supercomputers, and so they ended up working with gaining scientific may begin out of it. put it out there, and you had dozens and dozens of people around the world playing a game. they solved the structure of this protein in three weeks that have been years they hadn't been able to do that. so that's just a pretty dramatic example of what, really bad case of gaming as will the crowd sourcing can accomplish. and so in addition taking occasion, i think that's an important tool, indeed with complex systems. sustainability is complex, anything -- murrell said we need everybody on board and we need everybody's thinking, too. we are all intelligent people here and we need all of you. >> another question. down here in the front. >> i used to study economics of

wartime mobilization, and i would like to ask the panel, and everybody here, to reflect on the question of whether a threat posed by climate change is a bigger or smaller threat, the threat that adolf hitler posed to civilization many decades ago. and i would give you, as my answer, climate change is a worse threat to civilization than adolf hitler was. and if that were correct then it would have enormous implications the way we think about costs, and the way we think about the economics of response to the climate change problem. because when the u.s. got involved in world war ii, it's way of thinking about economics turned over, became arguably right side up again. mainly that we started to think about not the money and the financing, but what the real system could do. what the real productive system could do when it has to respond

to enormous challenge. in my view we have to go to that kind of economics in order to cope with the climate change problem. and it is not impossible to do so. it does not imply any obvious way enormous sacrifice the personal consumption expenditure per capita since world war ii in the united states. so that is -- >> that's a great way of framing the question. i wrote a book two years ago called last chance preserving life on earth, and one of the things i said in the book was if we had an enemy nation at our shores with ships ready to launch an invasion, if we sit around and ask if economics were such that we should prepare for that, we certainly wouldn't. it is that kind of time and i think it's a good framing for thinking about this. i want to add a comment about the notion of a broad change, because i think that's an important issue.

we don't know if we're going to experience abrupt change. but let me take her place near my home. the string is called slippery rock creek and in slippery rock creek there are boulders as big as this room, get the stream itself is a relatively tiny stream. it turns out that when the last glacier melted of it melted so abruptly, the change of shift away from the last glacial period, 11,000 years ago, was so abrupt that it tossed big boulders in the super glacial lakes broke loose and flooded this valley. so i think it's absolutely, the evidence in our history is any evidence of how these systems have shifted, is such that we should anticipate the notion of an abrupt change in the system because it happened before and it will certainly happen again. >> we have some students in the back. >> greenland was to melt and the

water levels rose, with that create another ice age? >> repeat the question. >> would that create another ice age? >> if greenland were to melt and the waters -- >> well, if those two events happen, they would be separated by quite a long period, right? because the water is genuinely concert tickets either in ice or it's in liquid water. so my sense is that we're most concerned about in the future that we can imagine is the warming and the melting, followed by increased water levels. later, you know, ice ages can be triggered historically the ice ages were not driven by human beings. we have to think about how our human actions interact with the natural world. so out into the future we could

into one of those periods, probably what would have is that water would refreeze and then the water levels would come back down, should that freezing poker. >> so, i don't know if you've seen the movie the day after tomorrow, the but that scenario of a real, very rapid shift into an ice age is in a matter of days. that's unrealistic, but a scenario of regional climate change like i mentioned, particularly in europe, getting europe getting colder, that might happen, possibly. the science is not settled. that it's possible that that could happen because of shifts in ocean courage. is a the gulf stream warms the coast of north america, comes across and warns ireland and that every of your. is a lot warmer than it would be otherwise. so if you shift the ocean currents you could get a lot colder in that part of the world. that's not global.

that's a part of the world. so that's another -- the site says it's not settled as far as whether that would happen or not. spent okay. i guess we have a question up in the balcony. just speak loud and in that direction. >> one of the big blogs that we have doing something about climate change in this country is all the climate deniers that are out there, and even many people who aren't active climate deniers don't actually believe co2 causes climate change, or that there is no climate change going on. and i think one of the most effective ways to get around that is by pointing out what larry pointed out earlier, and that's the ocean acidification problem, which is completely separate. that is caused by co2, even if co2 did nothing to change the

climate, ocean and acidification would still be a major disaster in the making, and something that would require limitations on the amount of co2 that we're putting in the atmosphere. and my question is, those of you are more involved in this than those of us in the audience, are people making that point to our elected leaders in congress? >> let me respond to the. i had a conversation with senator john kerry from massachusetts, and senator kerry is preparing to hold hearings on that very subject. in fact, i suspect it will happen sometime either the next month or in a month and a half. his effort is being made because he believes what you just said is true. as people understand what we're doing to our oceans, they may, in fact, connect at a deeper level. where overfishing are ocean to we are is to define the main heating. we're fundamentally raising the sea level so we're damaging all these coastal ecosystems.

we are trashing our oceans, and that's going to enormous consequence on food supplies and on a number of other really important things like the thing called oxygen. so it's really important that this hearing be held, and i think senator kerry's purpose will be exactly what you talked about. >> okay, over here. >> hi. yeah, you are talking about rio+20. this next week is actually stockholm plus 40. the first big major science driven talk about global sustainability. its again and stockholder in their predictions for what happened 40 years from 1972, if nothing was done to help the

environment, or the current state of the world. so what's new now? where are we moving in stockholm plus 40 conference next week? >> who wants to tackle this one? >> there were predictions 40 years ago. it's worse now than they predicted, actually. so i have been focused on rio+20, because the united nations is focused on the. but you're right, that's where begin. and here we are worse off than even the predictions 40 years ago. so it's time to take action. and it's time for sacrifice, by the way. i know people think that perhaps we should ask the american people to sacrifice very much, for just about anything these days. but we have to sacrifice. we have to sacrifice our old

ideas. >> i'd like to add to that, if i may. i was involved in the first -- of in 1970, around for the stockholm+40 conversations, and the really important thing that is missing right now that was available in 1970, one of the first earth day occurred, we created such a stir, my hometown of pittsburgh we carried coffins down the streets wearing gas best. in 1970 the congress passed, the senate passed the clean air act 100 to zero. can you imagine that happening today? and the reason is that the american public is asleep, and we need to wake up. and we need to drive, democratic system after all, thomas jefferson was right. we will get the government we deserve. and guess what? we have the government we deserve, and we need to step forward and challenge these people who have got the reins of

this government, and look beyond citizens united and all the money is going to be flowing into the election this year, and put back in the conversation the important role of citizens in this electoral process. and i think until we do that we will not made progress. [applause] >> i just want to add one quick point to that. that original earth day, according to what i have heard him and chrome on this, -- and correct me if i'm wrong, one in 10 were out that first day. immunizes kind of numbers today in that kind of activism? it's not happening right now. so this was a mass movement. >> on a related note, so how do we cannot conversation around? is occupy wall street, but it's all about jobs and big money and stuff, and not about how that relates to the environment

company to science is out there, you know, the data is out there. what is missing to put the puzzle together for our citizens? >> did everybody here that? the question is, how do they said, what's the call to arms? how do we engage our citizens on this? >> if i might come a couple things they do happen. one, i want to start with my generation, the baby boom generation, the generation after the second world war. we were there on the first earth day at some our and other we lost her way. with consummate activists on the first earth day to being couch potatoes. i think it's time for us to get back into that fight. i would put the focus first and foremost on those who are passing on the to which, those who are, i do want to leave this planet until i see a kind of climate policy in our world that will protect my children's future. i could die peacefully if i saw that happen. and everyone of us should feel the same way about this matter,

so i would put the focus first on the adults who are now having grandchildren, who are part of that original earth day, wake up and become a part of his urgent fight for your children's future. i don't know of a single parent who would knowingly trashed their kids future. and yet that's what we're all doing. everyone of us are doing that. the second thing is i think kids on college campuses need to get fired up. this is your future. the opportunity is here for green jobs. i think we could see an explosion of jobs. it infuriates me that the same people are saying where are these green jobs anywhere -- any what are the same people who block the passage of the climate bill which would have put a price on carbon. for goodness sakes let's get back to the conversation and i think that conversation is going to require young people whose future hangs in the balance to stand up and give voice to this important matter. this is a democracy. it's hours and it's ours to keep and it's ours to keep and it's

our civic happened. [applause] >> that was a great question. and when i was, this is my first time been invited to the conference, and they asked us to suggest topics, and i suggest a topic called windows the movement become a revolution. and it is going to be a panel on that. and so, this is a great question. because we did lose one in 10, i mean, we lost earth day somehow. we understand the. what happened? we had a really important social movement going, and look where you are today. so i've got occupy wall street on my mind. by the way, i think it's a lot, the second phase of occupied, which is what has been going on the strategic thinking about that has been going on alternative winter. i think we will be more connected to these more systemic issues. i certainly, that's the hope. there's been a lot of a lot of meetings about that with the general estimates and the working groups. but how do we make sure that

this new movement, occupy wall street, and perhaps what comes out of it in terms of this issue, becomes a social revolution. and hope we can talk about that on that panel. that was a great question. >> okay, we have time for one more question. okay. any students want to ask a question? okay, i'm sorry. we're going with the student in the back. your generation is the one at stake. >> okay, so under, you think it is possible to change our current status of global warming and the position of it under separate governments? or do you think we would have to have some sort of a unity in place? >> did everybody here this

question? can you change, let me make sure i got it right. can you change the global climate change paradigm, country by country, or is it going to take some kind of united global, multinational effort? was that the question? okay. that's a great question. >> i'll take a stab, right. so there have been attempts, there are attempts of these global multinational effort. this is what, you know, rio, copenhagen, all these conventions are all about, the kyoto conference. they still. they come in my view, the principal reason they still is fairly fundamental come and that is the problem is largely been caused by the developed world. is a scientific reason for that, right? when you put us into an atmospheric that last out there

for 700 years, that's the average lifetime. that means the stuff that's out there not that is causing climate change now that will call you in the near term has opened put up there by developed nations, right? today to developing nations are doing their fair share at pumping it out, but it's a fairly small contribution to the overall concentration. so we come in the developed world from any particular we in enough states, in my view, have a responsibility and an opportunity to lead the global multinational group forward, if we were to step forward. i do think it's our responsibility to step forward for two reasons. and one is that we are largely responsible for much of the stuff up there. but also because look, i think we are, i think we're capable of leading by example. we have to get on with and we're not actually leading by example today. i don't think it requires a radical changes in the structure of global governance at i think

it takes a nation, such as ours, to step forward and lead, which we've not been willing to do your but i think we can. i think if we did, the world might come along with us. we have the ability to influence that as citizens of this count country. >> so my answer to your either or question is yes. i think as douglas and, we need international efforts. we need u.s. leadership. but i used to be more optimistic about the prospects of a kyoto like treaty, by the international inviting, it has stalled progress. i think there's possibilities there, but i don't think we can't wait for the will to get together and cooperate. and i think that, going back to the issue of a complex system, the world is complex. i mean, within many countries out there, that many cultures, that many agendas, everybody

has, they can pursue their own agenda and find a solution, and there will be different solution. so we need multiple solutions. so yes for international cooperation, and effective leadership, and yes for hate, it's in everyone's self-interest, you know? >> okay, last word. >> i would like to add a word that has not been spoken much and that is the notion of leadership. this is really a matter of leadership vacuum, when you dress it down. my childhood mentor was the guy who fought on the beaches of normandy, fought all the way through europe and was one of the first troops to liberate the internment camps, and ralph came back from that experience and was my scout leader. he talked about the need for us to be stubborn leaders. and he believed that stubbornness was not a vice, as someone with a just but a virtue

to he would -- you just might make it happen. and i think that's the kind of stubborn leadership we need in america first. america needs to be a leader in the world. and bite us leading individually and working together, and i agree with everything that has been shared here, taking a bigger view and being contemplated about what we are doing, but beyond all that we need to get to the point where we are drawing leaders up for the future. and those leaders, wherever they emerge from, will help this nation go to a better place. and this nation has a duty to take the world to a better place. and that has been our history. it needs to be a part of our future. thank you. [applause] >> okay. all right, without let's thank our panel once again for a very provocative morning. [applause] thanks everybody for showing up here and hey, let's take this to

the call of arms. [inaudible conversations] >> tonight on c-span2, to a with madeline sackler. she made a documentary about a lottery system used to select students in new york's -- new york city charter schools. that's a 7 p.m. eastern. at 8 p.m. here on c-span2 with the senate in recess this week you can bring booktv in prime time. >> you are watching c-span2 with politics and public affairs weekdays they can live coverage

of the u.s. senate. on weeknights watch key public policy events. and every weekend the latest nonfiction authors and books on booktv. you can see past programs and get our schedules at our website, and you can join in the conversation on social media sites. >> bin laden was a strategically relevant communicator with various and disparate outfits, and to a certain extent i have to confess that while still in uniform i worked at u.s. senate commander work in afghanistan, and worked on the problem of iraq. and we knew bin laden personally was involved in communications to try to corral and bring under control also where. we knew he was making outreach are going to all should bob. when he is involved in these things working comedians and other individuals but when he was there and doing the. as a consequence, and no surprise where type of the globe ideology, bin laden was relevant. >> counterterrorism and national security change in the years since the death of osama bin laden.

former and current administration officials, analysts and other intelligent commuting and continue to wait and. see what they have to say on light at the c-span video library. all archived and searchable. >> the heritage foundation yesterday hosted a discussion with representatives of veterans organizations. among the speakers, colonel jack jacobs was awarded the medal of a in 1969 for his actions in vietnam and now is vice chair of the medal of honor foundation. this is an hour. >> good morning, ladies and gentlemen. thank you for joining us here at the heritage foundation, and our lewis lehrman auditorium. of course, welcome to those who join us on all of these occasions on our heritage.org website. we would ask everyone in house if you'll be so kind to see that cell phones have been turned off as we prepared to begin. it will be most appreciated. we will of course post the program within 24 hours on our

website, again for everyone's future reference. hosting our discussion this point is dr. james jay carafano, doctor vera font is director of our douglas sarah allison center for foreign policy studies and deputy director of the kathryn and shelby colum davis institute for international studies. i can't push and teaching he's an expert on defense and homeland security policy am a graduate of west point. easy 25 year veteran of the army. he holds a masters degree and a doctorate from georgetown university as well as a masters degree and strategy from the u.s. army war college. he is a prolific writer and has authored among others the book wiki at work, private sector public wars, g.i. ingenuity and co-authored winning the long more -- winning the long war.

[applause] >> so, we are in washington, d.c., a town where everybody thinks that everything is about what you'd in washington, d.c. and that goes for veterans affairs, too. so there is a tendency in washington i think that everybody is done to do with our veterans, and that is important done by the federal government. a kind of leaves out the rest of us. which is kind of a big deal. the 300 billion plus americans who are defended and protected by these unbelievable men and women who go off and do amazing things, some don't come back. but many, many, many do, and a service not just and more but they come back and transform us. they are leader in civil society, they are leader in government, leader in science and research, and every facet of our life. we want to talk about them, the rest of us, what we're supposed to do. so the former chief, chairman of joint chiefs of staff, admiral mullen's took a personal

interest in this issue in veterans affairs, and produce a very interesting white paper called tasha he is an advocate for has to be enable thing in there somewhere. but he made a really good point in this paper, and i would suggest that you go online and read. just googled it. you go to the web, you can instantly find over 400,000 websites of organizations that want to help veterans. so that it -- so there is this enormous sea of goodwill. there is this question of what post be doing and how we supposed be doing it? for the rest of us haven't given this a lot of thought and thought maybe we should be involved, or how should we be involved and what should we do? it's kind of a perilous journey. does have the appearance of not efforts of how do i get started. so having worked in veterans groups and start a very small nonprofit called -- bring attention to these issues in reaching out to veterans. one of the things that are discovered and looking at the

long history of america and its veterans is one of the constants from george washington to today is if you look at the needs of the veterans, things really haven't changed. the technology has changed, the society change but the basic requirements of what a nation can do, not just for its veterans but with its veterans, are kind of the same. there are really three. the first one i think is the most obvious and what we think about the most, which most readily comes to my, that's kind of the helping and healing for people who are coming back from war, for people who are from the service. not just for the service member, but for the families as well. i think it's well understood, and, obviously, want to do something about that. a second category which we think less of which is equally important, and that is the transition. the transition to the workplace, the transition to education. and sometimes it's not, it's just not the service member,

it's the family and sometimes servicemember doesn't come back and the transition is taking the family and bring them back into the community. and third is really the one we think about the least, which is a transformational aspect of the veterans service. because veterans go into the military and then make they make the military a better place. they are civilians, they bring these amazing skills, they contribute and then they are transformed in the military yet again. they add to it. with imagery gives them is leadership and courage and sacrifice, bravery, and they come back out and then they transform us. and they do these amazing things, and they need help, to comment in transforming what they know from the military into going back and continuing to feed that propensity to serve. and to what we wanted to do today was to bring together three representatives, three organizations that really typified these three different things because they're all important they are all valuable to annotate anyone who has any

interest, find with these kinds of organizations and grab onto them, or start with. to really kind of help thank you that i have three free market will people from the unbelievably remarkable, incredible organizations, and i can think of every positive wonderful adjective to say, it wouldn't be enough to say enough about the great things they are doing but i'm going to do a very, very brief introduction of each because it was want to give them an opportunity to really talk about their organizations and what to do. and then we'll have a little period for question answered at the end to get to the question and answer the be some folks at the microphones but if you have a question please feel free to ration and. if you would, wait for the mic of a because there are folks that will be listening on c-span and the internet. ..

john has an incredible love for this country and an appreciation for what veterans do and what his organization does is unbelievable remarkable and special and you will be thrilled to hear about it. edie rosenthal is the public-relations director of the special operations foundation. this is a foundation that works with the special operations community and does something that no other organization does and in terms of the transition of bringing families from after service into the rest of life is pretty remarkable. colonel jack jacobs is with the congressional medal of honor foundation and if there is an

organization that is transformational, the medal of honor recipients and how they continue to serve this nation by sharing their experiences and more importantly the values and the character of what makes great leadership and a great citizen, it's truly a remarkable story. i'm going to to turn it over to john chase. i think we will speak from our chairs and we will get there faster. thank you again for coming to heritage and participating with what is really a very very special event. john, over to you. [applause] >> 10 minutes i have, excellent. my wife who is sitting back there, and i are used to being at a university and talking for 50 minutes but we can do it for 10. we have the immense good fortune living on a ranch near bozeman montana. both of us came to montana to

teach many years ago. i retired a few years ago and we had a great range. it's only 10 miles from bozeman which is the town of montana state university which is the university of yellowstone. that is relevant to my story. it turns out that for a variety of reasons, a very large number, a very high proportion of veterans have elected to either return to bozeman or select bozeman as a place to retire. the county is gallatin county which is a fairly large county. it's approximately -- approximately half the size of the state of connecticut that only has 100,000 people but that 100,000 people are not exactly random sample of america. there are a few people live in bozeman by accident and no one comes to bozeman to make money.

