the assessme assessment. so yes, i am, i had not seen the final outcome. >> but you are unaware that a document has been prepared. they were hidden in the bunker, didn't you agree with mr. corzine's statement on october 24 that everything was fine? having knowledge that senior management is working on a plan to go to the foxhole? >> to the best of my knowledge, the break the glass in her issued a contingency plan that would have been an intelligent thing to do, and a number different cases in particular for a company that was just above investment grade. so i think that, as i said, the break the glass scenario is something that was an intelligent contingency plan to be looking at. >> well, what prompted them to do that, why don't we put

together a break the glass stretch. there had to be something that caused them to think that, wouldn't you think, that they need to develop a plan like this? >> best of my recollection, it was a board request it again, i think to find out some detail as to what the request and how it was prepared would have to be really directed towards our finance and treasury gurus who really drove that. >> i appreciate the committee's indulgence but now i will yield to mr. fitzpatrick, vice-chairman of the the committee. >> thank you, mr. chairman. mr. stockton, you just indicated the break the glass land was a board request it was anybody within the organization that had any concerns communicating with the board concerns? >> i'm sorry, i didn't hear the question. >> you indicated generation of this document, break the glass around october board request. did that come from within the organization at all?

>> to the best of my understanding, it came from -- >> directly from the board. you indicated you didn't spend much time in the trance station -- transition with mr. rose and. do you think anytime? how much time did you spend? >> yes. michael and i spent an hour together, two, three, four weeks into my initial, when i first arrived. and michael was helpful in the transition as well with the series, including me on a series of e-mails that i vaguely remembered receiving, but i couldn't speak to exactly -- >> mr. roseman indicate his concern about the risk in excess of $2 billion of sovereign debt? >> we, as a general matter, during that brief discussion that we had for an hour, to the best of my recollection, certainly indicated it is an item of interest as it relates to the company. but i don't recall any specific

discussions. >> i want to go back to the october 13 break the glass scenario that you indicated in response to the chairman's question that you are not directly involve in this plan, is that correct? >> correct. >> you are the chief risk officer responsible for how many employees of the organization? >> on my team, approximately 60. >> sixty. your office is in the same building? >> yes. >> liquidity was a key concern of this plan, correct? >> is done i had an opportunity really look at it carefully was just a day ago when is provided to me. >> sir, the committee obtained, our committee obtained into most of us' october meeting on mf global. there's a discussion of mf

global's big european exposure, analysts attracted these notes also writes that mf global is scrambling for funding, and that it had lost its liquidity. now i'd like to take to october 24, a day right in the middle of when this break the glass plan was being drafted. and implemented, and just four days before s&p said that mf global was scrambling for funding. on the 24th, mf global's cfo wrote a memo stating among other things that he believed mf global's capital and liquidity quote has never been stronger, and that quote, mf global was in its strongest position ever as a public entity. can you reconcile those two statements for our committee? >> i can't. i don't know what context our cfo said that no doubt, so i couldn't, or to the best of my

recollection, is not part of the dialogs i couldn't really speak -- >> did you speak with mr. steen camp? do you speak with them around that time? >> not in the subject, no. >> given what he know about the liquidity challenges that mf global was facing on october 24, and which the break the glass plan have foreseen, how do you think that mr. steen camp could make this representation to the credit rating agency? >> again i would be speculating as to what context mr. steen camp was referring to. and it would be hard for me to give you a comment as to why and what the context was. for that particular note. >> were there in internal meetings between your treasury people, you risk people and finance people in the creation of this document?

>> there was. >> and were you involved in any of those meetings? >> very early on as the treasury and finance team was pulling a document together. and as i mentioned before, subsequent, excuse me, after that point in time, a senior member of my staff assisted in the creation of that document as it relates to some of the various stress scenarios. >> mr. stockton, 1.2 village in dollars of customer mine is missing. i have constituents who have lost a significant amount of money. your risk team is putting together what is essentially an armageddon plan for the organization and you want the committee to believe that you had no direct involvement in the creation of the plan, you never saw the plant until very recently? >> again, sir, i mentioned that

the contingency plan such as fat was certainly sensible, and that is, i am just giving you the stated truth of my involvement in it. >> thank the chairman. >> now recognize mr. miller for five minutes. >> mr. stockton, in response to mr. capuano squash and you said you only spent an hour with mr. roseman and the subject of concerns about sovereign depositions date. but you also knew that you were being hired from outside to replace a cro he was being asked to leave. did you have any conversations in your interviews about why mr. roseman was leaving, and if it had to do with this risk appetite? >> in those conversations, we were, it was a continual

meaning. we talk a little bit -- it was a congenial meeting. we talked about the concept of my being hired was really related to the company's stated goals of transitioning from a broker, futures commissions broker to a broker-dealer, and that my skill set was more, had more history and more in line with what the firm was trying to do. ..

