layers of obamacare and they're able to receive va disability compensations sooner after separating from the military. but let's understand as we try to do this, this is it is a tough challenge. try to make this work in a way that can respond to our veterans effectively. ..

working steadily to build an integrated olap tronic health record system. when operational, the system will be the single source for servicemembers and veterans to access medical history and for clinicians to use that history had any dod and va medical facility. again, it it is not easy. the way we are approaching us to try and see if we can complete this process and to places, san antonio and hampton roads and then try to expand it to every other hospital.

it is tough, but if we can achieve this, it would be a very significant achievement that i think could be a model not only for the hospitals that we around, but for hospitals in the private sector as well. for a play, we need greater collaboration on mental and behavioral health. beyond the specific initiatives i mentioned, we are trying to focus on enhancing collaboration in areas that involve some of the toughest challenges we face now. related to mental and behavioral health, posttraumatic stress has emerged as a signature on seeing were of this last decade of war. its impact will be felt for decades to calm in both the dod and va must therefore improve our ability to identify and treat this condition as was all mental and behavioral health

condition and to better equip our system, to do with unique challenges these conditions can present. for example, i've been very concerned about reports of problems with modifying diagnoses for posttraumatic stress in the military disability evaluation system. many of these issues are brought to my attention by members of congress and i appreciate they are doing that. particularly the veterans affairs committee chairman, patty murray, who addressed this issue because it happened in her own state in a particular way. to address these concerns have directed a review across all of the uniformed services. this review, let it be undersecretary of defense for personnel and readiness, airing content will help ensure we are delivering on commitment to care for servicemembers. the review will be analytically sound, action oriented and will

provide hopefully the least disruptive impact of behavioral health services for servicemembers. the effort here is to determine where those diagnoses take place, why they were downgraded downward, which took place so that we know exactly what is happening. i hope the entire review will be completed within approximately 18 months. the last area is the area that is really concerned me, the area trying to prevent military suicide. we strongly focused on doing what we can to try to do with this issue, which i am sad is one of the most frustrating problems have come across as secretary of defense. despite increased efforts and attention by both dod and va, the suicide trend among

servicemembers and veterans continues to move in a very troubling and tragic direction. in part, reflect good of a society. the fact his numbers are increasing now within the military. the post cooperation with va and the dod is taking aggressive steps to address this issue. including promoting a culture -- to try to get people to seek help, seek the kind of hope that they need to improve access to mental and behavioral health care, to emphasize mental fitness and to work to better understand the issue of suicide with the help of other agencies, including the va. one of the things i try to stress is that we have got to improve the ability of leadership within the military to see these issues come to see

them coming and do something to try to prevent it from not name. our efforts to deliver the best possible services to pay nine are dod and va professionals who work extremely hard every day on behalf of those who have served in uniform and i extend my thanks to all who help support our men and women in uniform today, to veterans and families. let me just say, we are one family. we have to be one family. at the department of defense and department of veterans affairs family that supports one another and all those who have answered the call to defend our country. together we will do everything possible to ensure that the bond between our two departments and between our country and those who have defended it on micro stronger the future. let me also say this is a former

congressman, now secretary of defense and someone who has spent over 40 years involved in government in some capacity or another, i am well aware that too often the very best intentions, the very best intentions for caring for a veteran can get trapped in bureaucratic infighting. it gets trapped by conflicting rules and regulations. it gets trapped by frustrating levels of responsibility. this cannot be an excuse for not dealing with these issues. it should be a challenge for both va and dod, for the congressman for the administration to try to meet that challenge together. our warriors are trained not to fail on the battlefield. we must be committed not to fail

them on the home front. i realize that there have been a lot of good works and a lot of goodwill and a lot of good intentions, but i can assure you that my and chest as send results, not words. i'm grateful for the support of congress in these two committees and i tend to back look forward to your questions. >> thank you, mr. secretary. you know, the comments made about how unique this is to have this joint hearing about these two committees resulted from chairman miller coming to me with the idea and i want to thank him for that. and i think it also happened because we have two such outstanding secretaries, both of whom are veterans, both of whom have devoted their life to service to this country. secretary cannot i come in many

congress was here when i first came here come a couple other of us are still here. mr. bartman and mr. filner revealed people on this committee now. you are taken from ims server to serve the president as director omb and as chief of of staff and then later as director of central intelligence the announcer could care your defense. that's a lifetime to be commended. secretary should psyche, starting with entries into the united states military academy, lifetime of service in the army, culminating at chief of staff of the army, no one could have a better career leading troops in battle and leading the entire army in the start of this war against terrorism. thank you both for your service.

mr. secretary. >> thank you, mr. mckeown, ranking member smith, make a member filner, the house armed services in-house veterans affairs committees, thank you for your steadfast support of servicemembers and veterans and for this opportunity to testify before you. i'm honored to be here with my friend as well, secretary leon panetta, leadership in close partnership on behalf of those who have worn the uniform of our nation has been monumental. i'd also like to acknowledge -- i believe we have here and other places veterans service organizations who are here today because their insights have been helpful and hopefully an improving the programs that we overwatch in the department of veterans affairs.