[laughter] it is a college town. it's in the mountains. it is within -- the town is within 45 minutes of four different ski areas. one of the ski areas is nonprofit. all of this fits into the success that warriors and quiet waters has enjoyed. bozeman, or gallatin county, has less than 100,000 people and the state of montana which is slightly larger than japan, has just 1 million people. we just made 1 million people three months ago. so it is not highly populated. now we probably have more cows than people. we likely have more sheep than people and we certainly use too and we almost certainly have more trout than people. when you think of bozeman, you think of the access to yellowstone park. you think of all manner of

kayaking and he think of people who basically are fun hogs, outdoor fun hogs, people who so enjoy doing stuff on the outside and 30 years ago approximately, a retired air force general and his wife created an organization called eagle mountain. eagle mountain is an organization that makes a whole variety of outdoor activities accessible to people who suffer various physical and/or mental problems. they started for example 30 years ago about, a program for skiing for people without legs are people who are paralyzed. wow, that was quite a remarkable thing. and then, they added to it. they added kayaking and they have an equestrian program and so forth.

and it is a totally personally privately supported organization it takes no government money. well that is a model -- it now has 21 i think it is programs at eagle mount. rockclimbing, all manner of wonderful things. that is the background in which a few of us started talking about what can we do for wounded warriors. whatever it was, this was the perfect place to do it. one of my good friends, a fellow at the name of paul, is a physician, retired, a military doctor and also a historian. he has written several books on military medicine. he and i used to beat -- meet regularly at the same health club and we chatted about a

variety of things. it could be about fishing, could be about hunting but it often was about the conjunction of our interests and how can we help military veterans who have been severely injured? well, if there was ever a perfect place to create warriors and quiet waters it was precisely there. how many of you have heard or seen the movie, a river runs through it? most of you have. well it happened to have been filmed, most of it, within a very few miles of our branch on the gallatin river. the gallatin is prettier and more accessible and it's just a nicer place. well, we were talking about what could we do, what could we offer these veterans? and it turns out, because there

are a substantial number of very successful and young and active retired military officers there, a fellow by the name of eric hastings, who was a marine colonel, and tom o'connor, navy captain, and by hatched the idea of going to military hospitals and having the staff at the hospitals identify individuals to come to montana for a week and learn flyfishing. wow. this was an ambitious project, and it was a bit hard to sell it to the people in the military hospitals. that was sort of a remote place and how do we do all this? well, it turns out that the

bozeman area is the mecca of trout fishing so we saw a number of that knew about that. and the military, the veterans, had contacts with their colleagues, managed to identify people in military hospitals who could basically recruit the group. so, we brought six of very severely injured combat veterans to bozeman with the idea, and bozeman is such a remarkable place because among other things there are a number of people who are professional fly fisherman, and nontrivial number. we are talking in the hundreds. and some of them are extraordinarily good, and there is an immense reservoir of

respect and appreciation for veterans as part of the community. so at any rate, the veteran show up. we fly them in, either commercially or sometimes on military planes, and the first thing they do and oh by the way in the years we have done it -- we started in the 70s, we have only had to the best of my knowledge one person who had never fly fish. these tended to be urban kids and we only had one woman also. until we started our couples program. but they show up and they are and off. they are from houston and they are from baton rouge and they are from philadelphia and east l.a.. these are not kids who are used to family vacations out in luxury as places. but at any rate, they show up

and they land in this spectacular place, bozeman montana. the mountains are covered with snow and if they land in july, the mountains are still covered with snow. and in august there is a bit of snow there and it in september the snow starts coming back but it's really breathtaking. it's wonderful. at any rate, they arrived and we take them to one of the stems which is a very high place and we totally outfit them with all the fishing gear they will need basically for life. they will have to replace it if they weren't out and if they person's left leg off the knee, stems makes way special waders so they don't have as much stuff flopping around and they get a very nice rod and reel and tack and everything and they are outfitted totally. was not the very best equipment,

not professional guide quality equipment but it's better equipment than i have used and that my friends have used. at any rate, the first day we teach these people how to fly fish. so they go to a place where it's easy. additionally all of the troops came to our ranch. we have a little spring creek and a series of ponds and we set the ponds up with fishing platforms so people on crutches or people with new prostheses are people in a wheelchair, they can fish and comfort. they don't have to wade through weeds and so forth. but at any rate, it's a transforming experience for them and i would guess a systematic sample, but something like a quarter to one third of them say i want to come to bozeman to live. [laughter] and so we work with the university and we have veterans

who have come back and we have special housing. is that they and? that is the end that you can tell i am enthused. i'm enthused about what we do. let me just tell you the people, and oh by the way i am public policy courtney. my title is public policy advisor. sometimes people say, public policy advisor? what do you have to do? i say, i continually advised us, don't take any government money. [applause] it's entirely privately funded. can you imagine the osha requirements you would have to have? if you are person who is blind in one eye and has only one leg and love that person in a boat and float them down a wild river, can you imagine the osha problems?

>> can you say something very quickly about the web site? >> go to warriors and quiet waters and just type it in. among other things we have an 11 minute and 92nd video that is well worth watching. also, i'm sure that everyone here has heard of the magazine "the weekly standard." by contacted matt love -- who was one of the senior staff writers and i happen to know that he was an addict of flyfishing. i said ah-hah, i know what leeward will bring him. at any rate i talk to him about warriors and quiet waters and flyfishing and so forth. he came in last year about this time, a little later and he was just captivated by the program. and so i think it's the june the 11th issue of weekly standard, the cover story. it shows a double amputee

flyfishing with mountains in the background and it's the longest story that "the weekly standard" has ever run. its 1090 words with lots of pictures. [inaudible] >> island be happy to talk to you as long as you want and if you want to volunteer to help us, please do. go to our web site for some support. thank you. [applause] >> thank you. it is my honor to be here this afternoon. my name is edie rosenthal and i'm a special operations warrior foundation. for those of you who are not familiar with us, we are a nonprofit 501(c)(3) charity and have been around since 1980. what we do in a nutshell and i will expand on that a little bit, is if you're serving a special operations army and navy navy air force or marine corps

special operations forces, and those are your navy s.e.a.l.s, green berets and army rangers, the elite special forces guys, if you are serving as special operations a new user -- luger life our foundation will send your children to college all expenses paid, tuition, books, fees, room and board, laptop computer and a printer and if needed a kick from our president to make sure you get the right grades. are secondary program which was picked up in 2005 was to support our wounded warriors coming back from combat and what we do is we send them $3000 overnight to the hospital and that is to help them defray any unexpected costs, whether that is bringing in a family member, a wife, a spouse, a grandmother, and aunt.

they can cover daycare, pet expenses, whatever they want to use that money for. they get it overnight and they get it immediately and they can use it for whatever they need to cover those costs. our board is meeting right now to decide what else we can do to support our wounded warriors. we recently met with them at walter reed national medical center and we found out some of the things they need is for long-term care. we have been sending some of the spouses out for a weekend or just to get away because the caregivers are getting -- so we found that was the least we could do and we were trying to figure out what else we could do for the caregivers. we have also found out, and we just started a program where we are working with a select number so we can get our guys and gals that are recovering with missing limbs or severe burns or having spinal cord injuries.

we can get them the sleep number beds because we found out that they need hard and mattresses to get into the bed and to get out of the bed, but while they are sleeping, they may need to be very soft. on the other side of the bed is a spouse who may not want to have that hard bed or soft bed so no one is sleeping. so now we have got an a lot of feedback for getting the best they need. a simple thing, very simple but we are making certain they are getting what they need. so we are very proud to work with their special operations community. we have 900 something children in our program. we have about 140 children in colleges all across the country right now. we often get asked, what if they don't want to go to a traditional school? our main goal is to make sure that child knows that we are there for them. we are part of their extended family. we reach out to them and send them birthday cards, christmas

cards and congratulations cards. we invite them to any of that we can. we make sure that child and those children know that their fallen parents will never be forgotten and that we are going to be there for those children. so we make sure that they know that. if they want to go to a vocational school or a technical school, we are all for that too. our main goal is to make sure that they succeed in life. if you are going to go to school and become a mason then you are going to be the best mason married because we are to make sure you go to the best gil -- school to learn that skill. we are rated at the top 3% of charities within the country and our overhead is only 5%. so we are very small staff. we do all kinds of jobs and i

myself am retired navy. i have two sons serving in the military. so it is very personal. i like to knit get to know all the families meet the children. we are having a fundraising dinner this evening. we will have about 20 of our families there and it's kind of bittersweet to get to beat them and get to know them and get to love them. it's a lot of fun working there. >> could you talk for a minute about how the foundation got started? >> the foundation was started in 1980, when president carter sent over special operations teams and conventional forces to rescue the hostages held in i ran. we had a terrible accident in i ran. the president of the foundation called john carney and was actually on that mission. the c-130 and the helicopter collided and we lost eight servicemembers and one was severely burned. right there on the shore of i

ran the i ran the guys pass the hat that they had to do something. from passing the hat to taking care of them, 17 children that were left behind to make sure that those children were never forgotten. it has grown to 900 something children that we have today. it is all privately funded, all evidently and no government funding. >> thank you. jack? >> thanks for having me here. 10 minutes is a long time and still a long time on television. >> it is a like 47 appearances on nbc. [laughter] >> 50. you go on in the anchor says, so what do you think about this and you say i don't think anything about that and they say thank you very much and you go to a commercial. so it's a long time.

it's enjoyable. i spent the last couple of days on the air almost continuously talking about the president being in afghanistan because my contribution to all this knowledge is that yes there is a president and yes there is an afghanistan. [laughter] i am a military expert. it's a great treat to be with you. for someone like me it's a great treat to be anywhere near a live audience with live human beings and human beings have been a kind. typically the people i'm talking who are at home in their easy chairs in their underwear drinking beer. so talking to real life people is great fun. when i was decorated there were 400 living medal of honor recipients. today there are 81 and that includes the three young living recipients without him the average age would be somewhere in the neighborhood of 78 or nine or something like that.

i am one of the younger ones except for the three young kids who were recently decorated. and there were so many recipients back in those days, they were all there results, most of the result of the second world war. we had quite a few people from the first world war and there was still a living recipient from the boxer rebellion from beijing in 1900. he was still around. i had dinner with eddie rickenbacker and jimmy doolittle and so on. pappy boynton, those guys are all gone now. and about 10 years or so ago we started taking down oral histories to make sure we captured the reminiscences and the feelings, the ideas of the people who were still around. as i tell kids all the time, we all talked to them all the time. when today is gone, it's gone forever and you can't get it

back. when you're young there is an endless day that could disappear over the horizon. it's all the same to you. than then when you get to be old and decrepit and you are falling apart, you realize that everyday is a larger and larger percentage of what you have left and you realize it's vitally important you do whatever you can do today because if you don't do it there might not be a tomorrow to do it. the medal of honor recipients have always spend lots of times talking to the public audiences but particularly the b-schools and when we have living recipients, we have plenty of assets available to go and do it. the medal of honor society was chartered by the congress in 1958, but of course never appropriate any money for it. it's just a conglomeration of a small club charged by congress of all of the u.s. recipients of

the medal of honor. a dozen years or so some public spirited citizens happen to be in the airport and ran across a guy named john fan who recently was the oldest recipient. he died when he was almost 101 and he received his medal of honor for action on pearl harbor day. john finn was wandering around from airport to airport going to deliver to schools about service and sacrifice and so on. and as the citizen discovered, john finn was paying for it by himself. indeed that is what all the medal of honor his head done. they travel around and paid for everything by themselves. this was an abomination, so i found the medal of honor foundation whose sole purpose is to support the activities of the

medal of honor society and as i said the number of medal of honor recipients dwindles and becomes more and more important that this mission be accomplished. mostly to talk to kids, which is the most rewarding and the most important thing that any of us does. education is the single most important thing we do. without it we wouldn't be here today and without it the next generation wouldn't be able to survive so it's important to teach them the values that brought us to this point. particularly that of service and sacrifice. now all of the medal of honor is say exactly the same thing, we don't wear the award for ourselves, we wear it for all those who can't. gemini were talking earlier and someone asked bob kerrey who is a metal honor recipient who used to be a senator from nebraska. i am not a politician and --

[inaudible] someone asked him what does it take to get the medal of honor? he said you have to do something. people up to actually see it. they have to be able to write and they can't hate you. think about all those people who served valiantly and nobody saw it. they themselves were killed or at was written off for either intentionally or unintentionally lost. you realize that all the recipients know that we represent everybody who has ever been in uniform and it is the message of service and sacrifice and patriotism that we bring to the children. we do it because the medal of honor foundation has -- gets the assets from donations in order to do it because without it we couldn't do it. we couldn't send medal of honor subject to talk about their sacrifice and how people in uniform today sacrificed for

them. it is interesting to note that there are 310 million people in this country and most of them do not know somebody in uniform so it's not -- the wide gulf has opened up between those people being served and those people who serve. it's important to close that so that young people understand what service and sacrifice is all about. to that and the medal of honor foundation put together a character development program, an entire curriculum with lesson plans and videos, all of which were taken from the oral histories of medal of honor recipients. we have 140 or so and you can do the math. we have 140 or so of these oral histories and there are 81 recipients. there are 60 and if we didn't get started doing this 10 or 12 years ago we wouldn't have 60

people on tape today whom we do have. and any teacher, anywhere, can teach all of it or part of it or teach not just civics and character development but history and politics and social studies of all types and varieties. it started out in pennsylvania and it's in all 499 school districts now. it's vitally important we get to every school district in the entire country. which is what the medal of honor does. it's not our sole mission but -- let me tell you briefly my experience talking to kids, which i do all the time, i was born of six. i'm a bad example. i'm not getting any less cynical as time goes on. most kids are not. when you talk to high school kids, most of them, especially

in inner cities in difficult circumstances, at-risk kids, live with the grandparents and so on. they are tough audiences. of this program gets to them and i remember after the test curriculum was caught in the very pennsylvania, i remember we shot a video asking kids to give us feedback and remember this one real cynical 17-year-old gang member. i mean this was a bad kid. he had the program in his lap and he is looking at the camera and he says i didn't know any of this. and he puts an accusing finger toward the camera which means that the people in this community -- why didn't i know this? it brought tears to the eyes. we can make a difference and we think we are making a difference. we get out to everybody, all the

kids, we will make a difference and the service and sacrifice of the people who came before us and gave us the torch of liberty, their sacrifice won't be in vain. i appreciate you having me. [applause] ..

>> sylvester didn't realize, did no until the day he enlisted medal of honor recipient, to note of the day he enlisted that he was not an american citizen, that his uncle had carried him as an infant across the rio. and al, and alien from mexico, 18 year old medic in the noncom one of the more astonishing stories than rubin. rubin, a hungarian jew, in a concentration camp, gets freed by patton's third army, and opens up these cans and off they go to open up more camps and kill the bad guys and all the rest in the war. and it was not a sure thing that if you got released from a concentration camp you would

survive. they were all starving to death, no food and the rest of that. at the time he was 15. he made a vow and said that if i survive, i will do whatever i can to get to the united states so i can join the army, become a g.i. joe, in his words, and pay the united states back for saving my life. his entire family was extremely intense. sure enough in 1948 he managed to get to the united states. by the state if you talk to them, you need subtitles. [laughter] i don't know what he is saying. in any case, a real character. he can't speak english at all, so how's he going to pass the armed forces qualifying test and get in the army? he's not. he cheats off a bunch of other guys. [laughter] he gets the highest grade. [laughter] he is really scared the captain wants to talk to them. the jig is up, i'm in big

trouble. he winds up in korea come is recommended for the medal of honor four separate times with four different actions. and his first, a real anti-semite kept sending him out left by himself, hoping he would not come back. it's now 50 years later, by the way, he was ultimately captured, spent time in a concentration camp, helps his fellow guys survive because he knew how to survive in camps. in any case, a bunch of his buddies get together for a reunion as a whatever happened to ted rubin but i don't know. i recommend him for a medal of honor. i did, too. they banded together, and make a long story a little bit shorter, wrote it all up and got it all done. i went to the ceremony at the white house in 2005, and met

some of the guys to recommend him to the award to one of them sticks in my mind. he was about 80, 82 years old, in a wheelchair, crying his eyes out in east room of the white house. he points at ted room and says that man saved my life is these stories, and ted is out there talking to kids all the time. it's the stories, the notion about the fact we fight to defend the country and we fight to a college admission but most of all we fight for each other. the notion of community, and where service, sacrifice. what it means to a committee, it's these stories which we try to get out. >> i want you to tell the story because if it wasn't for the congressional for the congressional medal of honor foundation, i would have never heard that, that story. you go on the website, anybody can go in the website emboldening any one of these. is the story is so unbelievable moving. and when he says that line, if i survive if i want to be a g.i. joe. it's an unbelievable moment for them when he talks with his

experience in the camp, in korea, and guy sitting there thinking they would just die. and he is telling them, helping them live spent the one interesting thing about this is the result of his and 140 other stories about kids, we want to part of successful and important the notion that you are not on your part of a community, and if you give up all is lost but if you don't give up anything is possible. you can give anybody any even cynical kid to think that way. >> so we'll have an opportunity -- [applause] >> for questions to find out more about these remarkable organizations and what did you and the people behind them. celebration hands, the gentleman will bring the microphone. he has one good hand, i guess. >> i enjoyed the conversation.

i pushed the peanut of education ever since i retired and went into consulting, but i've tried a very diligently to get senior instructors and rotc to be ex-military, and had one of them in california, a friend of mine, bob, a marine. and he was a great role model but he taught in j. rotc, we need to kind of band together and get more kids to see these role models out in jrotc. but i bent my spear on the granite mountain of ignorance. they become a political appointee, and they say education is an afterthought. so anything we can do, i'm now on the board of the national trust for wounded warriors, which is supposed raise a lot of money and work with a lot of 501(c)(3)'s, hopefully in the

future. but god bless you all for what you are doing. >> may i respond to the i agree with you. i think you fix on the most important thing we always have to keep in mind when we are talking of taking care of wounded warriors, educating people and so one. it's a question of ignorance at the end of the day come and go thing that will overcome ignorance is education, is ignorance is an inertia ridden characteristic. and it takes a lot of work to get it rolling, but we work hard enough, once we get it rolling we will be able to overcome old the inertia and the ignorant. >> for people who don't know, can you explain what the initials jrotc stand for? >> junior reserve officer training corps. the reserve officer training corps, but at a younger age in high school, and quite frankly the younger, the younger you talk to kids about what's important, the more likely they will be to have those outsiders when they grow up.