but to the co0. did you have a discussion about that change in organization? >> did you have any questions about weather concerns that you might have about risk would make it to the board? >> cirque, reported directly to the ceo zero and had responsibilities to report from time to time on wrists matters. >> did you ask why you no longer

talking to the board? >> let me make sure i corrected. while i've reported directly to the coo, i also had obligations to the board to report on wrists and i let risks similar to my predecessor. so i had access to the board, if that is the -- >> published reports are that your role basically consisted of helping prepare power point presentation is for her jon corzine to make to the board. is that incorrect? >> that is incorrect. >> read a statement that mr. jon corzine made to investors shortly before the collapse that the repo to maturity presented no threat to capital of any consequence. a week before the collapse of the cfo told standard and poor's, s&p, that goal -- mf

global is in the strongest position ever and actually while moody's had downgraded mf global to junk status four days earlier at the time of the collapse, s&p still had mf global at investment grade. were you consulted in any way on the representations made by mr. jon corzine or by mr. scene can't? >> i was not. >> did you know those representations were being made? >> mr. jon corzine comments i believe for public. if i understood the "that you are referring to. the representation that you mentioned before, i was not involved or could not represent him on what the context was that he was -- >> did you pass along to anybody that you disagree with those representations that you thought there was still in fact an arrest? could you tell?

>> sir, as i mentioned, as far as the risk highlights and risk reporting goes, at the august board meeting there was quite a detailed representation of both verbal and a power point presented. is that this sort of example you are referring to? >> you have an auditor. price waterhouse coopers. today raise any concerns about the previous relationship? the change that you reported? did they raise any concerns? the processes that in the global had in place for proprietary trading in accounts segregation? was price waterhouse coopers, did they know about all this, the changes that were made, the

ending of the direct reporting to the board by the coo? >> i was not involved and the -- any direct relationships or discussions with price waterhouse. >> are you aware of any? did anyone tell you they talked to price waterhouse coopers or that price waterhouse coopers had raised any kind of concern or said it's okay with us? >> not to my understanding. >> you know of no discussion at all of any conversation, any communication with price waterhouse cooper tw see about the changes in the organization of mf global, the changes in reporting relationship between the coo and the board, or any changes or any thing regarding the processes for proprietary trading in the game series in?

>> to the best of my recollection i was not involved in those discussions. >> did you have a conversation at the water cooler, hear anything? was there robert? >> again, i was not responsible for the price waterhouse coopers relationship or -- >> i know that. did you hear about it? every organization is a rumor mill. were there no discussions within the organization? did you not hear from anybody about weather price waterhouse cooper was okay with all this? >> again, i come back to my original comments. to the best of my recollection i was not aware of specific conversations regarding the item you just mentioned. >> my time has expired. >> thank you. >> now go to mr. posey. recognized for five minutes.

>> at thank you very much, mr. chairman. it appears, just trying to put the pieces of the puzzle together as simply as possible, mr. rosen was the chief financial officer until he stopped telling jon corzine what he wanted to here. then mr. stockman was hired to tell jon corzine what he wanted to here. just saying that is clearly appear so far. i read an article sold out mf global investor protections trampled in private meetings between government regulators. i would like to begin by asking mr. stockman just a few questions about that meeting. do you know about the meeting with the sec j.p. morgan, goldman, and others? >> no, sir. i was not involved with those meetings. >> do you know about the

meetings? >> i was aware as a general matter, but not involved with those meetings. >> do you know the names of those who were there? >> i do not. >> how did you find out about the meeting? >> if it is the sec meetings that you are referring to, some of this was public and as a general matter, you know. >> rumor mill? >> i could not -- i don't recall exactly where, but as i said to my was not involved. >> do you know the names of anyone who was there under of jack >> under oath to the best of my knowledge, again, making sure i understand which means you're referring to, i was not aware.

>> okay. clearly the october 301st meeting, which you mentioned was with the sec. do you know the names of anyone who was at that meeting, robert, first and, second and, third and top defense? i want to know if you know anyone or about anyone who was at that meeting. >> i do not. >> did you find out after that meeting what transactions were made by mf global holdings? >> no, sir. >> you don't know what decisions came out of that meeting, what they decided to do, assets, how they decided to oppose the investors? you don't know any of that? you have not heard any of that anywhere? >> sir, if you are referring to

the final days of the company wind down, is that you're referring to? >> you are the risk manager. i'm just a congressman tried to put pieces together. you know more about this is your little finger than everyone appear on this board, and we are just right to give you just tell us about a little bit of a so that we might better protect the public and maybe for the first time in four years have some accountability for thieves that are pondering the public. it is important for you to be honest with us and tell us everything that you know about the situation in order to do that. your testimony, what you know about it, you didn't say this is all i know. you said this is all i care to say. this meeting is very, very critical, what went on at this meeting. i want to know everything the you know about that meeting, and i'm not going to stop asking questions about it on record under oath until the chairman makes me unless you start answering some of the.

>> i would not be able to answer to the -- answer the question in any differ way because i was not there were involved in that meeting. >> the last question i asked you was the result of what came out of the meeting. certainly you know what transpired after the meeting, don't you? there was a decision about selling some assets, who was going to get priority. tell me what you know about that subsequent to the meeting please >> subsequent to the media was not involved in the wind down of the company or in its decision to file for bankruptcy. i was not in the area so as beat when actual specific decisions were being made regarding which assets to sell and the wind down. >> you are saying you don't even know what decisions were made? >> i'm saying that i wasn't involved in the wind out of the

company during that time when assets and decisions were being made to reduce exposure. >> to be think is the best person to know what went on and a meeting? >> again, -- >> under rose. >> i know. >> not having been either appear to suspend or invitee to the meeting the you're referring to i think it would have been hard to figure out who the end of it attendees were. as u.s. before. >> this could have been any of them. for is that what's your selling me? >> no sir. i'm just simply saying that not having been invited to the meeting or participants of the then i would not know. >> and you have no clue as to

who would have been there? >> well, it would make sense that some senior management would have been there. >> some names may be. >> i mean, our senior management, again, it is hard for me to be very specific because, you know, this particular meeting, neither was i invited or a participant. >> listen. you were not a lowly clerk in that organization. you know darn good and well what's going on within that organization, and you know darn good will you can tell me who you think should have been at that meeting. i'm just asking you to be honest with this and do it. >> again, i just have to keep coming back. i could only imagine -- >> can you give me any ideas?

obviously you needed to be replaced by this guy. baby you have a little bit better knowledge of how the organization works. >> i think that i wasn't there, but can mr. stockman is defense it sounds like he was not at the meeting. after the fact i'm sure there was some direction that was given. he knows what actions were given up or otherwise. >> to do you think would have been in attendance? >> certainly if it were a very discerning meeting like you are suggesting a would suspect mr. jon corzine, i would expect mr. bradley abelow and maybe a few other members.

>> ms. waters -- >> thank you very much, mr. chairman. it is clear to me will was taking place at mf capital. and that they get this information has come out in a previous hearing. a one-man show. he was that chairman and ceo. he threatened the board. get in the way of his seven trading. he was glad when mr. grossman left. he hired his own people. he did his thing. and so i think there is no

question that mr. karzai and violated many of the rules of the game. in terms of being the chief and prolific that emerges of all this information. my real concern is what happened to the customer asset? a loss. stop them. what do you know about the decision that was made to utilize these customer funds despite the fact that they were supposed to be segregated and protected.

>> man, in my opening statement i noted that i have no specific knowledge of client funds or segregated funds. as far as my job duties, they were not involved with the treasury or at -- >> what non-specific dollars to you have? >> i have no specific or nonspecific knowledge. >> you know nothing about any decisions that were made to use these customer funds? you know nothing about that? >> that's correct. >> all rights. given everything that has happened what would you do differently? >> that is a terrific question we think that when the final chapter is written i believe

that the moment it is a little pulmonary to make specific decisions and recommendations. >> i didn't ask for recommendations. you were there risk officer. you had the responsibility for any least letting the board of directors are somebody about what was taking place. obviously you did not do it. what would you do differently today? i don't want to talk about any recommendations. i don't want to talk about any. i just simply want to know, the position that you are in now having been the rest of the cirque, everybody looking at you and wondering where you work. you were absent or not absent. what would you do differently? >> man, i think the absence comment, i want to challenge you on that a little bit which is to say that myself and my risk