>> one of the things that has surprised us by how well it works, after the first two years we had several of our alarm saying, him, i would like to come back and i want to bring my wife. she doesn't believe how this plays changed me. so we created a second program, and this is basically a couples program, and a total of eight, so for men and lives, they come in for a week and the guys basically just want to share this remarkable experience with their wives. we are hosting at our ranch, we are hosting one group, i think it's in august but sometime this summer, anthony, it's the

loyalty we have him on the alums is just really quite remarkable. >> do you know what's very interesting is, i hadn't intended this but the connections to education at all, all three, jack's organization is doing a lot in terms of trying to put curriculum, educate the school. and edie script is actually getting into school. and i didn't realize that a lot of the folks who go to want to come back and go to university -- >> montana state university. >> other questions? jim? >> thanks very much. john, i'd like to direct a question to you. take a step further on the comment that you just made about one of the vets saying to his wife, you can't believe how much this change in. tell a little bit about what changes you see from the time that a that arrives, until at the end, and what that brings to

his life going forward. >> one of the things i would recommend is if you go on our website, and look at the video, the 11 minute video. there's a very high probability that it will make your eyes swept -- sweat but not in a bad way at all. of the several hundred that we've had come through now, very few, very few have had any experience -- and it is not about fishing by the way. is about guys whose orientation has been doing physical things, and now they are seriously impaired. however, there's something transformative about being in this beautiful, beautiful

setting on this water with people here care, genuinely care about you. we have a professional guide who volunteers his time, and a companion for each, for each of their vets. and they are with them the whole time. and they just, they just show them love and care and tolerance, and success. i mean, 100% of these guys are successful in doing this physical, romantic activity of learning to throw a fly ride -- flightline and ashley catch wild trout that you can see. such beaming that comes over their faces, it's just remarkable. we had a seal who had lost both legs and suffered very serious

brain injuries from bomb blasts. he couldn't talk either. but he's out on the dock, not on our pond but on another company company's pond, another friends bond, and he catches a fish. and it's a beautiful trout, and people are sort of cheering for him, and he can't talk, but he reels again, and the guide brings it in and shows it to them, and he is crying, just -- it's just hard to talk about it. it's really a wonderful experience. its success and it's swimming in this pool of love. and we have far more volunteers and we can use. we have training sessions for volunteers. it's just, it's an experience in which they are just enmeshed in

beautiful nature and in people who care, with people who care. >> we keep them together also by the way, we least a guest ranch and so they're all in the same place. we hope to do is to have enough money such that we can build a certified place, or place that will be capable to handle people who are severely handicapped. now we have to sort of accommodate, sort of fudge it, quite frankly. but we make it. but what we would like to have a campaign that would enable us to have our own facility that we would share with other organizations, perhaps with eagle bound, perhaps with another. >> tell folks what ada stands for. >> american disabilities act. sorry, rant and so forth, bathroom facilities that are appropriate. >> talk for a second, not about

it was eloquently talked about the impact it has on these veterans showing them that there's a future in opportunity and publish me. talk about the impact that the group has had on the community. >> one of our big problems is telling people no, because this is a program that everybody learns about it says g., what can i do to help? and you know not everyone can help. we have professional level tides for fishing. there's a certification program for that. lots of people around those think i'm really good fly fisherman, right? i would make a good guide. well, no. [laughter] so we have professional guide to basically live close to the ground.

i mean, they are not rich people, but they give up a big chunk of, they forgo the opportunity to get paid a few hundred bucks for a day, plus a big tip, to donate their services to us, to the men. and then there's the companions, and then there's the moms, when you're in a guest ranch, the same ladies are there every morning to take care of them, to make him pancakes, to remember this one likes this and such and such and such and such. and again, we have people who just outpour their love, their concern, and by the way, remember this is relatively new. my piece writing about this was in december 27 of those six, and

it's a fairly new organization. >> other questions? >> so let me go back to you for a second. one of the stories that are really appreciated about the son of the pilot who died, he was one of the first graduates, and he has been an eloquent spokesperson for the program, so could you talk a bit about the story? >> i will. captain hal lewis was the pilot of the c-130 that collided in the desert of iran, and his son was only eight years old at the time, and he was one of our very first students, and he actually went all the way through medical school, and he is now a pediatric oncologist. he wants to be on our board but he is so busy. we love him.

whatever chance we have, he's a great spokesperson and i'll tell you a little story about another spokesperson that we had. he is a young marine who was involved in a roadside bomb when he was in a record he was only 23 at the time. he didn't lose his leg right away. it was severely damaged on the upper fight, and they wanted to take the lead but he wouldn't, didn't want to do within. but he was a single marine, and it meant so much to him that we gave him the money that his mom was able to come down to new york to go to bethesda to spend a month with him while he was there before they moved him up to new york, that even a 100-mile race. he ran a 100-mile ultramarathon, which had never done before, to raise money for them. but what happened during that race was what really shows you the character and a grid of these guys. he got to mile 75, he was a very dehydrated.

the race the town key west and he was from new york but it was super hot that we can. he got to mile 75 and he was like, i'm just letting you know i have to stop. i'm on mile 75 and the high rate. my friend is a medic. i'm going to take a little break. you don't have to finish. you've done so much. is like no, i'll have 25 more miles to go. [laughter] and i'd like, my comic us. it's only 25 more miles. but the special operators, anyone knows, they don't give up. they do not quit. so he rehydration himself against the better judgment of the race director, and he finished that race. he raised $100,000 for the foundation. and has to do with the grit and the character, told a story about use of facebook saying he couldn't quit, he would not quit. and it was because of the guys that he served with and his team and also his sense of family.

>> we will take two more questions. first i will tell you the last question, and the last question is, for the audience and for folks are watching online and on c-span, i'd like each of you to talk about what should people know about them, as a nation, and their veterans? what's the most important thing for them to understand about their veterans? and so we will let micah take the list -- wheel nut mike take the next to last question. >> i run a consulting company. edie, a specific question, we were severely tried on six august with the death of 38 in that shootout of the chinook, and a 32 special operators. large, horrific impact. could you, could you tell us a little bit about what your

foundation did with the immediacy and the beautiful commemorative service that was done on virginia beach, and then of the beautiful funeral, if i can say that? can you comment on that, please? >> i can. that was a horrible, horrible tragic accident. we have never lost that many special operators in one incident. so the whole community was just reading. and not on our foundation but there are other foundations as well who all pull together. so i do want to say it is a team effort, but within our foundation, that actually took out a large about a special operators, navy seals i'm also air force combat controllers, then there's also the conventional forces of the five military, army aircrew. and normally we don't cover those guys, but our board got together and said we have to. we have to cover all of these.

so all of those children are in our program right now and we want to make sure the go to college. where they are of the age right now, but in addition to that we stepped in and we said we need to make sure all these families, extended families, huge and out of families ones can get to the services. this is not a normal circumstances. so we again overnighted money to make sure that all families got to go to the services that need to go to where they needed to be. we hope we don't have another tragic accident like that again. >> we will start with jack. in a minute or less, actually i think we'll start with john. in a minute or less what should the nation know about its veterans and its responsibilities? >> the foundation that i'm with, foundation for research and economics and violent stresses the importance of social onto for no ship. and we are involved in creating warriors and quiet waters.

there were three board member's in the oddest at the moment. danny, john, and ramona. but social entrepreneurship is really important, creating warriors and quiet waters was a hard thing to do. and it may be can only work in a place like bozeman, but once we have the template built, it can be replicated. my fondest hope, when i started talking about it initially five years ago, my hope was we would build something that could be replicated across the country. of course, not necessarily flyfishing. you wouldn't be flyfishing presumably in texas or florida, maybe in new york you could, but i would just love to see our program be a model that was reproduced throughout the nation. and it could be with any number of things, not, it's not about flyfishing. it's about showing love and

appreciation for really wonderful people. >> your question is about veterans, and i guess my thought on that is i think that we're pretty glass that even in our younger generations, that we have people that still stand up to say, you know, i will go, and that takes a lot of courage, knowing that they will be most likely going to foreign countries, and i think that we're in good hands with their veterans of today. and it is because of the veterans that served in the past. >> jack? >> two things that come immediately to mind. the first is that nobody gets authority and responsibility at an early age more than veterans excellent people i think about hiring people, hiring a veteran, you're getting the absolute cream of the crop, the best that this country can produce. and about general, about veterans generally, whenever i think of them, you have to think

about war. but i'm always reminded of the observation that john stuart mill he said that war is a terrible thing but it's not the worst of things. a man for whom the most important thing is his own personal safety is a miserable creature, who is made free and kept free by the exertions of better people than he. we are very likely come as you say, to the people we have. >> i think the incredible remarkable thing about all three of these organizations and what they do is really not that they are veterans organizations. the greatest service that they really perform is the connection that they create between our veterans and us. and really, it's more the impact on us, which is much more incredible, whether it is a receipt be and going and educating a new generation, or

saving a child and making sure they get through college and become a doctor, our connecting a community to be able to understand and appreciate the value for what veterans do, and what they as a community can't accomplish. this is really about changing and enriching america. it's not just about helping veterans, as important as that is. so on behalf of all of us, and i'm sure everybody got thank you guys for what you do. and please thank us and help me thank us. [applause] >> thank you all for coming. [inaudible conversations]

>> the libertarian party holds its 2012 convention this weekend in las vegas to pick its presidential nominee. c-span coverage begins tonight at nine asia in particular debate among the candidates for the libertarian party presidential nomination. then at noon eastern on saturday, delegates hear speeches from the candidates and vote on a nominee, all that live also on c-span. and more road to the white house coverage this weekend. president obama holds a campaign rally with first lady michelle obama in richmond, virginia. that gets underway at 4:35 p.m. eastern tomorrow, with live coverage on c-span, c-span radio and c-span.org. >> spend a weekend in oklahoma city with booktv and american history tv. saturday at noon eastern check in on literary life with book tv on c-span2.

including the governors must read political books, oklahoma university present and former senator david boren on his a letter to america, also rare books on galileo and others in history of science collection at ou. and sunday at 5 p.m. asia, oklahoma history on american history tv on c-span3, 20 oh columbus city bombing memorial with codesigner. plus a look at african-american life in 1920s oklahoma, and native american artifacts from the special collections at the oakland history center. once a month see spence local content vehicles explore the life of cities across america. this weekend from oklahoma city on c-span2 in three. >> over the next few days, c-span's "washington journal" is live in north carolina ahead of the state republican primary on tuesday.

>> earlier this year, the house homeland security committee look at the security of chemical facilities. the hearing came after the release of an international memo from the homeland security department detailing problems with the office that regulates chemical security. homeland security undersecretary an official with the dow chemical both said u.s. chemical facilities are safe. >> well, mr. meehan is here, and that makes two of us, and with the approval of minority that we can start with the two on our

site, we shall start. the committee on homeland security subcommittee on cybersecurity infrastructure protection and security technologies will come to order. subcommittee is meeting today to examine the chemical facilities antiterrorism standards program at the department of homeland security. and before i start i just want to mention that we would remind our guests today that demonstrations from the audience, including the use of signs, placards and t-shirts, as well as verbal outbursts are a violation of the rules of the house. the chair wishes to thank our guests for their cooperation in maintaining order and property coram. i would recognize myself or an opening statement. i wish to thank undersecretary beers, director anderson, deputy director will for your cooperation providing our committee with detailed briefing on the challenges facing the infrastructure security compliance division. ..

most hated the congressional mandate forced development of the cfast program at an accelerated pace. this resulted in poor program implementation leaders and

inappropriate hiring and wasteful expenditure of taxpayer fundss. congress directed the secretary in the 2007 appropriations bill to develop a regulatory framework within six months to address the secured u.s. chemical facilities. that the shorter period than we envisioned in the bill we worked on in this subcommittee. however this short time line was an expression of congressional urgency and concern for at the chemical facilities and i don't believe it really was a hard deadline but nonetheless we wish to urge upon the executive branch our concern at that time in the hope that this would be expedited. since that time our homeland security committee conducted numerous oversight hearings and departmental briefings where these compliance problems were never mentioned. last year i along with my

colleagues on both sides champion dale long term extension of the department of cfast authority, this was also consistent with the request by the administration of a long-term extension and at that time these compliance problems were never referenced to us. the cfast was cited as a public/private partnership for securing infrastructure and that was the hope of those of us who had any part in offering legislation in the first instance. fortunately these program challenges for detailed in the anderson memo requested by mr. beers and exposed by fox news. no one likes to be surprised especially those of us in congress. we have been a surprises we create for ourselves. wholesale mismanagement of this division was disturbing particularly to someone like

those of us on the subcommittee who have been strong cfast advocates. the report was disappointing but the cfast program has many faces and appears to be failures in the memos in the compliance phase or final phase of the program. cfast improve the security of the chemical industry identifying chemicals of interest in establishing a threshold for those chemicals. it recorded high risk facilities to conduct vulnerability assessment of security plans and adopt performance standards that identified vulnerabilities. the government spends hundreds of millions of dollars on the chemical security program and the private sector invested millions of cfast security improvements. these are assets that should not

be wasted. my hope is the memo relates to failures in the compliance phase of the cfast program that this is not used or misread to people, that we wasted money in the government and the private sector has wasted money as they dealt with cfast improvements. rather i believe we have had a model of private public partnership. i hope this will be continued. i was pleased to see your quick response to the management phase by issuing your list of corrective action items. what was missing in the list is priorities and time lines. without that it seems priority and supervision you end up

hiring unqualified inspectors and paying for jobs that don't exist. the anderson memo reveals the program was victimized by mismanagement but mismanagement is correctable. in no way indicate failure of the underlying program or security achievements that you share that sentiment as evidenced by conversations, we will believe this is a worthy one that needs to be completed. the white house supported extending the life of this program. it can accomplish its mission. and outlined in their s s p. you are responsible for management of the program. undersecretary of the national

programs director in charge of cfast and adjustments of these management difficulties are under your watch and we will be interested to hear how you are and intend to correct those failures. it is my belief and i believe it is shared by other members of this subcommittee that there should be no more surprises as we implement the cfats program. we will conduct vigorous oversight of the infrastructure security compliance division action plan. this will include -- we will expect have quarterly briefings by director anderson to the subcommittee staff and what reforms have been implemented and i have included a more detailed quarterly report request and asked that it be made part of the record. if there is no objection we shall enter it into the record. is my pleasure to recognize the

gentlelady in new york, miss clark, ranking member of the subcommittee for her opening statement. >> thank you, mr. chairman. thank you for calling this hearing. the anti-terrorism standards program. the undersecretary's office provided a confidential memorandum report that he ordered in the summer of 2011 for internal use but was leaked to the news me and the summary article published in december. we have been provided with a rare insight into the internal workings of regulatory program experiencing drastic spasms. the cfats issues are greater than leaks in the internal memorandum that made headlines last year. let me review the facts. the department established cfats in 2007 and received

$442 million since then in appropriated funds to implement the cfats and ammonium nitrate program. the department has more time for the successful issuance of regulation and the establishment of a regulatory framework and dhs engaged in a chemical securities summit. the information memorandum contains information that raises questions about the accuracy of those presentations. the information memorandum seeks millions of dollars of training contracts have resulted in no client inspector training. the information technology systems are insufficient to meet i s c. d needs as regional and headquarters location invested in a needed capabilities inconsistent with the mission needs. the information memorandum identifies a series of institutional flaws such as lack of a system for tracking usage

of consumable flies, pay rate not aligned with job climates and weak leadership providing the appearance of favoritism, cronyism and retribution. here's what is really disturbing. the fact that dhs raise none of these points in its discussion, instead presenting the appearance of an ongoing regulatory program. the undersecretary testified he was not aware of the scope of the problem until 2011 the senior i s c. d official in charge was possessed -- detailed information is not available to the undersecretary. additionally congress is required to report language both -- briefing on the cfats program, none of which reported the challenge iscd was experiencing. it is our job to find the root

cause of the challenges experienced by iscd to avoid similar problems in other agencies and testify how prior appropriated -- what value was received and how we should identify the official or unofficials responsible for the failures in iscd performance. mr. chairman, besides the fact finding we need to do there's a bigger question of authorization. it seems only reasonable to me that in light of these leaked memorandum this, this week memorandum and the problem it outlines the cfats program it would be who of congress to think again about giving the program and extend authorization without further committee oversight and guidance. i have offered two amendments limiting the seven your authorization proposed in h r 901 and the idea of limiting the

authorization of this troubled program looks pretty good today. last congress we brought in all the stakeholders to craft legislation to fully authorized a program. it was a major undertaking. we brought in industry and labour and everyone else concerned about this issue. that is the guidance and operation this troubled program needs. what i do know is the from line workers in every government program, law enforcement, management or regulatory program, are the heart of the service to the american people. to protect us they make sure things are secure. indirect business and industry and citizens every day. these are the important workers in your cfats program and i am very keen to hear the testimony of david wright who represents the inspectors who make of the

inspections, the court and the heart of this program. we mean to get their views on the problems you found if we are to solve these challenges. mr. chairman, i hope we are going to hear the answers we need today and i yield back the balance of my time. >> the gentlelady yields that and other members of the committee are reminded their opening statements may be submitted to the record. we're pleased to have three distinguished witnesses on this important topic in our first panel. rand 11 beers is protector of the department of homeland security. a position he has held since june of 2009. he is tasked to reduce risk to fiscal cyber and communications infrastructure and collaborate with government. the private sector belong government organizations and international bodies to prevent illegal respond to and mitigate threats to national security from acts of terrorism and

natural disaster another events. penny anderson is director of the department of homeland security, national protection and program director office of infrastructure protection, infrastructure security compliance division. she is responsible for leading implementation of dhs regulatory authority for chemical facilities as well as supporting national level critical infrastructure risk-management preparedness and protection programs before joining in ppb she was the federal security director of west michigan from november of 2007 to july of 2011 and was primary appointee of coordination and oversight to transportation security matters in west michigan including implementation of species as a security compliance programs in that region. dave wulf joined the the, the violent security in july of 2011 as the the director of

infrastructure security compliance division leaders that iscd in the office of infrastructure protection. mr wulf lead implementation of the chemical facility anti-terrorism standards program to assess high risk chemical facilities leaders will promote collaborative security planning and to ensure covered facilities meet risk-based performance standards. mr. wulf manages the department's efforts to implement a regulatory regime for ammonium nitrate products. prior to joining dhs he held a number of positions at the bureau about all, tobacco, firearms and explosives and chief of the bureau office of regulatory affairs and director of the national center for explosives training and research. thank you for being here. we remind you your full written testimony will be made part of the record. we ask you for a summary of five minutes.

we have the light system to guide you on that and we will start from my left to right with secretary beers first. >> thank you, chairman lundgren and making member clark and members of the subcommittee. i am proud to discuss the department's efforts to regulate security and high risk chemical facility under the chemical facility anti-terrorism standard act. alongside me as you indicated are penny anderson and david wulf leaders of the director and deputy director of infrastructure security compliance division. they manage cfats program and their authors of the internal assessment which i will discuss shortly. they are here with me to answer any questions you might have about the original content of that assessment. as you are aware the current statutory authority to implement cfats, section 550 in fiscal year 2007 department of homeland

security appropriations act as amended was recently extended through october 4th, 2012. i strongly believe the cfats program is a program we need and i am confident it has made america safer and i welcome the opportunity to work with this committee and congress and all levels of government in the private sector to further improve the vital national security program. sins cfats's inception we issued the basic rule and define the chemicals of interest and jointly conducted two surveys with industry to the fine the facilities and have substantial enough quantity of these chemicals determined to be high risk. after receiving initial submissions of 40,000 facilities potentially under the program we have narrowed the number of facilities to approximately 4500. in that process 1600 facilities complete remove chemicals of interest and 700 other

facilities reduced holdings of chemicals of interest to level resulting in the facilities are no longer considered high risk. these actions many of which we believe were the result of choices made by facilities that the passage of 550. and adoption of cfats regulations of reduced the number of high-risk securities located throughout the nation and correspondingly made the nation more secure. the department has done much work over the past two years to establish and implement the unprecedented regulatory programs cfats clearly has challenges it still needs to address. recognition of this upon the arrival of the program's new director and deputy director of this past summer i asked them to provide for my consideration their views on the successes and challenges of the cfats program. candid legal honest assessment

and critiques of valuable tools in evaluating progress and determining where improvements are needed. furthermore an unprecedented program like cfats such corrections can be expected and ongoing decisions will need to be made. in late 2011 a detailed report was hand delivered in november. it is important to noaa in addition to reference challenges the report also proposed consideration, to address these challenges. and addressing issues to address those. we now have nearly 100 action items in this plan and each has been assigned to senior leadership team for actions and we have seen progress on many of these items. for accountability planning and tracking purposes and members of

the leadership team have been asked to provide milestones in a scheduled for completion of each of the tasks assigned and the program's acting chief of staff will monitor progress. in addition program leadership meets weekly with my principal deputy undersecretary susanne spaulding and provide updates as appropriate. as i said, i am happy to report we have already made tangible progress in addressing some of the challenges of this report. one issue identified in the report is completion of site security plan and we have reviewed those in a consistent, reasonable and timely fashion. we have an interim review process allowing the department to authorize tier 1 security plans and effective and timely manner using the interim approach over the last few months, iscd has been able to quadruple the number of

authorized plans specifically as of january, we have 55 different s s ps that have been authorized and expect to complete all the tier 1 security plans authorization and notify facilities in coming months ahead. we expect to issue authorizations to tier 2 facilities in fiscal year 12. this interim review process is under way we are working on an even more efficient long-term approach to the security plan reviews for tears 2, 3 and 4. the department takes its responsibility seriously to the cfats program and the nation's security and we are moving forward quickly and strategically to address the challenges before us. we believe cfats is making the nation safer and we are dedicated to its success. we will make the necessary course corrections to improve the program and better protect the nation. thank you, sir and madame and all members for holding this

important meeting and i am happy to respond to any questions you might have. >> thank you very much, mr. secretary. miss anderson? >> thank you, mr. chairman. thank you for the opportunity to meet with you and members of the subcommittee. i appreciate the opportunity to talk about the cfats program, where we are and where we need to go. i particularly appreciate the opportunity to provide some context for the internal memorandum. we are all aware that is what this was. it is not an investigative report. was an internal memorandum for my leader expressing mr. wulf and my observations about what we fought our priorities should be an challenges are and most importantly the way forward and because it was written in that context and in that way it didn't provide the context that would have been necessary for external readers of the program.

and i appreciate the opportunity in that regard to provide context. i would like to say i view the challenges identified with in that memorandum as not insignificant i also do not view them as insurmountable. an awful lot of good work has been done by a lot of good hard-working people and we can make the corrections necessary to keep us on the right track and move down the road. i look forward to discussing with you that way forward. thank you, sir. >> thank you. the chair recognizes mr. wulf to testify. >> i don't want to reiterate the remarks of the undersecretary and director anderson but i appreciate the opportunity to be here today. both director anderson and i arrived nppd several months ago

and i cannot say enough how excited i was to join the team, specifically within our division. a -- relief filled with a huge number of talented and committed individuals who are completely dedicated to moving cfats and our ammonium nitrate program forward. as director anderson mentioned, our report identified a number of challenges. in no way are those challenges insurmountable. we are looking forward to continuing to work with our industry stakeholders as well as stakeholders within the union to move the program forward and looking forward to answering questions about the program today. thank you so much.