management team, we did our job during this time. we highlighted, and last, assess risks made transparent and clear to both senior management and the board. the risks that we were running at the firm. >> you did you give this information to? >> senior management and board. and the -- informed and sophisticated business judgments were made based on my department's assessments. >> you may have said this already, excuse me. you may have said this already. in your report to the board, did you say that this company was being placed in a highly risky situation with the sovereign debt trading that mr. jon

corzine was involved in? >> in the august board report it was clearly highlighted -- excuse me, and both written and verbal presentation to the board and senior management as an example, the increased risk in the marketplace overall from the summer volatility. member to, widening credit spreads, number three, increasing probabilities of the fall, number four, lowering liquidity in the marketplace. importantly number five in particular, the increasing stress. >> in essence you felt you did your job. is that right? >> correct. >> and there is nothing you would have done differently. >> man, obviously when you say that what the benefit of 2020 hindsight there are things that we would have done differently knowing what we know now. >> my time is over. i yield back. >> thank the gentleman.

you're recognized for five minutes. >> thank you, mr. chairman. mr. stockman, i am over here on this side. again, looking at all of the questions you're hearing and getting, probably starting to get the understanding that mr. rosen at least saw some issues, brought them to the board. at the time the board was not happy with the decisions he was making. went on to hire someone else, and i was you. my question, who recruited you? how did you come to this position? >> i came to the position through a search firm and then went through an extensive interview process. >> okay. who ended up hiring you ultimately? mr. jon corzine? >> you mean effectively with the decision makers? >> yes,. >> i was hired in directly reported to mr. bradley abelow.

>> so mr. jon corzine had no influence in that decision? >> i'm sure as a matter of senior management when you recruit for a senior petition i sadly interview with mr. jon corzine, but there is an east is an interview process with those jon corzine and the board. >> you asked your opinion any time of the mf global appetite in taking a greater position in the european back to our team? >> the european back tart gm specifically to the best of my recollection did not come up specifically during the interview process which as a general matter would not be that unusual as it relates to proprietary positions for somebody who is not hired yet. >> to you believe in any way that mf global increased appetite during this discussion, and to the process would have been a prerequisite of you being hired or do you think that was totally not a position of their

decision? >> yes. i believe it was not a prerequisite. as i mentioned, not specifically discussed, and it was really about the interview and hiring process, really about my skill set and where the firm has his stated goals and where it was going. >> he said in your testimony you noticed after you were hired that there were some concerns noted in the board minutes that mr. rosen had addressed with the board, related to increased positions being taken in european back to our team? what to do after that? ignore that to look into it? you are the rest officer. what did you do with that information. >> i began soon after i arrived at the firm to do my own analysis. i was assisted by my department. that analysis included a number of features and crew more sophisticated with every month

that went by touring by -- during my tenure. the analysis included a number of elements in particular the clearest. >> you also said in your testimony that you felt that positions were acceptable, is that correct? >> correct. in the context of the first three or four months market conditions were with their work, much more benign and favorable. i found that the risk and reward were acceptable. then, as we have discussed, and july i had a change of you. >> so, as all this was going on as you looked back to the minutes to you had no concern about the potential outcome? you were comfortable that everything was doing okay right down to the last? >> sir, i highlighted the risks, as i mentioned, and very

specific form of fashion. in those early few months, as i mentioned, found an acceptable market conditions change to, and so did my view. >> now, my background is financial also. a deal with a lot of companies. there comes a time when you realize things ago in the wrong direction in the stirrups and flags. did you ever do that? >> in july that was as market conditions changed that is when i began to recommend that the company think through carefully not only really understanding the increased risk profile, but that we consider hedging our reduction strategies. >> mr. michael roseman, regarding the plan, margin calls the kind of risk that a chief risk officer at mf global my concern himself with jack