>> all right. we will have a first round of questions five minutes apiece. recognize myself for the purpose of asking questions. mr wulf, ms. anderson. if i take the testimony you gave just now i would think everything is hunky dory and we are moving ahead and have minor problems we don't have to worry about. i would hope that would be the case but in the memo you outline some serious problems. if you were to make an overarching statement about the nature of the problems what would it be? ms. anderson? >> thank you for that question. and overarching statement about the challenges, i think many of the challenges we are facing our challenges that are not uncommon to a new program standing up in a government environment,

standing up very quickly. the statement you often hear is building an airplane while flying it. what we are doing is moving in the right direction. i think a lot of the work that has been done is important. it has provided a sound basis for the program technically and the vast majority of the challenges are not programmatic but more administrative in nature. >> let me ask you this. one of the first thing he mentioned in the memo is at the beginning of the cfats program specific requirements of the congressional mandate resulted in extraordinary pressure to proceed with the development implementation of the program at an impractical pace. what do you mean by that? congress often urges the executive branch to get moving on something. this is important. we always use the expression it is not rocket science but it does involve science and chemicals and chemistry.

what is the cause of this extraordinary pressure? is that really an excuse for what you found? >> i wasn't here when the program stood up. difficult for me to speak for what is in people's minds people who are not here to talk about that. but what has been expressed to me and i defer to the undersecretary to clarify or add to this that there was every effort to understand, recognize congress's sense of urgency in terms of the importance of this program and making sure chemical facilities were secure and we mitigate risks to those facilities and we rushed forward rather quickly. in the spirit of any new

regulatory program or any new program, there are bumps in the road and take some course corrections. a big program, complex program and it is not unusual to encounter challenges. >> secretary beers, the administration asked fred extension, as permanent as you can get in the executive branch, multiyear extension. one of the things i supported because i believe in this program but what would you say to critics who suggest the revelations that are contained in this memo are evidence that we have to go back to ground zero. that the program has failed. that this is an indication of

lack of foundation of the program itself? >> in answer to that i would take two things. the first thing is as indicated by the chart up on the screen and i realize it is a little busy. if you were to look at the 12 steps that are in that charge, reading left to right, top to bottom we are in the tenth step of a 12 step process at this point in time. my first point would be we have come a long way from the very beginning of the program in terms of things we have accomplished. as we have gotten to the compliance stage, as we have gotten to the security plan authorization stage we have come to the realization through a number of difficult steps and the result of the report that ms. anderson and mr. wulf

provided us that we need to make sure that we have all of the people and items in place that will allow us to execute program successfully in the final stages. my first point is i think we have come a long way. we clearly have challengess. the second point is as long as the program continues to operates on an annual authorization basis since the original authorization it leaves a degree of uncertainty as to the long-term status of the program and i believe that we and our industry partners will be on a much stronger footing if you all indicate to us that you believe in the program as we do and want to see it go forward. having said that we obviously know you agree deal of

information about the progress we make with respect to the plan of action and would hope that in the oversight function we would be able to provide that. thank you. >> my time is expired. miss clark is recognized for five minutes. >> undersecretary beers. your office provided the subcommittee with an internal memorandum entitled challenges facing iscd which identified challenges facing iscd has continued implementing the cfats programs including those related to human capital management, strategic planning, procurement and program administration. many challenges i testify in a more emmer -- memorandum longstanding issues to develop a cfats program for some time.

nevertheless when you testify before the house committee on energy and commerce on the cfats program in march of 2011 you gave no indication there was significant problem with the program's progress. when did nppd become aware of the problems with the cfats program and what problems were brought to its attention at that time? >> as we have briefed this committee and other committees at the point in time that i asked for this report there have been three different pieces of information or problems that come to my attention which the committees have all been briefed. the first was related to localities and the second related to the slowness of the

authorization of the site security plan and the third was related to that hearing mistake that occurred within the program. those three items represented and the last item came to my attention in june of last year. those three items and report that together with assistant secretary kyle commissioned in december of 200010, formed the basis of wanting to make sure that we had a real thorough scrub of the program and that is what resulted in the report. >> challenges described in the iscd memorandum raise questions whether iscd is positioned to make progress implementing the cfats program especially over the short-term. what barriers does iscd face overcoming challenges discussed

in the memorandum? what can npp do to help iscd overcome these challenges and what can the congress take to help nppd and iscd overcome these challenges and does nppd intend to discuss a study to determine the extent to which the management challenges outlined in the iscd internal memorandum extent to nppd component? >> the nppd front office as well as infrastructure protection front office stand fully behind the iscd director and deputy director. we provided them with human capital support in order to be able to realign the positions and the people in the organization to ensure the best possible match of requirement

and qualifications. we have overcome the restrictions that existed from dhs whether there could be training officers within the office. we have regular meetings with the leadership of the office in order to ascertain where progress is on the plan of action and whether it there are obstacles identified that beater ship nppd can overcome and can the security of homeland security -- >> let me ask finally in light of the detailed failings of the program and especially in light of the managerial deficiencies outlined in a recently leaked memorandum is it your opinion the program should be reauthorize for seven years with no recommendations from the

committee and if so why? >> it is my hope the committee will authorize the program for the full 7 years to recount stability with the program and i believe we can meet the oversight, and a recipe for going forward. the clear intent on the part of leadership, not that we didn't do. not the we didn't realize what support. committed leadership will go forward to authorize the program to the full seven years. >> the gentlelady's time is expired. mr me and is recognized for five minute.

>> thank you, mr. chairman, for your presence here. and to internally resolve these issues for businesses and others for the ultimate determination. and it was a concern. can you talk about the formulas that were taking place and the tears were identified and how that resolve itself at the first level. >> we identified levels of holdings sites you might have. to determine whether or not a second look was required. that information was required as indicated in my opening

statement 40,000 facilities were identified. itself reported. >> any of that, any random checks to make sure that with accuracy in self reporting? >> the check was the second curing process which was a much more detailed -- excuse me. a second assessment which was a much more detailed vulnerability assessment which was provided by those companies which reduced 40,000 facilities to 4,000 plus facilities. we have a clear indication that we were getting to the heart of the high risk, full sins of -- chemical facilities who were put into tears depending on their vulnerability of those holdings. that provided an ability to look at each of them against risk

calculus that suggested how great the risk was. >> at some point in a program there were flaws in that process. you identify those flaws and what we did to correct them. >> yes. what we discovered in the curing process is the information that was used to put companies, in particular tiers, the original tiering was done with non classified dummy information in the sense it wasn't what we were going to use but gave us enough of a sense within the ballpark of what the risk factor was. when we did the final tearing that information did not get substituted with the information that was classified which was a narrower parameter of how high

the risk was. in the sense of how many individuals would be affected by a chemical release in the vicinity of the plant. so as a result of that we discovered that we had missed teetered a number of facilities and those facilities which were -- >> the detriment of the facilities as a higher risk for less of a risk? >> all of the tiering results cause a reduction in the cheering or stayed in the same tier. no company that was miss tiered went to a higher tier level as a result. >> did any company's challenge their tiering? >> with respect to the read tiering no. companies change their holdings over time. they have new procedures that they put in place.

the program allows them to come in and resubmit a screen as to whether or not that would adjust. >> is that done in an fashion? [talking over each other] >> at any time. >> one last question in the time i have. miss anderson, at one point in time you talked of little bit about management and the culture of where there were some senior officials with technical and other kinds of performance issues that have been raised and have not been checked upon oregon and checked. can you elaborate on that, what has been done to alleviate that issue? >> thank you for the question. i am not sure we identified any ethical interest per se from among those you are referring to but certainly cultural challenges have been something we found it and are working to

overcome. it is a function of putting together a large group of people quickly. they all come from different places with a different life experiences and we're putting them together and asking them to work together as a teen. because of those different experiences they have different outlooks on where we need to go and how we need to get there and sometimes some of the nice things fall by the wayside in a rush to do that. what we are doing is everything we can to create a cohesive culture, to bring everyone into the team as an engage contributing member of the team and to address the concerns they have with regard to consistency, transparency and fairness and we have done a number of things in that regard. i have monthly all hands meeting both electronic over the telephone and in person with our

headquarters folks. we have reinvigorated or reinstituted the newsletter. we are developing a share page. an online page where we share information with each other. we have an open-door policy and a series of e-mails where we're hearing about the status of things. we are doing everything we can to be as transparent and make as much sense as we can to be as consistent and let all the members of the team know what we're doing and why we're doing it and the direction we're going and solicit their active involvement in the process. >> thank you. >> the gentleman's time is expired. we recognize miss richardson for five minutes. >> according to the notes i have here dhs began inspections of tier 1 facilities in february of 2010. by september of 2011 you had performed only nine of a rise inspections and as of

january 23rd, dhs have only completed 53. are those the correct numbers? >> 55 now. >> 55 out of how many that need to be done? [inaudible] >> your mike is not on. >> the overall number that would need to be done is about 4500. the tier 1s are 110 and 111. >> of the 55 all come out of here -- germac 261? >> yes. >> in light of that power you planning on completing these if it was only done 4500? >> the current plan is we will finish the side security plan reviews for the tier 1 facilities in the next several months and then move on to tier

2 facilities in the remainder of fiscal year 12. >> what time do you think you will start tier 2? >> sometime this summer roughly. >> will be tier 1 facilities be required to submit new s s t -- ssps even though completion is just finishing now? >> the plan is the plans that we have now will be reviewed and if they are authorized, than we would go out with an authorization inspection to make sure that the plan as submitted represents a reasonable approach to the facts on the ground. the inspectors will do that.

if the inspectors then feel that that is true then the plans would be approved. what we are talking about here is as the security plans are authorized, we have authorization inspectors where our inspectors go out and look at each of those sites. that is the next to the last step. >> i have only got two minutes and 16 seconds. my understanding under cfats, they resubmit their security plan every two years to iscd -- to tier 1 or 2 facilities. is that correct? >> the regulation does suggest that but also offers flexibility in how we implement that. >> my question is if we are made in conducting these are you still going to be requiring these companies to submit them on the two year cycle or are you

making an adjustment? >> we are focusing as a matter of priority in clearing the plans we have. at this point we do not anticipate in the near term requesting recent mission of ssps we have authorized for the first two year submission. >> the information memorandum also raises concerns about the content and conduct of a compliance inspection has not been defined. is possible the compliance inspection will yield different results than the authorization inspection along disparity in results. severe implemented changes to address that and if so what? >> we have a process under way to ensure to the extent possible that doesn't happen but that the

asked director anderson. >> thank you for the question. in fact while it is true we have not yet completed our policies and procedures in terms of the way forward for in compliance inspection what we have done is held off conducting further authorization inspections pending that information so we can make sure our authorization inspection are consistent and appropriate as they relate to our compliance inspection. we want to move together. >> ten seconds left. according to the memorandum, you have approximately 108 inspectors and those inspectors can only inspect 10% to 15% of this facility. is that correct? >> we are currently evaluating our work force in terms of what it takes to do an inspection and when we fully conceptualize what

an inspection is and what it takes to do that we will be projecting our capabilities with existing work force. >> my time is expired but one more question before we release the panel. thank you. >> thank you, chairman, thank you, folks, for being here. i will not direct this question but i will start with mr. beers and then perhaps both for one of the other two can add something to this. the flaws in the program according to some information you submitted to us in preparation for today which i commend you on the way it was put together, did not appear overnight. how did it happen that the information in the leaked memo made it to the media before being shared with congress or

this committee? >> what happened with the arrival of the report from director anderson and that the director wulf was that we had not done a thorough review to insure that there were not more issues and questions and work proposals associated with that and we were caught in a process before we were able to come to you and discuss it. >> how many individuals had access to this information? >> to this information? >> the report that was leaked. >> i can tell you within the office of the undersecretary i believe that number is three.

myself, my deputy and the chief of staff. i have to ask miss anderson how many people had access in her office. my understanding is only two people in the office of the assistant secretary had it but i am not sure of that. >> thank you for the question. there were in fact seven hard copies made of a final report. two belonging to deputy director wulf and myself and the remainder moving forward to our leadership. there were other individuals involved in the transfer of those documents the only seven hard copies were made. >> are you saying only seven individuals have access to that or do they pass that to someone else? the seven hard copies? >> i can't speak to whether or not other folks who received copies -- >> looking from five to maybe 13

or 14 people had access to this. were any of these people interviewed subsequent to the release of the newspaper? >> there is an ongoing review of that. >> i will not delve into questioning any further on this but perhaps at some an time we can get more of an in-depth explanation from law enforcement. i understand that clearly. this anderson. miss anderson. that probably in further response incorrectly but one of my colleagues asked where we were headed with the process. what did you mean by cultural challenges? did it have anything to do with the leak of the memo to the media? >> thank you for the question.

when i answered the question about where we were headed i believe i was answering a question that was specifically directed towards our cultural -- the word ethical was used. we are headed in a lot of directions depending on the challenge. >> let me narrow my question. talking about a challenge, cultural challenge as far as information being leaked or what information can be shared or what information is contained because in my experience, at least in the nine years i have been with the federal government is u.s. attorney in congress we pretty much take an oaf and there is an understanding of what information stays within an agency and i am sure you will agree that no one other than designated individuals should speak with the media. some one wants to make a name for themselves or at least read an article or hear of an article

they were associated with that can you elaborate on that? >> yes. i share your disappointment in the week of a report. i can't speak to the motivations of the person who leaked it because at this point we don't know who did leak it. >> we know what the motivations are when something like this occurs. i am not holding you folks responsible. i am concerned about as you say the cultural aspect of this. what has to take place before we get to the point that this should not be done? >> i don't believe the cultural challenges identified in the memorandum can be attributed to the motivations of the person leaking of the report. >> my time has run out. i yield. >> we will do a quick second round sins will have four of us here. the first five minutes.

this is to miss anderson and mr. wulf. you have gone a pass today so we're going to hear from you. in a memorandum there's a section which talks about inadequate training capability. due to restrictions placed on our hiring the division has not been able to hire personnel added dickson -- abilities needed to appropriately achieve our mission. one example is training. what restrictions placed upon hiring are you referring to? >> that passage of the report referred to a policy and the undersecretary may be and a better position to speak about it but a policy that is no longer in existence within nppd that i believe was in place to

try to centralized training function within the directorate. that was a policy that at the time precluded our division from hiring into the division, thiatbutm

>> even with your fiscal year 2015, that is still eleven million that needs to be spent. yet in the memo there is a citation of budget constraints as an obstacle to hiring and training personnel. what are the budget constraints? >> the budget constraints to hiring and training personnel are in part what mr. wulf was alluding to. that we couldn't use the money because policy which was a centralizing policies for dhs didn't allow that to happen. other carriers are a result of the program wasn't moving as evidenced by the slowness of the authorization of the security plan as rapidly as we had anticipated when we requested

the money but let me turn to director anderson to elaborate further. >> i concur. >> you have a $25 million budget to carry over $14 million. that is still $11 million so you are not saying there are constraints expanding those funds for this purpose. >> at this time i don't believe we have. >> mr beers. the iscd internal memorandum implies some of the challenges involve human capital management procurement and program ministration that are outside of iscd's control. they could result from factors imposed by such things as nppd and budgetary policies, procedures and practices. to what extent are the

management problems outlined in the internal memorandum attributed to various associated with policies, procedures and practices aside for what you already said about the hiring? >> with respect to the procurement in the administrative issues, those are areas where the alignment between iscd and the office of infrastructure protection and the office of the undersecretary needed to be better aligned with one another and the information flow needed to get from the bottom to the top so that we were aware of those problems and could fix them. this is from my perspective the most disappointing thing about this discovery which was in

epitomized by the failure of the office to report the tiering problem we described before. i have a consistent policy that i told people that i want to hear bad news first from people who work for me and not people outside and i was extraordinarily disappointed by this and have used it as a teaching moment with respect to the entire event the 25. wasn't that i hadn't said it before but this kind of problem existed then i needed to reiterate as loss strong possible language that this kind of behavior was unacceptable and didn't do justice to the people who work for me and didn't allow us to fix the problems that they had. >> i appreciate that and hope we don't have too many more teaching moments. >> thank you, mr. chairman. i want to go back to a little

bit of what congressman marino was trying to get at. i want to ask a couple questions about the status of the investigation of who leaked the memo. who is conducting the investigation and can you explain the process? is it within dhs? >> the office of compliance and security which is an office within nppd run by a certified law enforcement officer. is conducting the investigation. it was begun in the days after the leak. the process is to go around and determine first of all who had possession of the report at one point in time. director anderson has indicated two of them prepared the report. i don't believe there was

anybody below them who had access to the report but i will let them speak. .. the >> process begins shortly after

the week you stated? >> yes, ma'am. >> and its ongoing? >> it's ongoing. it's not one interview necessarily it may be reenter views of the same person over and over again in order to try to get the story straight. >> got it. thank you for a much. i yield back the balance of my time. >> the chair recognizes ms. richardson for a second round. >> thank you, mr. chairman. so if i understand you correctly, you've completed 55 of tier one and expect to be done some point in the next couple of months and then you will be starting to hear too. when do you expect to complete tear number two? >> the expectation is sometime in fiscal year 13 but let me ask director anderson if she can be more specific on that. >> thank you. thank you for the question. i think when we talk about completion we have to talk about what we mean by completion in the context of the process. what we have completed so far is

we have authorized or conditionally authorized 55 security plans. of those 55, ten have had authorization inspections conducted. the remaining 45 authorization inspections are linda que to be conducted. we expect very soon to have completed the reviews of the actionable tier one and i see actionable because we had some tier one facilities that are not being actively reviewed because they've had a redetermination request that reef received from the facility over reasons like that. as we haven't continued to review the ssp because the we evaluate their tiering. we've already begun reviewing the tier to site security plans and expect to have completed the review is in the coming year, no later than the end of 2013, but hopefully will be for. >> the actual inspections wouldn't take place in tier two

this year? >> i do not believe we will have the authorization inspections of the tier tiering and fy 12th. >> i have a tier two facility in didier need and i will forward the information that we have been patiently waiting and i am very concerned as this process continues. my next question has to do with your sleeper work force. according to the notes from the prior briefing that we've had, there's been a high reliance of contractors in this particular department, and the question is whether there's been an over reliance on these externals folks to what degree do we think that it's appropriate for them to be performing the critical functions such as training and development was, ssp technical writing. would you agree that there still is -- what is the reliance of the percentage in contractors verses internal employees.

>> this is a problem or an issue that is in the nature of the organization of the department of homeland security. there are seven components which came as legacy organizations to the department. the headquarters elements of the department did not pre-exist in most cases. the standout of the department comes of the initials stand up of the department was very contractor heavy, and as one nppd is part of that element, so too were we. i was briefed initially the work force of nppd was over 60% contractors. we have now gotten down to about 40% contractors in the last several years. so, it is an issue but we also

have a balanced workforce initiative which requires all of our contractor hires to be reviewed not just by us but the office of general counsel to make sure that they are not performing inherently government work. so that's the framework that we are in. let me let director anderson speak to that. >> thank you. i think the under secretary captured my thoughts exactly. when we talk about the use of contractors, although we certainly are evaluating whether or not any are doing inherently governmental work, my greatest concern as expressed in the memorandum to the under secretary was the need for us to stabilize the program, and to create a sustainable program and with contractors coming and going it's very difficult to do that. >> so in light of the limited amount of inspection that you've been able to complete you have

108 inspectors if you are to do new hires with the intention to do those from contractors or to do them from federal positions or do you intend upon increasing them at all? >> excuse me. increasing the number of inspectors? >> yes. >> as i mentioned during a previous question, we are currently evaluating what we will be able to accomplish in terms of the compliance activities with our existing work force and projecting what additional resources, what we would be able to accomplish with additional resources. >> mr. chairman, can i ask the following question since she didn't answer my question? my question was i asked you my question now is once you do that review, if it calls for you needing to hire more, is it your intention to hire those from contractors or to hire them through internal training and to hire the government positions

what is your intention? steny and so far as we have not developed the plan for additional inspector positions, i cannot say categorically that a decision has been made to move in a certain direction though i suppose it has been my anticipation that new inspector positions would be for all employees. >> where is the bulk of the contractor positions at 40% and that is my last question mr. chairman. >> i don't know the specifics with her individual work. >> if you could just supplied to the committee because i know the chairman wants to get on with the second panel of the workers then you have of now the 40% where they are located in the department. thank you. >> i believe the gentle lady from new york wants to recapture the time that she gave back. estimate just a minute, mr. chairman, i appreciate your indulgence.

my question is directed to ms. anderson and mr. wulf. we've had a lot of discussion about what went wrong. i want to focus in on the employees for a minute because certainly with the investigations going on, with all that has been uncovered, they're has to be some level of disruption, some level of not knowing where they stand. what is the relationship now with the employees, how were the employees getting through this, what types of things have been put in place to give some level of reassurance to people that first of their value, but second of all, do know, that things will work out in the end, and have there been conversations with the union? thank you. >> yes, ma'am, thank you for the question.

i actually am happy you asked the question about the work force because they're seems to be a perception that there's some question about the key devotees, and while it's true the identified instances where we don't have a good person positioned i can honestly say i've never worked with a more talented and hard-working group of folks and they are the key to our success and i'm very concerned about the impact of recent activities on their morale, and on the confidence that they have in our program and our way forward. so you are correct in suggesting that there's a certain amount of jinxed and there have been some dips in the morale and it's been a distraction from the mission activities. we are doing as much as we can to reassure them. we are being as transparent as we can with them at every stage of the process when the fox news

article was leaked it came out as a result of the week i sat down with my folks and talked through it and about and linked it back to previous discussions we had about our challenges and very open about what. we have again set up a routine communication with our folks. we've shared with them the action plan and involve them in the implementation of the action plan. we've engaged them at every level and to every extent we can, and certainly our engagement has involved the union. we met with mr. wright coming and we have to the extent that we can involved the inspectors in all of these discussions and have been sharing this information with them reassuring them they are an important part of our team. they are the key to the success of the program and we need to move forward with them. and we are taking every step we

can to involve them in that process and be transparent about to an estimate the gentlelady is back and i want to think the witnesses for their testimony on the first panel and the members may have some additional questions for the witnesses coming and we ask that you would respond to these in a timely fashion in writing and with that, but be pleased. [inaudible conversations]

>> we have a distinguished panel of three witnesses for the second panel, mr. bill alterman is the vice president of government and public relations for the society of chemical manufacturers and affiliate's position he's held since 2007. the society is the leading treatise aziz and representing specialty bags chemical manufacturing, and prior to joining the society, mr. allmon served as the public affairs at the national association of chemical distributors. mr. timothy scott is the chief security officer and corporate director of emergency services on security at the dow chemical company that he's served since 1979 in his current role mr. space leads the global

emergency services and security operational organizations and over 200 locations around the world, and mr. david wright is the president of the american federation of employees local 918 and his rear as a federal protection service officer 1986 since that time in the rank of sergeant and inspector and served as the president of local 918 since 2006. we think all of you for being here. we of course will include your written testimony is in their entirety in the record and we would ask that you confine your statements to a summary for five minutes and we will proceed from my left to my right with mr. nppd first. lynndie member clark and members of the committee my name is bill allmon and the vice president of public relations at the society of chemical manufacturers and affiliates. i'm pleased to provide this testimony regarding the problems

of and the progress made by the chemical society and writer of some standards. six years ago congress enacted a comprehensive chemical security program known as cfad. we are well on the road in implementing this important program. a great extent, the dhs slash template the mandate issued by congress in 2006 regrettably however the stumbled in implementing the rules by failing to put in place among other things basic management practices or effective leadership. a 2011 internal memorandum from the infrastructure security provision is sobering. it demonstrates the government agency without proper management can take an effective regulatory framework and then a set up. however, as the subcommittee assesses the departments failures the program, we must bear in mind that it is the policies and personnel that needs addressing, the program as self. the program thus far is a success despite the internal management challenges.

we emphasize the four key facts. first, this demanding program is now requiring over 4,000 chemical facilities nationwide to develop and deploy security enhancements. covered facilities have invested billions of dollars in security upgrades to meet the requirements. the members of law in a majority of which are small manufacturers with under 40 million of annual sales of and invested an estimated 515 million in security measures. hundreds of other related facilities that haven't already done so have made productive investments in security measures in anticipation of the compliance obligations. second and equally important, they fled over 2,000 facilities to voluntarily take steps to reduce the risk profile that they no longer warrant regulation, less as predicted, the driving facilities to reduce inherent hazards where in their expert judgment doing so is in fact safer, doesn't transfer risk to some other point in the supply chain and makes economic

sense. third, congress drafted the statute to impose security performance standards but a more demanding a higher risk facilities and less demanding of lower risk facilities. the performance is a bridge projects facilities against without impairing the industry's ability to remain innovative and to maintain some of the nation's highest paying manufacturing jobs. finally, the standards have achieved the secretary has the ability to levy significant finds of the facility from on compliance and can shut down a facility. with the law and the rules are fundamentally sound and do not require replacement. the the debris program decree is not inherently impossible for a government agency to implement but it does require knowledgeable people to review sfp and the courage to make decisions based on judgment. unfortunately the memorandum indicated that the staff largely does not have adequate skills in part because higher levels of the dhs presented the iset from hiring sufficiently expert personnel. staff have also been discouraged from using their judgment. on the other hand, no one should

dispute the fact that despite the challenges of the implementation, the two main alternatives would be far worse. an absence of chemical security regulation komondor a prescriptive program but would drive chemical operations overseas deutsch the burden such as mandatory corporation of inherently safer technology. the internal problems of the back its implementation are serious but not insurmountable. the most confident leadership of penny anderson and david wulf is committed to improving the program's implementation. thanks to the internal assessment to have a greater understanding of the shoulders facing them in a robust action plan. the following recommendations for placing the implementation that contract and congress should encourage them the greatest security expertise rely. the can and should be more transparent about the operation and also to simplify the personal federal dhaka and check programs need to be a top priority. also, mandating the inherently

safer technology into the program is the last thing we should or even could try to implement. also, we need to retrain, and as necessary, replace much of the staff. lastly, congress needs to provide certainty for the regulator and regulated alike by improving the multi-year reauthorization. it may appear counter intuitive to advocate for a long-term authorization of the program troubled by agency mismanagement, but the key is a vigorous oversight not budget cuts or complete reset. we appreciate this opportunity to testify today and i look forward to your questions. >> thank you very much for testifying. mr. scott? >> chairman lungren, ranking member clark and members of the subcommittee, and the chief security officer for the dow chemical company. speaking today on behalf of doubt and the american chemistry council the largest chemical industry representative. i will focus on the four points today.

first, there are clearly concerned on all sides about the lack of significant progress on the implementation of the chemicals as of the anti-terrorism standards. we see these as management issues and not as issues with the concept. we've implemented responsible care and improve the security over the past decade's spending nearly the landaluze on the enhancements. towards improving the security of the nation's chemical sector. the concept and the design are good. the correct course and complete a critical task before us. the lack of progress along with the appearance of internal issues at dhs are disheartening, but not the cause for altering the course and mollifying the efforts and progress that has been made the partnership that made it successful in the

beginning has declined amid a lack of mission floridian the leadership is apparent. this is not a condemnation of everyone and everything is a breakdown in the management communications and collaboration. making it relatively straightforward program overly complex and burdensome. this is a wake-up call. we have a catalyst for change and an excellent opportunity to correct the course and achieve success. the concept in basic design of the debate to a solid, the of potential and that sparks an improvement and security. it can be developed an efficient and productive process to improve the security of the nation's critical chemical industry. industry is dedicated billions of dollars and thousands of hours working with dhs at every level. adel alone has spent about to hundred $50 million of security. as needed security upgrades and the facilities worldwide not just those regulated under the laws in the u.s.. from the beginning and to this

day, they've taken a leadership issue on the security issue, and our is the only chemical company to achieve safety act is a commission from dhs, from both of the site security and the distribution system security process these the concept is good. risk-based and progress on the right priorities. the design is good. along the regulated companies to apply customized security systems and process these to each uniques site and situation to comply with the dhs established performance standards and subject to the dhs approval. the issues with cfab or in the details and those can be fixed if we work as a collaborative team with a common goal. we need to fix what is wrong, not start over from square one, and we don't need to make the process more complex. there are many effective and efficient operations to achieve the successful implementation of cfab and the ultimate goal of reducing the volume of of the chemical industry, the communities and the country. we can get site security plans approved. we can get the highest risk

site, we can get agreements and plans in place to reduce the vulnerability is and comply with the risk-based performance standards coming and we can make this happen within a very reasonable period of time. included with my written statement of potential solutions to some issues of most concern, the personnel process, site security plan approval, transparency on the risk assessment process and reasonable alternatives that would expedite the process. this would be a difficult task but not an impossible mission. it can work as conceived and implementation will take leadership, communication and collaboration well beyond what we've seen recently. this subcommittee can make this work. acc has consistently taken a protective approach to security and work in good faith someone also the beginning. our issues have aggressively stepped out and the significant investments in security, the industry doesn't want to waste this effort by starting over. acc is willing to take on the challenges is to culbert to

finish the task and fully implement cfats. we need dhs on the teams and this dillinger of the common vision and goal. they ask the we separate the address the internal issues in the hs and reauthorize the cfats legislation so that we can continue the efforts that are already underway. thank you. >> you're recognized for your stay at journal london, ranking member clark - david wright president of afg, and also in a spirit of the federal protective service component of whom nppd. i'm here to express our commitment to the homeland security mission and to work with as i have repeatedly expressed to the senior aide leaders. i've not been given the opportunity to review the internal report written by the director anderson that generated this hearing to give my knowledge as the content of the

internal report is mostly limited to what i've read in the fox news articles of december, 2011 degette my perception is that these are the types of issues that can be addressed, and a good labor-management relations. policies and procedures can only be addressed is actively by taking into account the perspective of the field level work force that accomplishes the work on a daily basis afg local 918 labor-management relationships with nppd is mostly cooperative and effective. and direct conflict with what has been reported in the media as a result of the internal report. the conflict ranges from outright the exaggeration of the vehicle mileage login initio to the implied agency and the ability to implement policy procedure due to a union work force to realize consistently placed the union cooperation on many national level meetings to

include one meeting with the director anderson in september, 2011. and all meetings, i indicated the unions readiness to remove any perceived union roadblocks and support of the program. janaria ninth, 2012, after the negative news article, i met with director anderson in the presence of assistant secretary todd koschel and senior union leadership. once again, all i reiterated the successful accomplishment of the cfats mission as a union first priority, and that while we would expect an opportunity to give meaningful input, there would be no union road blocked implementation of critical homeland security policies and procedures. i strongly reject the assertion that the work force is unqualified. most of extensive background in law enforcement, military regulatory authority and

academics. they've dedicated and all came on board closing a potential gap in the nation's homeland security network, the storage of mass amounts of hazardous chemicals and chemical facilities. in closing, been asked by the work force to advise you and the american public that the chemicals into the inspector workforce is qualified, willing, ready, and able to accomplish the critical task of assessing security at the nation's chemical facilities. local mining team has repeatedly declared its cooperation to the agency then moving forward before and after the internal report. we are now making that commitment to you. it is incumbent on congress and the dhs leadership to mark that path forward. i think the subcommittee for the attention of the critical homeland security issue. i'm available for questions three islamic hinkle panel members for the discussion and

we will go into a first round of questioning to start off. mr. wright, i know you haven't seen the entire report, and you -- as a memorandum that he has been respected in the discussions you have. what impact if any has this memo or the part that it's being described in the press had on the morality of members, they still have a desire to work with the program and they still think this program is worthy, do they still think the program is workable? >> above all, they think is worthy, and they are ready to move forward. with that being said, there was an aspect of insult to the report. there was an aspect of calling into question the key devotees, education, training and so forth, so there was and still is

an aspect of being disrespected. >> mr. space, since the millo came out, how has, if they have come dhs engaged on the issues that were outlined in the memo, and have there been any suggestion of how you work together to solve the issues detailed in the memo or is that viewed more as the department's internal problems that has not effected the relationship of the industry with the department? >> mr. chairman, the dhs discusses these issues with the industry through the chemical sector coordinating council that mr. scott has been involved in and so have i. we haven't had too many discussions as of yet, but we have had some preliminary discussions about some of the things that have been holding up the program that we've identified for well over a year now.

stomach mr. scott, you said that this report coming to that of which came out of the report as a wake-up call, not a death knell for the program. it is my hope that this is the case. could you outline why the program as articulate it or as legislatively john and the response by the private sector to that is both worthy of being maintained, and what are the essential advantages as you see it in the context as you say of the industry having spent billions of dollars in terms of security? >> the primary reason that we agreed to cfats as it approaches the risk-based approach that it takes. it's really focus on the risk of each individual site, different scenarios that each site, so it takes the risk and to ? and then you apply the appropriate risk

rating so that's a strong positive. we want to make sure that we are focusing on the risk and focusing on reducing the risk. the second piece of the puzzle is that it gives you, cfats gives you a broad array of opportunities to reduce that risk. it doesn't dictate anyone message or means of reducing risks. so each site, and every site is very different in each situation whether it's the best scenario are an attack samarium the site has the opportunity to pick the right answer, the right solution to reduce the risk that site which makes sense comes of the risk-based approach and the opportunity to apply its customized security package at the site was the value and that's why you can see the real improvement already in many of the sites when they start to focus on the risk and focus on the opportunity to reduce that

risk. it's why you seen some success already even though cfats isn't fully implanted we have seen some remarkable success with the issues that we are facing right now are the management issues of how to manage success and cite the security plans and get the final inspections in place. it's not the process that's the problem to this bernanke vindicate you support mr. space is permanent or seven year whatever we want to call the extension of the authorization or as we would say you're a permanent authorization, and you indicated that without that there is uncertainty. some might say that's overstated. why would your members not continue to go forward with the capitol investment necessary for securing their own assets? i know how i would respond to that question but i would like to know how you would respond to that question. >> regulation in general impacts

small businesses and when there's a delay in the implementation that can compound the impact, the delay has seized upon compliance cost the were budgeted when companies sit down and do their compliance costs that were not spent and that could have been spent on things like manufacturing and innovation, r&d, more jobs, so in some respects, that money wasn't spent and it should have. spinach you indicated 80% of your members of small businesses. >> that's correct. >> thank you mr. chairman and i think the witnesses for providing their insight as well. my first question goes to mr. wright. when you have a problem it's like the memorandum, the related hiring and developing steps to implement the program including the lack of policy and procedures to guide staff

efforts to do their jobs please discuss whether you believe problems related to hiring and developing stuff and a lack of related policies and procedures are a challenge to implementing the program, and if so, why. then give us your experience with how the employees were hired for the program, the history from your point of view. >> i think i will start with the second part of the question first. i've probably been around longer than any of the nppd leadership at the inception of the program in hiring the inspectors. we were originally detailed from the work force, so i did at tenet at initial class one day in a week-long course for the initial group of inspectors and

i think the was the initial what can now be looked at as a setback because the focus was ultimately compliance and ultimately law enforcement. the inspectors were lured away from their federal law enforcement career as the promise with the lure of building a new agency regulating chemical facilities, and unfortunately from those inspectors, the program was apparently misguided or label that is misguided and changes occur along the way. many inspectors can that can't the ones that could tolerate the loss of their federal law enforcement career stayed and

then there's the aspect of the management culture. it just seems to have changed several times over the years. the focus seems to have changed is what i am told. >> in your opinion, to what extent do the staffing challenges and lack of program guidance in pete progress in implementing the facts if at all? >> i can only go back to what i have seen in the fox news articles, apparently by victor anderson thinks that the mission is impeded by law enforcement officers that, quote, want to bury a badge and gun. it goes back to a cultural issue. it goes back to the authorization, and let's do form

a culture, and nppd culture as opposed to the differing cultures that have occurred throughout time period by bringing, by losing the focus on the law enforcement and the compliance originally seeking to refocus it every year. >> i seen the memo the union is causing friction in the workplace. would you give us a viewpoint of the employees in the union on this matter of workplace conditions or relationships with management. would you characterize those efforts of employees as putting themselves in the position of being subjected to retaliation or intimidation? >> the union culture is new.