>> certainly liquidity risk is always a material concern. if you look at oil companies that have failed ultimately it is generated by a liquidity risk of it more often than not. certainly the -- you need to have a very good understanding of liquidity risk that the organization is facing, including margin calls. >> you did throughout the red flag to mr. jon corzine a couple of times. can you briefly tell me what his opinion was denied. >> initially there was some disagreement on the potential price risk or default risk associated with the positions in regard to capital risk. at that point in time i put my written statement, there was initial concern about liquidity risk because the firm had more than enough liquidity to handle the initial positions. then as positions started to grow in the fall, that is what i expressed my growing concerns

about the liquidity risk and there is department presented to me and i presented to mr. jon corzine what i considered, you know, potential scenarios around initial margin. >> thank you, mr. chairman. >> thank the gentleman. recognized for five minutes. >> thank you, mr. chairman. i just want to try to read better under this fairly complicated for me and i just want to try to better understand some of the basics here. so i would like to start a little bit where mr. rene c. left off with you about when you raised the flag. if you could explain for me what you think caused the problem here, you started to outline it in the answer that you just finished with. if you could just walk me through that in as simple ways

to can and tell me how you cut the risk management process here fell apart or did not work right and how it may be should have happened. >> first thing that the committee needs to realize his as mr. stockman stated as well, the solvent position and the associated risk with those positions were very well communicated, very transparent within the organization. so the risk associated with everything that was going on where clearly laid out. they decided to go forward notwithstanding some of those -- understanding what the risks were in fairness to them.

as in other events, events that have not occurred before. sometimes there is a difference of opinion of view of what might happen. the challenge there, though, is if you get it wrong then you have an event such as what happened with enough global. >> so in your position was global risk manager cal what is your role in that conversation? >> my role is to articulate my view on what the risks are. i also believe an sure there is enough cushion with in the company's needs to support the risk and make sure that the risks that the company is taking is aligned with the strategy of the company and that it is an ongoing concern. >> so you obviously moved out of

the position. was that because management was unhappy with the advice that you were providing? >> i'm sorry, yes and was replaced. >> yes. >> i'm really not in a position to answer that. i would say that my views on this certainly played a factor in the decision. >> so regardless of that happening how did -- what happened after you left? where do you think the company went wrong from that point on? >> in my opinion there is a sovereign strategy in itself, burke in a broader context the firm was pursuing an investment banking strategy that was fairly

articulate it. mr. jon corzine to the public, shareholders and others. that strategy required resources, capitol, liquidity to fully support. it was important to manage this strategy within the means, and that he think that strategy may be exceeded the ability of the resources. >> are there lessons here with respect to how systemic risk is indicated with this particular case? >> i'm sorry. could you repeat that? >> are there systemic issues that we ought to be concerned about as members of this committee with respect to what happened at mf global? >> well, as per my written statement, it -- one of the main

takeaways is firms need to be very mindful of the concentration risks of their running and the implications of the stress in areas related to that concentration risk. clearly during the mortgage crisis some of the firms failed. they had concentrations in the mortgage securities, and we know the outcome that occurred there. i certainly think, again, that needs to be revisited. >> the issue of concentration. >> concentration risk, large positions. >> thank you very much. i see my time is up until the back. >> thank the gentleman. now the gentleman from new mexico, you're recognized for five minutes. >> thank you, mr. chairman. back from prayer breakfast. $1 billion then disappearing off the table out there. the -- mr. stockman, how much did you get hired for? will was your salary?

>> my salary began at 300,000. >> how much? >> 300,000 u.s. >> what about you? when you departed ceremoniously are unceremoniously. >> 350,000. >> the 50 -- 350. >> so chief operating officer, ceo, chief executive officer, chief risk officer. they all began with a c. does that mean anything? in other words, it doesn't sound like you are in many of the real management meetings. you're just kind of left out of those. am i hearing you correctly? >> sir, my responsibilities -- >> i did not master responsibilities. as a juror left at of key meetings. you're answering some of the questions from the other side and did not know who might be at those meetings. you did not answer mr. posey. it appears that you are not

there, so you were something with other firms. did you get to sit in on senior management meetings that those other firms as arrest officer? >> at the -- it -- meetings that were appropriate. >> cbs. did you get to sit in on things are you were talking about the future of the company? yes are no. >> i'm sorry? >> yes no. did you sit in on the key meetings? >> as chief risk officer i did not sit in at the highest levels. >> you were not. is that right? okay. so track october 201st. you had that management team with moody's. did they come back and report to you kind of as a chief risk officer that things might not be going so good over there to

mecca they are now worried a little bit about what they're seeing. did they come back and relate that to you, the chief risk officer? you either had guy in charge. you're not wearing a hard hat. you're right up there with the fancy pinstripes you guys. did they come back into you anything at all? >> the key contact at moody's was are cfo. >> i didn't ask that. as it did they come back and tell you anything? raise the flag? >> on record to me. >> and did not share anything with the? >> correct. >> did you ever think that maybe they ran off mr. grossman and brought you and to be the guy that doesn't see, tell, no? did that ever occur to you? >> no, sir. >> it didn't? what about off-balance sheet stuff? i'm looking here at your thing. says he will prevent the off-balance sheet drain. when i read that, i know i and justice this is character, but it brings to mind and run doing