we've been in place since march of 2011. so, i was absolutely blindsided by the allegations in the news article. i worked with secretary beers management for years now, and the fact mess of working with the union, the union creating road blocks to implementing policies and procedures is exactly that and it is a mess -- myth. >> it's my pleasure to recognize mr. richard -- mr. richmond for five minutes. >> thank you, mr. chairman. i will not use my entire five minutes.

my question is for mr. scott, and i will just say we have a facility in my congressional district that will actually be the largest home to petrochemical facilities and places that will fall into cfats in the country. now, my concern and my goal is to make sure that it is as efficient and least burdensome to the businesses. i know that at least in your recommendations you mentioned one way to become more efficient very quickly is to leverage the existing relationship between cfats by recognizing the court. is that one of the recommendations? >> my personal opinion is that that would make the personnel ushered a program a lot easier to manage to reassess the people and if the sites that you are talking about in your area you

will see the both of those sites security updates to meet the dhs compliance requirement, so that is what we like to do but in those sites you have a card required for entry and when somebody comes to the gate to work and get a bad it is easy to lose that card and they've already been vetted by the government and meet the requirements that are currently involved in the cfats personal insurance requirement. >> with just down have any of your facilities are covered by cfats and also by ntsa? >> i'm not sure i can answer that. i think it's about 3,000. >> in the united states we have about three dozen sites covered by one or the other. all of the sites are covered by the response security code to reduce the mix before and i

yield back mr. chairman. ms. richardson is recognized for five minutes. >> thank you mr. sherman. my first question is for mr. scott. have you presented the recommendations that are in your testimony to the dhs? >> some of the recommendations been discussed with dhs through the council of individual companies? through the acc, the various associations, i can't say that we've talked about each and every one of the recommendations but most of them have been some discussions, yes. are you aware of any responsive that might have been received from the dhs? >> ghs has always been willing to sit down and talk with us. we are having ongoing discussions. >> my question is have there been any specific responses to the recommendations that you provided to your knowledge? >> not at this time, no. >> is dow or acc a part of an advisory group and the discussion in light of the

memorandum of was leaked? for you provide feedback to them were working with them on the process? >> i'm not working directly with dhs on that response, no. >> today to your knowledge have any advisory role working with this department? >> v. acc has offered in put on the recommendations. i don't know that they are having any direct response to those recommendations as yet. >> if i'm hearing what you are saying there is no formal body advisory body to your knowledge that you are participating in on a regular basis. >> not on a regular basis, no. >> i have the same question for you. is there a regular advisory group that's working with the department to provide feedback on an ongoing basis? >> not to my knowledge. >> for you, how about you? >> there is the chemical council but it's not a government

advisory board it's an illustrated advice recommend that is where we have periodic discussions about various chemical security issues in the department. spec is a formal process of a regular meeting that happens like once a year? >> it's more like four or five times a year but it is an industry led group that discusses chemical securities. sometimes we do involve dhs as guests to the meetings but we do exchange information. >> since your meeting, not theirs? >> right. >> also in your testimony you've referenced that you have supplied the dhs with a proposal and some things they could consider. have you gotten any response is? >> there's been discussion about the personal a share of the issue that mr. scott talked about coming and we've had some back-and-forth with of the department for many months now and we hope to have some

resolution on but because that is one of the areas of the performance standards that is holding up implementation quite frankly. >> mr. wright i just want to encourage you and those as a part of the union that you support i hope that he will share the comment from mr. mr. allmon to rely on half a dozen or so federally issued credentials that involve the check your nyanja also expressed concern with dhs so they've supported you in that, and it's also noted additionally relying upon the contractors who typically have high job turnover -- i'm struggling on that today, a little late last night. the need for constant retraining and the key to the activities and conducted a partner with contract support.

so they are really providing a lot of support and like you had to testify about on your folks here strongly commend the work that your folks have done and it's important to share that with them. some of mr. mechem following my question is for you. have you found there to be a transfer and an open process of knowledge among the work force of positions never open since so many of the march contract positions currently? >> i don't have much experience with contractors. i am concerned with the statements made here by director anderson about the openness and transparency of the action plan because it hasn't been brought to me. i've not been notified. i do know that there are town hall meetings. i will also say that my work

force is at this point i think intimidated and unwilling to share that information with the union also director anderson is on willing to share the plan despite my efforts. >> hopefully through this committee we can improve upon that. thank you all for your testimony. precipitate. got it. i think the gentlelady for yielding back and the witnesses for their testimony and the members for their question and the members of the committee may have some additional questions for the witnesses, and we would ask you to respond to these and writing in a timely fashion the hearing record will be open for ten days, and with that, the subcommittee stands adjourned.

>> bin laden maza strategically religious communicator with various outfits in, and to a certain extent i have to confess knowledge most to the yen for my work and sent, and in afghanistan, and i worked on the problem of iraq and we knew that bin laden personally was involved in communications to try to corral and brank al-zawahiri. we knew he was making of reach early on in somalia and he was involved in all these type of things working for the mediums and other individuals, but we knew she was their doing that and as a consequence, and no

surprise when you're talking about a global eddy ogle gif, bin laden was relevant

in-house financial services subcommittee recently held a hearing on mobile payments. paying for products and services with a cell phone rather than cash or credit card witnesses from the financial industry are being developed but cannot be fully implemented for several years. i appreciate what is being year we expect a series of votes as early as 11:30 if we are unable to conclude the hearing before the vote we will continue after votes are completed. but we need today to begin with what i think is an exciting and important task which is making sure our financial system and its regulatory structure are prepared to enter the new world of mobile payments. you see a lot of press about global banking and certainly a lot of advertising on mobile

banking, and without saying much about my general age area, this is age specific in some ways considering my mother has never used an atm but she does pumper own gas 3i know what my children are going to be doing when my children are in their 20s are going to be doing in terms of how the bank, and i think this is what i think is the relevance of why i'm extremely interested in this as we move through the next panel. while most people believe making a mobile payment involves a smart phone at a cash register, and it may be, there are a lot more ways to exchange value. contact with cards and short e-mail messages giving instructions to transfer value represent other forms of payment. the whole field offers the possibility of the faster and cheaper transfers of the value, but oftentimes with the promise of enhanced security that

surpasses what is possible today. we are getting on oppressiveness of some fundamental change and the way that money is exchanged between consumers and that is why i'm interested and wanted to have this hearing on the future of money. while somesptsf mobile payments havebeen with us for a while and some business models are alread developed, other aspects are in the beginning stages of the pilot programs. either way there's a lot for congress, banks, regulators, retailers and customers to learn. most importantly, we want to make sure the payments are safe and secure. at least as safe as using cash on checks or credit cards, and hopefully even more so three bringing the strength of computers to bear on account safety could allow us to averitt layers of security that help find the hackers that wait on the internet to be stealing millions of identities and reflect into this in our subcommittees as well and billions of dollars annually. after all, the smart phones that were essentially nonexistent less than six years ago is said

to be far more powerful than the large supercomputers of the 80's or certainly those of us that went to college in the 70's and to computer science with stacks of cards that we had to stay in the computer room all night to make sure they went through. today's hearing is an introduction to mobile payments the first i'm aware of to be held by congress with five expert witnesses who can discuss the state of the mobile payment industry and where and how fast they see it developing. among them is richard oliver to read until he retired last year he was the federal reserve top mobil payment expert and the principal author of the fed widely praised white paper on the subject. we also have experts from the issue side and the standard side of mobile payments come and the consumer specialists. i look forward to hearing of revenues testimony and i would now like to recognize my ranking member from new york, ms. maloney. >> first i would like to thank

the chair lady capito for holding this hearing. one in the series on the future of mobile payments, and the financial system and thank future of the panelists for joining this morning. the hearing will serve as a great first step and learning session on this rapidly evolving technology. ausley feel that this is another example of american exceptional was some of coming up with an innovative idea and an efficient idea that keeps america moving forward employing more people, becoming more efficient, and making us an even stronger country. i'm excited about this idea come and i really look forward to hearing from all of your testimony. mobile payments in the united states expect to generate 215 billion by the year 2014, 43 million adults in the country use alternative financial services to as a form of banking, and as the technology continues to move forward, it creates innovative and exciting opportunities for everyday

citizens at home and at work. the possibilities are truly endless. we are seeing what technology can do for consumers and businesses as mobile technology newmehod o mobile payments, payments made intrtions. by electronic means effectively replace cash, checks and traditional credit cards. of this evil and form a financial exchange can provide consumers with greater purchasing power allowing merchants to market their goods more efficiently and helped create truly mobile electronic and innovative society. mobile payments can he solve delete command of text messages that transfer funds from one person to whether or to a financial restitution. as experienced in the successful program to funnel aid to haii i wa sthe earthquake and to its su program was.

if they had on every taxicab get on your mobile phone and text $5 to the earthquake victims, and that successful effort led to 5 million of $10 donations from americans throughout our great country on their cell phone carriers. this happened in just 48 hours. and that's one example of the truly outstanding possibilities for this new form of pyment, and mobile payment technology can allowconsumers to waive thkouts d even direct the charges to prepaid phone deposits and phone bills. it just gets better and better. we wouldn't lose our papers of the time if we had this come and mobile phones become more prevalent and as the number of methods of making payments increase, it is important to look at bucklacinits implementa.how muh will the adof

mobile payments cost mercts reader for rei toughstall the knowledge? help protected are the consumers that hackers can steal their data out of the air. what is the level of disclosure that would be provided to our consumers? how cane provide a re regulatory clarity for this market? consumers want payments that are convenient and inexpensive, but we must make sure that adel laws are properly tailored and that security is not abandoned for the sake of the new technology. it may be years before the technology foley becomes a reality for the majority of people the way that debit cards have. however, i'm happy we are discussing this important issue at the ground level. i congratulate the chairwoman for calling this important hearing and i look forward to your testimony had welcome everybody. >> thank you.

>> thank you madame chairwoman. this is an exciting time in the payment industry. over last several years and a bit of companies have invested huge amounts of capital and man hours to lay the groundwork for many of the methods we are discussing here today. new innovations and smart phones and mobile payments are bringing consumers greater convenience and a better body experience while also increasing the security of payment transactions. while i am interested to learn about the products and services today i also want to hear what we in congress can do to make sure that these innovations progress in a safe and prosperous manner. we must encourage a free market where innovators can realize the benefits of the investments and consumers can benefit from lower cost and safer products. i look forward to hearing your testimony today and yelled back the remainder of my time. >> thank you. i think mr. gramm didn't particularly want to make an en to the testimony.

i want to recognize the witnesses for the purpose of making a five that statement, then we will go to the question and answer period. as i mentioned in my opening statement we are lucky and pleased to have mr. richard oliver, the kuhl offer of mobile payments of the united states mapping out the road ahead which was published by the federal reserve bank of atlanta. >> thank you very much. let me start by thanking the committee and the subcommittee for the opportunity to come and share information with you about the mobile payment and tire met while it's still very yearly in its evolution. ..

in this country. the attend keys included major wireless operators, financial constitutions, industry trade groupers, retailers and many other participates. please note this effort was not directed at mobile banking, which is the use of your mobile phone to access online banking function. it was directed at exchanging value at the point of sale utilizing your phone. over the course what turned out to be seven meetings we not only gained great insight into the evolution of the mobile payments but the group helped us isolate the series of key factors they felt should be e met to ensure a safe implementation. our purpose here today is share those with you. the first was the proposal

environment should be best defined as a open wallet. that is, a wallet that would allow complete access by all persons using all corrects they might to use as opposed to proprietary instruments. the mobile infrastructure secondly, would likely be based on-air field communication technology. residence and mobile devices and in retail point of sale. the technology is now becoming common in other countries. and would allow users to tap their phones and institute a purchase. third, existing well protected and clearing and settlement rails would be the way value is exchanged. that is through the debit card, clearing house. four, some fort of enhanced security. such as dynamic data authorization should be used to

detur counterfeiting and i.d. theft. it is already residence in chip and pin cards being used. common standards should be designed, developed ab when certified throughout the industry to ensure efficiency. sixth, the regulatory oversight for regimen should be made clear early on and participates should be involved in these compliance activities. bank and nonbank regulators. the fcc and financial consumer protection bureau should -- for all the participates. seven, entities such a trusted service manager that exist in the card world today should oversee the provision of the interoperate rabble and shared security elements in the phone president group also recognized the possible need of time for some e entity to serve as a coordinating party to keep the

very diverse participates on track and working together. and possibly to create a road a map for the future that would allow the participates to understand how to minimize their long-term investments and the technology that's necessary. however the majority of the group at the time felt it was too early in the process to do and the completion of early pilots and tests would before inform such work. all of this information and more was captured in the paper that you eluded to which was authorized by the participates and the cooperative offered by the reserve banks. it's available on reserve bank websites it's been well vetted in conferences and trade presses over the past year and was shared with all of the federal regulators and law enforcement agencies at the session we she held in the first half of last year that my colleague and i presented at. as the work proceeded, most of the participates have decided to participate in a number of pilots and test situations going

on that should better test the validity of these afore mentions principles and pave the way for wide spread employment. work group continues to meet on common issues but they have been outspoken recently about the need to educate and inform, business, government and consumers about the mobile environment. we do this hearing as a great first step not excess and appreciate the opportunity to participate. thank you. >> thank you very much. our next witness is mr. troy le, ch. welcome. >> rank -- we probably want to pull the microphone closer. >> absolutely. thank you the opportunity to testify on the important topic of mobile payment security. my name is troy. i'm the chief technology office for the payment card try. security standards counsel also known as dci.

born in 2006 the counsel divides the element -- to protect payment information. more than 600 companies worldwide participate in the counsel's work. many different industries and with backgrounds including a number of leading play ease. incoming a number of people that will be spoken about later today. so it's exciting for us to be here today representing the mes to resaurant website banking, to technology venders who are eager to real the benefit in the most secure way possible. bci standards are strong framework for protecting payment data. it's the frabbingwork we are implying to mobile payment. mobile technology is exciting and dynamic with a potential to change the way we accept payments not only in the u.s. but also around the world. the benefits can be significant. however, both consumers and merchants want to use that mobile technology is just as safe as using traditional form

of payment. from our perspective making it secure is our priority. for tray dedicational payment card security we have focused on people, process, and technology. the mobile payment environment is complex. more so than the traditional payment card. our goal is to work with the industry to provide security across that spectrum. let me also clarify the counsel's focus. there are two aspects to mobile payment. initiation and acceptance. the first is when a consumers is using a phone in place of a card. that is initiation. and the other is where a mobile device perhaps even the same mobile phone is being used bay merchant to accept payment cards. there are a number of groups including some of my fellow panel lists work on the first aspect to protect consumer payment data. they have been focused on the second area. specifically securing the use of mobile devices as a point much

sale acceptance tool. our first step has been make sure that merchantses can use the mobling technology safely and protect the customer's information. bci standards apply to mobile acceptance today. addressing the security of monal devices of mobile abdications and the environments in which they operate. expanding on the standards, we published security requirements make it possible for merchants to use plug in devices with mobile phones to swipe payment card data. we put on guidance on application to help merchants process the payments securely. and will be releasing practices this year on securing mobile payment transactions. as payment security is a shared possibility all parties must work together in the effort. the counsel is concerned with making sure the parties are validated and the products and services they provide. and moving forward, we'll explore the area even further. lastly, great work is being done

through the advance of technologies and payment. technologies are emerges that have the ability to eliminate card data from potentially insecure mobile environments. counsel has already harnessed some of these technology to address this dynamic environment. we continue to assess and develop standards. in closing, mobile technology officers exciting, potential payment space. to help realize the curly, the counsel work with the global take holders to develop industry standards and the resources necessary for the protection of card holder data and the production of fraud from -- thank you and i look forward to your questions. >> thank you very much. our next witness is mr. ed chief emerging payments office. global productions and solution mastercard. >> thank you. and good morning. ranking members, and members of the sub imphee. my name is ed and the chief emerging payments based in new

york. my pleasure to appear before you today and discuss developments in mobile payment. mastercard is a leader in the transaction formation of mobile foition. and a champion of global mobile payment standards. we appreciate the opportunity to be here to share our perspective on how mobile payments are developing and benefits consumers and businesses. as mobile payments don't evolve we need to focus on two goals. first, we must strive to make paying for something as simple and as excelling as possible. second, we must provide the highest level of security to consumers, merchants and our financial constitution customers. at mastercard we invest heavily to make both of these goals possible. mobile devices are being changed in the way people interact and also how they want to transact.

for example, the accept of card-based payments through the use of hand held payments is opening up channels for entrepreneurs that were not possible just a few years ago. smartphones also provide a platform for the new application that are transforming the in-store shopping experience for consumers. for merchants smartphones provided a convenient chaibl to engage consumers at multiple levels such as through internet or social media. smartphones themselves are also becoming payment dwietses through the adoption near-field communication. mastercard pay pass the tap and go product is the forefront. by 2016 it's anticipated that the majority of smartphones will support this technology. so why the new usage for mobile phones so important? because they provide convenience and promote financial enclose in a very secure environment. unlike the simple plastic card

that has been around for decades. smartphones provide an intelligent device in the consumer's hands they can use to interact with merchants in ways that were neverbefore possible. also, when you look at the 85% of transactions they're still being funded through cash and check. it's clear smartphone technology provides an opportunity to accelerate the transaction to safety and secure electronic payments. by enhancing the ways people connect dot network we are able to deliver new services to benefit consumers and reach a large number of consumers who are outside the full-time financial mainstream. can unlock the global commerce grid to consumers who do not have access to mainstream financial services. at mastercard we have invested substantial resources and capital to develop the technology necessary for our part in the mobile payment

system. each day we strive to make payments simple for all participates in the payment change. or providing the highest level of security. for example, this is why we applied mastercard zero liability approximate for consumers to the new payment technologies. including mobile-based payments. in addition, we have recently announced a program to transaction mastercard branded paimght products in u.s. to the eme standard. the it is a standard for global and debit payments based on chip technology. and acceptance of payment cards in a worldwide basis. the adoption from the u.s. will help provide additional layers of protection for consumers at the points of interaction. mastercard extremely proud of the role we play in advance commerce through new technologies. and mobile phone and many other smart hand held devices are transforming the way we conduct

our every day lives that hold significant promise for providing new value for consumers and businesses particularly in the delivery of financial services. i appreciate the opportunity to appear before you today. i'd be glad to answerfully questions you may have. >> thank you. our next witness is mr. randy vannedder hoff. smart card alliance. welcome. >> thank you. chairman, and members of the committee. on behalf i thank you for the opportunity to testify today. the smart card alliance a nonprofit education that -- collaborative open forum among leaders in various industries including mobile payments. we applaud the sub committee's intersection in making it safe, flexible and resilient with the appropriate legal frameworks. mobile devices request where used to facility the payment process in many ways. i'm going to focus my remarks on the use of a payment application

enabled mobile phone that can be used to pay out a physical merchant location as an alternative to paying with a plastic credit or debit card. this hearing was convened to exam issues essential to making mobile payments safe and ensure a legislative oversight is in place. the good news the type i'm here to talk about today is established on legal regulatory and security frameworks in both the payment and the quireless tell come tries. this mobile technology is referred to a nfc mobile contactless payment. nfc or near field communication is a form of short range wireless communications inside a phone. it is a new technology that enables secure mobile payment at locations. the contact payment approach has two advantages very important to the sub committee. first, uderpining the -- is the simple fact that while nfc mobile payments use a phone

instead of a card, the paymentability remains a debit or credit card and is covered by existing laws and regulations. the security and the liability of the approach are grounded in global standards established sftion process see and the industry best practice that the cull make of nearly twenty years of work in applying smart card chip technology to protect payment accounts. multiple international standards have been the develop for nfc mobile payment and are supporting by mobile industry and endorsed by the payment industry. in addition, new and existing safe guards are used with monal payment devices to add many layers of protection for consumer bilityd information and transactions. for example, access to the payment application can be password protected and a lost or stolen phone can be turned off instantly with one call to the mobile operate. the nfc enabled phone is

provisioned with a digital payment credential issued by aback and stored in a new specially designed secure memory location in the phone. the credential is transmitted to payment terminal by short range wireless communications. authorization and settle processes are the same for those used when consumers pays with a traditional credit or debit card. market development involving many of the largest and trusted companies is well underway. well example is isis a mobile carrier between arranges at&t and t-mobile using the nfc mobile contact paymentless technology we are successing today. -- for the nfc rollouts. another example is google wallet. it launched the offering to consumers partnering with

mastercard, citity, first data and sprint. more than two dozen large retarialers have enabled their stores to accept google offers. nfc payment enbeamed in phones won't be the only form. -- promising yet still unpriefn value to both consumers and merchants. in addition to value, consumers confidents underlying in the underlying infrastructure about credibility of the industry offerings are critical to the adoption. consumers will benefit from and trust in a mobile payment infrastructure that has a strong focus on security and using the existing payments infrastructure for transactions. mobile phones represent a for forte l landscape that consumers can interact with each other. the mobile payment invasion is going to continue to evolve and

more people upgrade to smartphones and learn the new services they hold in the palm of their hand inspect in summary, the future of money at the hearings is entitled is the positively impacted by mobile technology. the change of the financial service that you are rightfully called too are being well managed and security protected by nfc technology and the collective resources. the smart are card alliance would like to thank you for are holding this hearing. we greatly appreciate the opportunity present information that assists in the setting of legal regulatory and security framework necessary to implement safe, flexible, and resilient mobile financial products. >> our final witness is suzanne. attorney with -- >> thank you for the opportunity to testify today on behalf of consumers union the policy arm. mobile payments allow consumers

to buy products or transfer money. the market includes a range of different dj technology. still it is too soon to know which consumers or inversely be most vulnerable to risk however policy makers can make a few simple fixes to make sure that all are safe. mobile payments market it in a word con flex. there are multiple ways to initiate payments. some involve sending a text message. other employ a chip embedded in the hard ward. parties are involved in completing the transaction you have consumers merchants, third party processers, wireless carrier and financial constitutions all in the same ecosystem. so many players involved the risk of consumers for the increases. who's responsible for fixing the problem? you have the different parties all point fig fingers at each

other the consumer may be out of luck. mobile payments are projected to gross $2 14 billion any 2015 to provide speed and convenience for consumers and merchants. so are interested until the technology because mobile payment service providers may charge lower processing fees. mobile payment technology also have the potential to serve new audiences it appeals to the young consumers as well as those who go outside the traditional system for services. mobile payments may provide increased access to financial services. low income house hold and house had holds of color in particular are more likely to be unbanked or underbanks and cord to a recent study, these same households are more likely to adopt cell phone and smartphones. it presents and opportunity to penetrate the markets. however, the same markets may be vulnerable to risk without

adequate safe guards. internationally they have gashered attention for helping consumers in developing countries. estimated 5 billion consumers worldwide have a mobile phone but only 1.5 billion have a bank account. in ken pays a service enabled consumers to manage transactions entirely through their mobile phone. smartphones just regular cell phones. and a cash and send money true a network of atm and agencies all without needing a bank account. however, you as consumers have been slow to adopt mobile payments. some mobile payment systems remain limit in scope and availability. the new google wallet uses a near field communication chip which con -- however, google wallet is currently only available to sprint customers. another system bling nation uses

a sticker with a chip that the consumers phis fixes to the device. however it is still available through pilot programs. further more market research indicates consumers have concerns about security about the financial information. in a survey released last week. they found over 40% of consumers site security concerns as a reason for not adopting mobile payments. final not all ways for the monal device are created equal. a lot consumers may be aware of it it is fragmented the level of protections against unauthorsed transaction varies whether it includes it -- a distributional credit and credit cards and mandatory protection under law. however prepaid cards do not are especially problematic because they do not fit into the existing legal categories. wireless carries may provide

voluntary protection bus they are not disclosed in customer contracts. the different way to pay by mobile device and potential confusion when a consumers is faced with a traction gone wrong. consumers need to know where to complain and how to get their money back in case of errors. they cannot -- the looses could be especially horrible. until the law is updated to provide clear guarantee protections consumers may be at risk when using mobile payment technology nevertheless, a few simple fixes could close the gap and protection. the consumer financial bureau is in a unique position. jurisdiction -- in implementing federal consumer laws. congress and other federal agencies also have a very important role to play in establishing some protect consumers and foster invasion. thank you for the opportunity to testify. >> thank you.

i want to thank all of you. and i will begin with the questions. first of all mr. oliver. i'm starting here with the basics. you mentioned open wallet. can you explain what an open wallet is? >> concept of the open wallet is that it would operate on the phone the same way it does in the current wallet. you can select on the phony payment instrument you choose from any provider. and execute a payment using standard technology without having to do something different from one instrument to another. >> you could pay out of your bank account. >> on any card you may have in the wallet. competing cards. what have you? >> right. okay. okay. my understanding is i'll throwing this out to anybody who knows this. is that europe has been much further ahead than we are on the technology. they have the chip and pen cards, i guess they're using in europe.

and there is some thought that the nfc chips would leapfrog that technology. why is this do you think it's caught on there and not here. do you think it will leapfrog their technology and? i imagine it's going to catch on like wild fire once it gets going in a more robust fashion. does anybody have a -- , you know, the european model and why they are further ahead than we are. >> let me open. when you look at markets and how they evolve. it usually starts at baseline conditions. the u.s. benefited from having the best tell come infrastructure in the world at the time we were looking a. the there are requirements in europe to be able to handle offline transactions. it is compensate for the tell come infrastructure that was there. so that lead to a set of investments and emv and

underlining security technology. we have seen that cascade in markets around the world, canada, mexico, and other markets moving toward endorsing that. so in the u.s., we now see it as absolutely time for us to move from static plastic based corrects to dynamic protections that can be jen raced use the technology. in many ways we took a plastic card, put a chip on the card. we are put anything it into the phone. it's essential we worked this we continue to maintain that the worldwide interoperability. consumers know that anywhere they can go they get the same security around their payment products. >> i agree with that. question i have on -- you mentioned i think all you have mentioned the contactless reader, which would be at the vender sight the. the retailer sight. the question -- i represent a rural area. and, you know, there's a

question of cost for the retrailers. how expensive are these devices? are people invest anything them? obviously you mentioned about twenty retailers who are involved in this the larger retailers. how do you see this in terms of the retailer investment? i know when we interchange, that was a big cry from the retrailers from the different readers. does anybody have a kind of a statement on that? >> i'd like to begin by saying that when the u.s. brands particularly visa a, mastercard, and discover announced they are moving towards the emv chip strategy within the last year, an important distinction they included in that road map was that they were going to incorporate both contact and contactless technology as a part of that in order to be able to embrace the mobile contactless technologies that we're talks

about here today. from a merchant perspective they now have a very clear and distinct path forward in what will be the technology platform to accept the existing payment cards the new and emerging chip cards that are coming but also the mobile nfc payment technology. so the advantage for the merchants now is that when they do make that decision to upgrade their acceptance infrastructure in the stores, they can purchase one device that's going to support the legacy card technology that's in the market today, evolving new chip contact card technology that's coming and the nfc mobile technology in the phone. so they'll make one investment supporting three of their primary methods of payment. is that available now to retailers. the technology right 1992.? >> it is not only available the manufacturers of the devices have now totally upgraded their

equipment to be able to absorb the new technologies so that the same devices they would purchase five years ago didn't have -- >> right. i understand. a couple second because i think the security issue is something we want to delve deep into. if something goes wrong, how are you going to track back as a consumer to figure out you're going to write right that wrong. and so i think, you know,. :

who is going to pull them together, the industry or whatever? >> these are best and usually done by industries and mr. vanderhoff made several comments about the smartcard and others. there are forms in europe as well as international standard forums that generate these types of standards and allow people to adopt them. it is a critical issue and interoperability and the key to the earlier question about an open wallet. he would have the same egg sperry and no matter what you did so there are organizations collaboratively participated and that would generate these. >> that is great news because on 9/11 one of our biggest challenges was the police could not interact with the phones from the fire and if they could

have the could have saved lives. so making that commonsense common sense step forward would be important. many of you talked about this would allow more access for the unbanked and those that don't have access to banking and what someone it elaborate, because that is the concern, to make sure that all of our citizens can find some form of banking services. how are you going to reach out to the unbanked? how is it going to help the unbanked? >> this is something that we have been working on a lot particularly using prepaid products as an access tools. for those that don't have formal banking relationships. it starts with providing ways of getting access to funds themselves so they are not left to the tender mercies of the check cashers and payday lenders. if you look at the work we have done with the social security administration through the electronic distribution of funds

and the other ways to allow it to reach these consumers. we think the key to using mobile will provide people more visibility into their financial information, into their account status so they can be more informed. they can make savvier decisions and then we can reach individuals we have not traditionally been able to reach through bank areas and others. >> the fed has been looking into this and they did a federal reserve report that said that 57% of all americans and consumers surveyed felt that the banking services that they had now were adequate. and then they looked at people who had mobile banking, and only 12% of mobile phone users reported that they made a mobile payment in the past 12 months. the technology is out there and people are not using it. given this finding in their report, what actions should be

taken by retailers and credit card companies, banks and non-banks, mobile phone service providers and others, to develop mobile payment opportunities that are tailored to customers so that the customers use it? they say that technology is out there and people don't want it at this point. use it. >> the mobile devices are still just starting to reach the consumers hands through the mobile networks and through the retail stores that offer them, so we are expecting that there is going to be decreasing numbers of options available for consumers to be able to upgrade phones with smartcard technology that has the ability to support these types of mobile payments. unfortunately today we have the chicken and egg situation where we have consumers who want to pay with their mobile device and are waiting for the quitman to arrive for them to use it and that will, when the equipment is

available, then the issuance of these paid instruments on mobile phones will have an opportunity to get to the consumer's. >> that is one barrier. barrier. whatever their ears can inhibit widespread adoption of those payment options? security concerns? >> i would think so. one of the areas we are addressing is the security of payment card data wherever progresses. we have a technology agnostic and how the data flows into the system. many of the terminal certified on our web site have gone through laboratory tests and do have the capability to accept what we are talking about here today. we are talking mostly on the consumer side. we also have the security of the merchant side and we are seeing rapid growth in emerging community so we talked about unbanked consumers. there has been unbanked merchants and we are starting to see a new generation of merchants that before were not accepting types of payment other

than cash and now we are using such devices as peripherals that you would plug into a smartphone or other types of mobile devices to accept payment and we are seeing a new industry bombs here in the u.s.. >> thank you. my time has expired. speech thank you. >> thank you adam chairwoman and i want to thank the witnesses being here today. mr. oliver and mr. mclaughlin what effect do you think the regulatory environment will have on many of these new innovations and the changing regulatory environment had an effect on or slowed the evolution of many of these new products? we will start with mr. oliver. >> well that is a great question and one of the important questions that we discussed within this workgroup. one of the reasons they asked us to try to rationalize the regulatory infrastructure, given that most of the payments will be made using existing instruments, i think the people are pretty comfortable with where that is right now and

there appears to be no serious legislation on the horizon to change that. i think the real issue here has to do with those places where gaps occur where different parties are involved in the transaction then have typically been involved before. the federal communications commission for instance oversees the wireless industry but they have no experience with payments. many of the payments have no experience with that so that is why this collaborative effort to try to understand whether or not or not any new regulation at all would be required is a really important first step on the part of the government and should occur pretty quickly but it's not obvious that there are serious unregulated areas. >> mr. mclaughlin? >> i think it's important to recognize that the global -- mobile phone will be one device albeit incredibly compelling device that consumers will use to access their accounts so from a mastercard prospectively want to make sure that all the right

protections and privileges consumers have doing that transaction is the same, whether they are using their physical card, whether they are initiating the transaction from a mobile device or shopping on line. that is the reality for our consumers, to be able to trust the transaction and know they are protected wherever they are using it. ably picking sure we aren't creating some separate and independent mobile world but rather seeing these devices as a right and privilege that the people have today is essential. i think it's also important that we allow innovation to flourish in this area and we need to ensure the security and consumer protections. what we can do is constrain or restrict the ability for industry to determine how to create the most value for the consumers and merchants using these devices. >> to move into these types of innovations, there is a scale of investment that has to be made. can you kind of explain again the scale of investment that companies such as your spent on

developing these products in the underlying infrastructure? >> absolutely and one of the things i think is important to point out is these are technologies we have been working on for a decade and more. we knew that we would want to take advantage of smart devices. we knew the form factors would be changing so the first trials we had in contact with technology were in orlando and dallas in 2002. so we continue to build and invest in 2005 as an industry. he began rolling out a path which is the contact technology we have had an weak work with all of the participants in the chain whether this handset manufacturers, security and chip companies and telcos to make sure there is a safe and secure environment to leverage that technology. so it's an ongoing substantial investment not only in the consumer experience in the environment but the underlying security infrastructure. >> mr. oliver could you talk about the potential upfront costs merchants will be required to accept mobile payments and is

there any danger that they make an expensive transaction only to have the payment technology fear often a different direction? >> i'm probably not the best person to answer the question about whether the expense will be to the merchant but i would like to answer a question about the long-run investments. obviously they are confronted with the issue of trying to understand what the endgame is and therefore make wise choices now, and there are very large -- two of me that decision to say what we think will happen in the next seven years. we believe mobile technology is the contact as well as current instruments will be there and they have actually are required to terminals to do that. the incremental cost from what i understand in adding that technology to existing terminals is pretty inexpensive, but across a huge footprint for a large retailer, it's going to encourage -- incur some money but that is what they want to do

with this roadmap is determine what is the end state and let us choose the transition and spend wisely. >> i see i am running out of time so i will yield back. speech thank you and thank you for your testimony. i tend to think a lot of people will find this really fascinating. two things that i would like to ask about. the europeans have been using this technology for a while. what statistics are those countries that are more advanced than us on the breaking in, the ceiling of information, their protections? so you already see that information over there. what have you done that is going to be different here for us? >> there are several underlying technologies that we have discussed today. the european market in particular has been using this chip technology is part of their payment card structure for many more years and they have ervin

dramatic reductions in their fraud, because the payment cards now are unable to be counterfeited or the information on the consumer payment product cannot be cloned or replicated because of the security of the chip technology. what is inaccurate is that they have been ahead of the u.s. market in terms of mobile payments. in fact, the u.s. market has a much faster potential for adoption of mobile payments because we have made this investment over the last five years in payment card technology and therefore we have hundreds of thousands of terminals already installed in the marketplace that can used now a mobile phone with the same payment capability to make this payment transactions. where in europe and other parts of the world who have implemented chip technology have not implemented chip technology with the ability to interface to a mobile device so they will

require a second investment. >> a second thought. obviously we hear a lot about

whatever innovation we create the can encrypt this information and render it as no value to a criminal and that way the system itself can produce transact and with the consumer have confidence in that transaction. what we have seen in the u.s. one example is urchins are taking devices and plugging them into the phone and they are now swiping cards or using mobile technology and they are able to encrypt this information, protected before it ever gets into an insecure mobile environment and they will process that securely. so we do have standards already is an industry and we are looking at new standards as well as new dynamic ways to create data that is of no value so even if the data is exposed i share my credit card information with you, we have new tech elegies that are emerging that would render that if no value to a

criminal. >> the same reason i'm concerned, we all have our blackberries. they are government issued, you know, but every few days we get a very long list of those that have actually broken into our black dairies and was likely spam or someone actually has gotten our information. so i can understand where the american people might be a little concerned here. we are supposed to have the protection yet we are not even supposed to use these when we go overseas. they ask us asked us not to use them. so, you know i can see where you can have a big sell for a lot of people. it might take time but i do know it is used over and europe quite a bit. with that being said, you will have to convince an awful lot of people that their checking account is not going to be wiped out. >> i think that is what happens anytime we introduce new technology.

people are familiar and that is why our obligation is to be sure every new technology we bring out there is enhanced in security. it is making it safer so consumers can understand that we can do things using the intelligent devices to make it more secure than what we could ever do with a static plastic device. that is the advantage with new technology that we need to make sure we are smart about how we harness it. >> i yield back the balance of my time. >> mr. graham for five minutes. >> thank you madam chairwoman for holding this hearing worst of all and i appreciate everyone's testimony today. a couple of questions mr. mclaughlin, how much does mastercard spend annually on fraud? i know there is quite a bit of fraud now traditionally with cards. do you have a ballpark of how big a problem as for mastercard? >> i don't think we have broken out specific fraud expenses, but what i would say is something that we constantly battled.

any change we have to make sure that we are making the system safer for that, so one of the primary focuses of our organization is to make sure that we are eliminating fraud or mitigating it wherever possible. >> would you say that it increased significantly with the advancements of the internet? >> i think any new technology creates challenges to make sure that it is secure. we have been able to over the last decade, do a lot to mitigate the fraud potential of what is on line but that is something we combat every day. >> i will take that as a yes. don't get me wrong, i am all for the new technology. i just recognize that with anything that is new, i slightly disagree with my colleague. i think criminals are a step ahead of this many times with most of these things whether it be the internet counterfeiting cards originally was tremendous

problem then with the internet. just now there was a massive sting operation throughout the entire country of people ordering on line and then fencing those items for cash at significant discounts. the effect on merchants, because i think a lot of the merchants are going to have some issues, when someone comes in and does a transaction, for example if they order over the phone and they give their credit card over the phone and then they get their bill and say a oh oh i didn't order this, the merchant usually, that has been my experience. which is really unfair because let's just say it's for food at a restaurant and you delivered to that residence many times in the delivery boy does that person but it might be a college

student using dads card and this time ted gup the bill and said $45? now they come in and actually signed ford and the merchant is protected. so are there going to be safeguards for the merchants because they are our bernsley aren't going to be any signatures with this? that would be a question. >> i think you highlighted one of the most important points of running a payments network or payments environment and it's not simply the technology available to us and quite often when we see proposals that are out there or innovations that are being booted, it's not what does the technology do but how do you run the network itself and how do you make sure that it's balanced and fair for all of the participants that are in it? that? that is why i said earlier we want to make sure the same protections and rules that we have applied and the same dispute resolution mechanisms are there. the goal for adopting new technologies is to increase the level of verification and certainty.