all this fancy stuff around the edges. fast-moving traders moving all been down. did it occur to you that may be off-balance sheet stuff was maybe something that you should not be signing off on as the chief risk officer? did it occur to you that you might maybe say something about that? >> the off-balance sheet treatment -- >> pull the might a little closer. >> the off-balance sheet to me you are referring to, if you are referring to the sovereigns, fully established prior. >> added that ask you if it was fully established. did you ever think you ought to say something about that? is it normal when you're doing off-balance sheet trading? >> to the best of my recollection, it there was off-balance sheet trading. if you are referring to mf of balance sheet. >> is off balance sheet leo?

>> it is an accounting treatment >> is off balance sheet legal? >> again, i'm not an accounting expert, but under -- >> you are the one who has to certify the risk. i don't care if you are an expert on not. i'm asking from you as a seat, s.c., cro, ceo, cio oh, you are one of the seas. is it legal? >> to the best of my understanding it was performed under accounting principles. >> is it ethical? >> that is a hard question to answer. >> i mean, we hired you. we hired you to be the head guy, cr0. you have to say it. nobody else is responsible for telling as the risk. is it ethical? >> again, as the goal is a -- it relates to accounting and how the off-balance sheet statements

are prepared, guided by accounting principles. i don't have a strong u.s. to -- >> i get the drift. you don't have to keep going. i get the drift. $1 billion with the people get the drift. we are hiding around corners, doing stuff that we don't know is legal, certainly will not say it is ethical or unethical and deeply sorry. i read your testimony. it is the same as mr. jon corzine. deeply sorry, deeply, deeply sorry. i have a guy in my district lost 5,000 bucks at christmastime. did you call anyone? that's a lot of people. did you call one of them? >> i have not, sir. again i -- >> i deeply sorry, though. deeply sorry. i see. have you suggested that maybe

you ought to give your payback and put it into a scholarship fund for these kids that are going to go to college sitting up there with some hot former? just tried to make and meats. i know what it's like. trying to pay for the next sector feed. you guys, one. 2 billion in your riding around the definition of whether it's legal and whether it's ethical or unethical? i don't think shame regis will street. if it did maybe you should be looking at how much you were paid and what you're paid for. >> i think it's a moment. now from taxes. >> -- texas. >> one very brief question here as a follow-up to some of the questions that have been asked already. >> i apologize for interrupting. i wanted to just make sure that it was understood that i -- the moody's meeting, i did attend if there was any confusion on that. i'm not sure there was, but i

just wanted to confirm. >> thank you. >> it's all right. let me ask a question. when did mf global first approach you? i know that you went through an agency. when did you first meet? when did mf global first approached you, either by letter or by phone call or otherwise? >> best of my recollection, september october possibly, possibly october. >> and by what means? letter, phone call, you know? >> phone call. >> phone call. did you go and visit with him shortly thereafter? >> shortly thereafter, a series of interviews. >> okay. and was it york headhunter or agents that cause you or was it mf global that called you? >> this was through a search

firm. >> so your search firm called you up and said, mf global was to visit with you. is that correct? >> direct. >> and it was in october? >> to the best of my recollection. >> early october or late october? >> i apologize. to the best of my recollection it was around that time. >> you were told that you were no longer need as chief risk officer of mf global in january of 2011. is that correct? >> yes, sir. >> okay. so the cr0 is an important job. i imagine that in order to replace you it would require at least a few months of the search process. dino wind mf global began to search for your replacement? >> i do not, sir. >> okay. in what month was your biggest disagreement with jon corzine over liquidity risk of european

sovereign rcn? >> i would say the discussion started becoming much more internal and september. >> and what month was it that you made your presentation to the board saying that the board should not follow mr. jon corzine advice to increase mf global and european sovereign r.p.m.? >> i did a full presentation in november. >> do you have an opinion whether or not to your presentation had anything to do with your removal? >> as i said before, i am really not in a position to respond to that. i do think my views on risk would have played a part. >> thank you for your candor. i thank you for your answers. in testifying before the house agriculture committee mr. jon corzine said that he replaced us chief risk officer because mf

global needed someone in the chief risk officer position that was more fully its hand to the broker-dealer side of our business than what mr. mr. rosen is background was. there were other issues about how people work with each other. so you have a very impressive resonate. a wide variety of experiences in the financial industry. do you believe that your background was not fully attuned to the broker-dealer side of the business? >> i would disagree with that statement. i have the experience in investment banking prior to mf global. >> so which is true that you have a very strong financial background and experience and a good strong resin made? you would agree with me there? >> i appreciate you saying it that way, but i would say i certainly had a strong background. >> thank you.