you can put around every transaction. issuers benefit from reduced fraud, merchants also benefit from that reduction in fraud. so harnessing the new technology and enhanced security and enhanced clarity is the objective. we can do things like providing one time cryptographic on the individual transaction so we know specifically where it was generated from, moving from static identifiers to dynamic. we can get additional certainty of who you were and the device you are transacting from by doing things like an on line transaction. what we see going forward is the distinction between what is happening how you purchase on line and other ways you are transacting. we will move more and more to intelligent devices and looking to harness the capability those devices to reduce fraud is the overall goal. >> the last question on that topic, how about the eight bit danced fishing tech knowledge

allergy that is out there with? when cell phones came out they were cloning the phones constantly by using phishing technology to steal your i.d. right out of the air. i'm assuming that is built into this technology but i think it's worth mentioning synthesis and information form right now. >> absolutely and that is why in reference to the trusted service managers, that is why we wanted to make sure anything we do with the new devices is more secure than what we do in the physical card world so things like phishing and other types of attacks were protected against. >> thank you. my time is expired and i yield back. >> thank you. i yield five minutes to the gentleman from georgia, mr. scott. >> thank you very much mr. chairman. bis is a real theft hearing.

we are moving so fast with tech allergy that it's even hard to keep up with it. and now we are -- we have a real challenge here it seems to me and i have a number of questions. particularly that 91% of the american people now, 91% of the american people own a mobile phone. that is a phenomenal situation. so, you know, first of all i have questions about who should regulate this? let's start with right now, people are paying through their mobile units. what regulatory agency -- who regulates this now? who does it, under, mobile payments? is their regulation now? >> well i think you pose a great question. there really is sent with the

mobile payments specifically. the use of the phone to make a noncommunication type of transaction, the fingers are pointing in all different directions. the federal communications commission doesn't appear to at least perceive it has jurisdiction over these types of transactions and as i pointed out earlier, when consumers phones get stolen they will go to the wireless carrier and expect the wireless carrier has maybe something in the contractor maybe has a policy. maybe there's a phone agency that is supposed to be in charge but that is at best unclear right now. >> yeah because you see that concerns me because people lose their phones all the time. the point i'm making is if you have got 91% of the american people, 90% of the american people means young people, old people, senior people, people who are getting adjusted to it. so i think that there are some very serious questions here

about the regulatory function of it. i also think that there are some issues about the complexity of this issue and with that comes the great concern about my other major concern is that, who really is responsible for monitoring the security risks that are here? i mean, all these questions really have to be carefully, carefully examined. and i think that we have the consumer protection bureau and we have the fcc. we have the ftc. then we have this little thing in there where these bills, who pays them, where they get the money from, how is it transactes

the telecommunications company pays the bill for them, adds that to their monthly bill, then you have god i am sure all kinds of fee structures, late payments that are piled upon -- if they don't pay their phone bill let alone the other bill. it just seems to me the consumer can really get bamboozled here. but a lot of, a lot of financial burden and yet, right now this is going on and we don't have a regulator for it. so, my question is, where do you all believe this would fall and is there one agency? should there be several? who is going to regulate this? who is going to do the oversight for this and particularly right now i am sure there are problems in this area. my concern is, this technology is moving so fast, we really

have got to put it a priority on how we are going to protect the american consumer because it's going to move very very fast. even right now, my own cell phone, i have problems just trying to figure out how to get all of this information i am receiving. and the other point is to match, this is going to have an economic impact someplace. there are a lot of businesses that are out of business and it's certainly going to expedite putting the post post office further out of business. and then, there is no paper trail here. i mean if i get my fill and i pay my bill, i like to have something in my hand that says hey, i pay this bill. i've got a paper trail here. there is nothing here. it is all in space so i'm just making these points to say, we have got some work to do. thank you mr. chairman. >> thank you. i yield five minutes to the gentleman from delaware,

mr. carney. >> thank you mr. chairman and thank you for the panel for coming today. i just like to pick on -- pick up where my colleague left off and asked the question, what is the drive to move to mobile payments? why don't we start with mr. mclaughlin. [inaudible] >> would have to do that, wouldn't you? my arch rival. >> i think it's absolutely driven by the demand we are seeing from consumers. what we are recognizing is mobile is transforming their lives, reticular younger consumers. they expect to have immediate access to information. they expect to have more information and richer information about where they can shop, what deals and offers are available to them and have immediate access. >> so that information would be available on their cell phone and they would then make some purchase and then make the payment through the phone?

>> personally, i don't want my cell phone to do anything more. i have a hard time keeping track of what it does now and then when i leave it at home i feel completely lost the naked without my phone. >> in fact we do consumer research the expressions like losing a lamb which i found disturbing, when they don't have a phone with an. i think you are right. i think gps has become your personal assistant and your alarm clock is something that is always on. >> some of you have touched on it. is a more sakir? >> that is absolutely the objective. we would not move towards this environment unless we could enhance the security of what we are doing we are doing and keep in mind, what we have been able to do with plastic cards and the on line authorization has been a great way to combat fraud. we believe by harnessing mobile devices we can enhance that even further by using the intelligence available to it and secondly by incorporating

consumers deeper into the process of monitoring their finances, even without it we can use the phone today. mastercard has a technology that we call in control where it says let me know when my international payment occurs or transaction over a certain amount. so that connectivity gives consumers more information. how much money is in my account before i make this payment? >> so that was one of my questions. it would help you not make a payment that you don't -- that you didn't have money to cover? one of the things that aggravates folks as when they overdraft their account and get a charge for that. this would help you not do that? >> we can do even better than that. we can tell you exact link, working with mobile banking and other applications, the current status of your account. we can say, here is how much you you have spent against the budget you have said in certain categories and provide real-time access to information.

controls are essential to the mobile payment experience and keep in mind the mastercard network and the underlying account the polls this together. >> i am breaking in because my time is running out. how about the unbanked or underbanked ms. martindale? what is the advantage and how does it work? you mentioned in your opening statement, for those folks, because that's an important group of my constituents. >> you know i think the way that you can set it up now you wouldn't even need a bank account to do transactions, you could have a prepaid debit card which is not a bank account. you could make your moment -- mobile payment application to a prepaid card. this is a way that unbanked or underbanked consumers -- >> would have to set something up? >> you would have to set something up and again you know

we have a whole host of other concerns about prepaid cards just standing alone because they are as yet not regulated the same way the debit card link to a debit account already is. mandatory -- if someone rips your number, you are adding extra layers of the mobile payment transaction when he do prepay card, we do have a concern that this has -- this is a great opportunity to provide information in a way that consumers will actually use it. ..

, you know, general acceptance? what do you see the timeframe for -- the problems to popup and occur here so we know what kind of timeframe we have for some regulatory fix for this? >> i will take the first shot at that. >> yes. >> there are a lot of elements of change involved in this and a lot of parties that will have to collaborate, release technology, implement technology, educate

the consumer. so my sense, just as a personal estimate is that you will see significant deployment and the 2-5 year range because many of the pilots that are currently going on are going to be completed sometime next year. i think you will see a slow growth curve for an extended amount of time. >> do you anticipate this same? >> we have been talking about the consumer side. from a mobile payment acceptance we see that today. we have standards that except certain types of mobile technology to accept traditional payment cards, plastic cards. we have seen our first products come through the lab tested and be certified. for mobile acceptance, payment acceptance is here today. >> excuse me. i would just add that the solutions on mobile payment that you are hearing from the well known and well recognized brands that have a clean sense of the security and the certification

requirements of this technology are going to evolve slower than the internet startups of the world who might come up with an application that you can down load on your phone and be in business basically overnight. for consumers they have to pay attention to who is behind the technology that they might be interested in using and what safeguards exist. it is always probably the wise choice to look at the established companies that are backing this and reasons why they are moving at the pace that they are moving in order to maintain security. >> i am not very technologically savvy. three steps above migrate here, but it would seem to me that you are going to have to have a platform here within which all of these transactions can occur with this same sort of technology to be able to talk to each other. i assume that is possible.

i assume everybody is already working on the same platform, the same language, whatever it takes to make this work. is that a same -- safe assumption? >> strong movement that we work together as an industry to make sure that this will work, that it is safe and secure. that is why some of the standards we have talked about, like the underlying e envy technology, the pci standards and things of that nature provide a baseline that consumers and merchants know they can trust. having those standards out there also allows us to compete vigorously on who can deliver the best consumer experience. we have to make sure their is a foundation that works so that we can compete. >> other places in the world where this is being done yet? are we the leading country? are we technologically leading the world with this application? >> actually, we are behind on

mobile. >> we are behind? >> in fact, other countries, people have mentioned europe, but in developing countries this has taken off like wildfire, but with a different set up and granted the infrastructure may be different. i'm not necessarily saying we would be able to replicate in the same way. i used kenya as an example. african countries, you don't have to have a smart phone. a regular cell phone where you are giving a deposit to the wireless carrier, and the wireless carrier is helping you manager fund. that is not something that the industry has been as interested in. it is more of the nfc enabled it, cool bolick type of scenario where you have your different payment cards move to five linked up. but other countries have been doing this for several years, and there has been a way of banking. however, it has also involved a great deal of pro-active collaboration between the central banks of nigeria, for

example, and the major telecom. a very different, more centralized set up. >> i think the key is providing the appropriate technology for consumers. consumers have access to electronic payments. mastercard has been working hard to work with the telecommunication providers and financial institutions in those countries to provide appropriate technology. one quick example, the mobile association last year gave us the mobile money innovation of the year award for what we had done in kenya working standard chartered bank to provide virtual master card numbers to people who had no access to on-line transactions of the internet. suddenly a swath of the population that was not able to access anything online now have access to it by harnessing the existing payment networks and tailoring it precisely for what was needed in this that works. >> it is interesting.

cash and checks and many years, and it seems that they are still there. maybe you guys are taking the first step down that road. thank you, mr. chairman. >> of want to thank the members of the panel for testifying this morning. the chair notes some members may have additional questions which they may wish to submit in writing. without objection the hearing record will remain open for 30 days so members can submit questions. this hearing is adjourned. i'm sorry. [background noises] [inaudible conversations]

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[inaudible conversations] >> well, we are off to a good start. i am going to introduce our three panelists. we will each let them speak for about ten minutes, and then we will have time for questions. so with that, thomas dukes is the senior adviser to the state department coordinator for cyber issues. he focuses on cyber crime, server security, national security, and capacity building. before that he was at the computer crimes intellectual property section of the department of justice, which is, of course, one of our premier institutions in cyber security. he is also a lieutenant colonel in the air force reserves. france what is known to many of you here already. he was the d.c. m at the french

embassy at the u.s. he has had a distinguished career, currently the deputy head of the eu delegation to the united states, been here about a year almost on the nose in that position. many times in the past his career has focused on disarmament, security, multilateral affairs. he was the ambassador to geneva, which is a perfect place for security affairs. the spokesperson for the french ministry of foreign affairs and the head of the mission -- the ministries you in directorate which is a focus of attention here for server security in the coming year. finally, bruce mcconnell who also is probably known to everyone. he is the senior counselor of the national protection and programs directorate at d.h. s. i have, of course, numbers for a long time.

he was on the transition team. before that he was in the private sector. before that he was in the omb, the true center of power. we are very happy that we can have all three panelists here to speak to you. why don't we do the following cannot go one, two, three, start with bruce and end up with tom. >> good morning, everyone. great to be here, although i must say i hardbacks to follow. so that is a good thing. we are really happy to be here, and i wanted to come on a couple of things, draw out a couple of the conversations that jamie and cecilia started because i think there are some interesting threads here that we can pull on collectively over the course of the day and in the future work that the commission will be doing in this important area of trans-atlantic separate security

cooperation. so starting from home i would note that there is actually a fairly large footprint of the hs people here at the conference, and i think that is instructive because its takes me back to an article that dippy secretary and i rode about a year-and-a-half ago. the main thrust of which is that cyberspace is civilian space. so there are many metaphors. all of us who work in this field are always searching for them because we cannot see very far into the future. we are always trying to reason by analogy. they take as part way and produce some bizarre conclusion. you think, well, that is the end of that analogy. we all have good examples of that. if you think about some of the things that cyberspace can't stop of, whether it is as school yard or a classroom or a library

or a marketplace, the one thing that we asserted in the article that we do not want to become at least by its very nature is a battlefield. and so it is, i think, instructive that the administration and this event today have such strong representation from a civilian agency, homeland security, and the administration's legislative proposal as to the congress to give us the primary responsibility for securing cyberspace in the united states. from a government standpoint that the government cannot do this, and governments cannot do this by themselves. to that points, a second interesting aspect of the conversation today and as you heard this morning already is the initial focus that many of

us have in many of us collectively internationally have on so-called cyber crime. and so we have the convention, which is the probably principal government to government instrument at the moment that covers -- covers the cooperation in cyberspace. it is -- we were happy to see in the most recent -- i guess today's adelle announcement from the president's, obama and prime minister of japan that the japanese have decided to exceed the budapest connection. that is a major, i think, extension of its two outside the normal kind of atlantic sphere. so very promising, and we hope that is just the beginning of more broad international participation.

but i think as you tease out pieces and threads of how we deal with this large problem of cyber safety and security there are a number of threats. this cyber crime piece is an interesting one because, in fact, of course almost every attack that we encounter everyday is a crime in the united states anyway, any unauthorized attempt to access a computer system of someone else without their permission or to deny service to it is a federal crime, but we don't generally prosecute under the statute. it is very difficult to prosecute under. the focus that we all collectively work on as government, a subset of those crimes which i would call cyber enabled crimes. that is the kind of thing where we all are in agreement that

child pornography is not an appropriate thing to have in cyberspace. so we attack that as a cyber enabled crime among other -- using that among other tools. we attack intellectual property crimes that are enabled by cyber -- by the internet. financial crimes that are enabled by the internet. so there is a whole area of collaboration and cooperation, and i think we need to continue as governments to increase this way and use of law enforcement tools in this area. i know this second panel, my colleague will take up that question in more detail. so you can then get it to a couple of other things. three other areas, i think, that are interesting to -- that we all work on and think about because they deal with different parts. there is the problem of cyber defense, the possibility which

our colleagues in estonia and georgia, those countries which know they have been hacked in this context. and so they're leading the charge in europe to get to the others to understand the importance of this issue from a national security level. in that area as the deputy said, there is another area of great debate about roles and responsibilities in this area and of the content -- defense establishment. there is no doubt that there is no role and that there are adversaries that we all face that are national governments and that inevitably cyber will become an element of conflict going forward. so that is not something that you can deal with particularly well or effectively in the law

enforcement context. in my opinion it is an area that needs to be dealt with in its own right. so the third area, what i think of generally and which is our core mission at homeland security, from this space, cyber security, this is securing the internet itself. it is a place that can be supportive of our ability to defend against cyber adversaries from a nation states and point. it can also be supportive of reducing cyber crime, but it is really about the defense of the networks and the defense of the information and the protection of identities. it is in this space that we get into why it is important to have a civilian agency doing this. as the deputy secretary said, from the standpoint of cyber security and homeland security generally it is a bottom-up

thing. it is not a top down thing. international security and national defense, the actual norm is that you wait until you are attacked or are about to be attacked before you do something. in policing, homeland security you cannot wait for that. if the population is afraid in the the local jurisdiction, if you are already behind the curve you have to act proactively to defend and create environments which are resilient which include empowered individuals. in a cyber that connects with the stop, think, connect campaign and awareness campaign. and there you are thinking about similar campaigns. the capable communities, and that is if you translate that piece of resilience in to cyberspace you are talking about all the various network to communities and making sure they're able to defend themselves and in the response

of the federal system that can aid and assist that whether it is through sharing threat information and remediation, alerts to coordination when incidents reach a national level and so in that context there are a bunch of areas where we collectively are cooperating. we talked about emerging collaboration and cooperation. there are several interesting approaches. the estonians have an interesting approach. the germans are well along. this is under broader conversation. we know, as you know, have had a couple of successes here working with the isp on a voluntary basis to promote the stopping of botnets. there was discussion earlier about the importance of managing the domain name system and, of course, on all this we are cooperating on a bilateral basis an increase in the multilateral on operational matters.

we were recently in india where we signed a search to assert cooperation agreement which allows us to, if we see a tax that appear to be coming from india we can call them up and ask them to check in with the hosting company and see what is going on. they can do the same. so that can be quite helpful in this operational cooperation and collaboration. can work, as all cyber security actually works that is effective on the internet in a very informal basis and among communities of trust. so the fourth area just to capture the overall peace, picture here is the question of internet content. we all, both europeans and the united states and our international strategies talk about the importance of keeping internet open which means open from a technology and interoperable standpoint, but it also means it is an open place for discourse. and this is an area where in my

opinion there is the least amount of international agreement. we will have a long set of conversations about how to deal with the problem of what content is viewed as appropriate by governing bodies in various jurisdictions. and so that is a longer-term conversation. it is not strictly about sever security. on the other hand, it is -- it does relate to the nature of the cyberspace. i think for those of us to think about these questions, what is cyberspace and how it works and how becomes an environment for humans to collectively discuss and take action on global problems, this question of conscience will become increasingly important and something we will need to deal with. you will have those four threads. on top of that you have the question of governance, how you manage these things collectively for that just as the deputies

said, we are trying to make sure we can get the machines to help us protect them by having them automating some of the response and a lawyer to aspect of it. so to i think we have to have -- use the internet to help us government. and because we can not only rely on the agility of standing government and standing government institutions, we found already in a separate security that it is certainly true if you can work informally and collectively to get things done. i think we will need to continue to develop institutions that are internet based for the future to govern some of these problems. that is very much still a work in progress. so i am asking only that as we increase our dialogue and cooperation that we take the big picture and the long view since this problem will be with us for

a long time as an exciting area. i just want to echo the points made earlier about how important this particular collaboration is i look forward to discussion. [speaking in native tongue] >> thanks you very much. i am in an even more challenging situation than you because not only have to speak, but blunt and firm. she is here. and let me tell you, we are very motivated to work with the commissioner. particularly because she knows how to motivate people. you know the collaborators, review what i was going to tell you. it is an example of the way she works. she knows how to create a stimulating environment. we have to talk about

transatlantic cooperation. let me start with one. the volume of data that goes in the atlantic ocean over communication exceeds by far, by very far any that flow between all the region. and another is that we share basically the same value. this is also a unique element of our relationship. although we don't necessarily have the same privacy conceptions, we have controls and different federal structure. we share the same values. the debate we have on both sides of the atlantic on how to offer a narrow path between the need to regulate against cyber crime, cyber security to protect critical infrastructure to fight. but also on the other, to promote in other countries to preserve the freedom of internet and to maintain business

friendly environment as much as we can because on both sides of the atlantic we need. we know that big internet firms are for the time being still in europe and in the u.s., so it is our common interest. we share so many things. that is why our corporation is so important. that may start, my second point. state of play. as commissioner put it so well, cyber security on both sides of the atlantic has evolved rather difficult. seventh security has become part of national security. maybe compared to the first u.s. national cyber strategy. while it is something more recent, sense to doesn't eight and nine for the first time

policies focusing mostly on the german market, but in the last year's we set up a new dimension for cyber security. most important initiative of the commissioner. the safety of engaging and discussions and preparing a new strategy for cyberspace. this really shows that we know that we have to come after that quickly. as she put it, particularly cyber crime and for many other reasons. an issue of emergency. i can tell you that we plan to try to achieve that as fast as possible because we know it cannot wait to. because of critical dependencies between the u.s. companies we know that there i n