so, in a letter to the subcommittee moody's indicated that they did not understand until october 201st 2011 that the european sovereign debt portfolio was part of a mf global trading bloc. did this surprise you sense mf global had disclosed to this exposure several months before? >> yes. i was not fully attuned to exactly the dialogue, but, yes, i would find that surprising. >> you found a surprising. even though mf global had disclosed the exposure several months before? this should have been of no surprise. >> again, i couldn't tell you exactly the context that moody's was making the statement. i thought that our disclosures were both adequate to and robust

>> what was the initial response to inquiries from moody's about the exposure? >> i was not -- when you say initial inquiries, can you help me? >> don't parse it. what was the company, mf global, response to inquiries? and me, you are the chief risk officer. >> right. also mentioned by my predecessor, i was not the key contact and had very little contact or direct contact in terms of discussions with the rating agency. >> let me ask you this. you are the risk officer. i don't care who you told, but when you heard about this what response, what response would

you have given about this? they didn't realize that european sovereign debt was part of the trading book. >> the -- again, i probably want to talk more and understand more specifically what the reference to the trading book and otherwise was because as i mentioned before, i thought that our disclosures were both adequate and -- were adequate. >> and that is what your response would be? your disclosures were adequate? un disco -- did a october 13th executives at in of global put together a break the glass presentation that outlines what a mess global would do in the event of a credit rating downgrade that was prepared by the chief risk officer. that would be you. the cfo and mf global treasury

department. why did mf global find it necessary to draft a break the glass presentation? >> as mentioned before, this initiative to the best of my understanding was that the board request. this cfo and treasurer of that strategy or that analysis. one of my senior officers helped out on creating one of these scenarios and there. so the -- that is -- that was the genesis of that -- of that contingency plan. >> i see that my time has expired, but i don't think you have been very candid with us. thank you. >> the gentleman from tennessee. >> thank you, mr. chair.

thank you, gentlemen. did you have previous relationships with any of the board members to back. >> i have -- i did not have previous relationships with any of the board members. >> she did not know them at all? >> no. >> mr. jon corzine, governor jon corzine, how long did you know him personally? >> i had -- aiden to -- i'm sorry, if you are asking how long i knew mr. jon corzine. >> personally. >> i didn't note mr. jon corzine personally, but i worked at goldman a number of years prior. >> he said in a few minutes ago that you did your job, that you reported information to the board, to mr. jon corzine, and they made the decisions. mr. michael roseman also said he

did your job, reported the information. just, it looks on the face side to my colleague, mr. pierce, i have a district that many, many people lost thousands of dollars , farmers and ranchers. it almost looks like they took mr. michael roseman out and replaced mr. michael roseman with a yes man. does it look that way to you guys? mr. michael roseman, would you comment at all? you give them the permission they didn't like so they replaced you and put someone and that give them information that they like to back >> i have answered that question twice. in fairness i have to say i'm really not in a position to answer that. others made decisions for me. i would say some of my views would have played a part, a belief. >> mr. stockman. >> sir, i think as in my testimony noting that when i

joined the firm doing deep analysis on sovereign positions in particular, i found the risks acceptable, and in particular so did the board and senior management in terms of finding those risks of acceptable. as market conditions changed in particular in july i expressed my views as it relates to wanting to recommend hedging strategies and bringing risk down. i would have to make a different -- the cs me, take exception to your characterization of a yes man. >> in your opinion that the margins, the money was there to cover the margins? or whenever the recommendation was? >> correct, although to be specific our treasury and finance area would have

represented that's because that is their first line of business. >> but you would know in your position? >> i understood, but ultimately our treasury and finance area is responsible for the liquidity. >> and then those that were produced the member writes about his negative assessment of mf global risk management. he writes that mf global is betting the house so to speak in their current approach to risk management. both of you, do you agree with this assessment? and was mr. jon corzine betting the house with european debt rtm portfolio? >> as i mentioned before, through the genesis of the nine months that i was there, first three or four months, i would have to say the idea of putting the house was inaccurate or not

a matter, the depiction that i would represent. as the risk profiles changed in the marketplace that the same transparency in assessment and analysis and informed business judgment was made at that senior management level. let's not forget, the sophisticated board being -- you know, the balance between john and these decisions. >> i serve this suggests that the ability of the company to handle the positions was pushed to the maximum. as i outlined before, under adverse liquidity conditions or scenarios and would potentially puts the company in harm's way. >> okay. i yield back.

>> i think the gentleman. no the gentleman from california is recognized. >> thank you. let me ask you about leverage ratios can affected. thirty to one leverage ratio has often been cited in the financial press. mr. jon corzine testified that he worked to deliverers the firm as he testified tests. can you expand upon the effective leverage, the ratio that actually existed there well you were there and whether you believe the leverage of the firm materially changed under mr. jon corzine? >> i think the important point is not only the leverage but what composes the leverage. so the year before that almost all the levers that existed was extremely liquid securities. it was presented to rating

agencies that we were holding treasuries, holding treasuries, notes, and what have you, that were very short in nature. after mr. jon corzine joined, the composition of the leverage he changed. that is the important point. >> 2008, he came in the spring of 2010. as you say, that started to change. this window dressing issue began to arise as well? >> i would say when we speak in terms of when addressing is pretty common practice across the street to bring the levers ten at the reporting. i would also -- >> 34% higher. >> i'm sorry? it did come down. brought down. i am aware of that. the point you need to be aware of as well, if you can bring the

leverage down, it reflects the liquidity of the positions. so that means that it does not pose a threat to the balance sheet per say. it is the leverage you can't bring down which is the more concerning risk which would be consistent with what happened in sub prime prices as well as the other positions held by mf global. >> the investments overseas in sovereign debt, i take it. when asked about the concerns you raised, testified that we allow people to speak their minds. that was his response. your testimony here today suggests something slightly different. you raise concerns about the positions as you lay them out to the board. you walk them through the risk scenarios, and they were challenged as being impossible, as you said. surely there after you were let

go. they were challenged as being impossible. can you reconcile those two representations' of what was going on in the border and? >> i'm sorry, repeat the first? >> the first part, mr. jon corzine testified that we allow people to speak their mind. that was his argument about what went on. you say when you brought of these risk scenarios you were challenged before the board. that was impossible. but you were arguing was impossible. of course a few months later -- >> i don't know if those two statements are contradictory. i mean, certainly allow me to express my opinion and the board meetings twice but was there a constructive dialogue really raise your concerns?

it is one thing. it is another to be told by the chairman he. >> within the room on the positions themselves. so there were certainly discussions. >> one last question. you noted the strategy pursued by mr. jon corzine did not match the resources. can you expand a little bit on what you mean by that? what specifically caused the failure of mf global in your opinion? >> since i was not there i am not really permitted to discuss the specific positions that they added to the company's

subsequent to my departure. i'm probably not in the best position to respond to that. >> then how about this. you noted that the strategy pursued by mr. jon corzine did not match the resources. what did you mean by that? >> sufficient capital globally. operating a number of different companies around the globe which causes some challenges still moving around funds or capital to other entities. when you employ a strategy you have to make sure you do the analysis on the forward needs. there were certainly additional capital and what have you. there might have been other plans to raise more funds and more capital than non not aware of. i wasn't there, but it certainly presents the need to assess the strategy against the resources. >> thank you very much. >> i think the gentlemen.

the gentleman from new york is recognized for five minutes. >> thank you, chairman. we have already testified that you were not privy to the meeting on a october 31st where the sec and cftc allegedly discussed the unwinding with other large entities of mf global. let me ask you this, mf global, would you say 98 to 99% of its business was commodities? commodities and futures, i mean. >> in terms of revenue breakdown i am not 100 percent sure, but i think that sounds a little bit high. >> over 90% to? vast majority of their business? >> if we had to spotted maybe it

was in terms of the strike strategy, commodities and futures, maybe could have been posted half. i'm really speculating at this point. >> i think your speculating quite a bit. my curiosity is this. urh schieffer's officer. you obviously know the industry pretty well. paid handsomely to know the industry. is there any reason that you can think of why this would be a bankruptcy under the securities investor protection act verses under the commodities rose? any reason why he would see why that would be? >> sir, i understand the question. i don't really offer but experts -- much expertise as a religious to bankruptcy