i said it often enough and i'll save all my time. little of what we do and va originate in ca. much of what we were on originate from dod. so what this means is that we and va must be aware, must be agile and must be fully capable of caring for those who, in lincoln words, borne the battle. as a footnote, we still today in va care for true children of veterans were children families. the promises of abraham lincoln are being delivered today that president barack obama. this congress and the va p100 yours turn out will be fulfilling to families and survivors. history also shows that mrs. a piece of history, also shows that our requirements and va

continue to grow for about a decade, maybe sometimes a little more after the last combatant is back from operation. so in this case, a decade or more after the last combatant leaves afghanistan, they will continue to grow and the operation will reflect that. our requirements will still be growing. so, for ask him it's important that we spend the time now to better anticipate their needs for care, for benefits and for a successful transition to civilian life. for this current generation, without losing sight of the needs that we care for peer collaboration and cooperation have never been more important and i think for the next two decades, it will be entirely important because this will be in large measure the work of the nation and focusing on how we

care for the less than what% of americans who serve in uniform today and provide for us this way of life. most significantly, we are looking forward initially here for areas. three of those areas will match up with what secretary pineda just provided. that doesn't mean that he and his five and nine for we are disconnected, but we describe them just a little bit differently. the integrated health record, the ihr, which you've are marked has been in the process of discussion for 10 years now. i think both secretary pineda and i have agreed on what that will be and we are moving towards a solution. the second point, more comprehensive sharing of data through virtual lifetime electronic record of which that

integrated electronic health record is a key component. the third area of focus is the integrated disability evaluation system, which is primarily a dod enterprise for significant va support to ensure an efficient process. in the fourth of rdas areas of focus, the president's initiative to redesign the process and implementation to higher heroes act. my testimony submitted to the committee expands on each of these areas in some detail and i thank the chairman for accepting that written testimony into the record and i won't go to them in detail at this time. let me briefly emphasize that it's especially important that we shared the greatest collaboration between va and dod and that critical phase before

servicemembers leave the military. we simply must transition them better and i speak as one whose watch that process from a different vantage point over time. we do this best with warm handoffs between the department. that is key to assuring the success of transitioning servicemembers back to their communities and protect ways, but it's also key in preventing the downward spiral that some faith and being challenged, transitioning does not work quite as well for them and in some cases, homelessness and sometimes suicide or what we have to do it. so, i echo secretary pineda's comments here. while we are pleased with the progress made today on critical issues common to those va and dod, we know we have a responsibility to better harmonize or two large departments in ways that better

serves servicemembers, families, veterans and our survivors. their well-being is the strongest justification of why we should be working together more close late in more collaborative late and we are today. there's more important work to be done and i'm proud to work for it to make the most progress possible in our time on behalf of those who wear and how foreign the uniforms of our nation and with that, mr. chairman, thank you into the members of this committee for your unwavering support of our efforts and i look forward to your questions. >> thank you very much. i ask unanimous consent to include the record of all member statements into the record. without objection, so ordered. we've already agreed that we will have to meta-questions, so i would encourage members to make their questions short so they can have the answers

complete that we will start with me. as i verity said, we know that there's high unemployment among our veterans, our young veterans and we know what the 487 billion cut in defense, we will have 100,000 leaving the military. we will have another 100,000 at the sequestration takes effect. what plans do have to ensure that these servicemembers will not go from the front lines to the unemployment lines and how do you see potential reduction in the defense workforce resulting from the sequestration what effect will that have and what we be able to do to try to move them into some meaningful employment? mr. secretary. >> well, i sure hope that sequestration doesn't happen with you. it would be, as i have said time

and time again, a disaster in terms of the defense department as far as their budget is concerned and our ability to respond to threats that are out there and would have a huge impact. it doubles the cuts in the military. it would obviously add another 100,000 that would have to be reduced and the impact of that on top of the reductions that are currently going to take place would place a huge burden on the system's to be able to respond to that. i think would be near impossible to try and do the kind of work that we are trying to do and make it work effectively. i think we can handle what we have proposed in our budget and the drawdown numbers coming now. we'll try to do this pursuant to our rational strategy over these next five years and i think the systems we are working on and what we are trying to put in

place and company can respond to that. but i sequester should have been annexing additional rudeness and they put on top of it, it could really strain the systems. >> mr. secretary, could you please give us that input for the record and in keeping with that, my time is expired. mr. miller. >> both secretaries in 1861, john f. kennedy said we put a man on the mid-and eight years later america was fair. we talk about integrated health record by 2017. why could we put a man on the moon and eight years and were not starting from ground zero with the electronic health record. why is it taking so long? it is so vital especially, secretary should psyche to solving the backlog issue that exists out there today in regards to disability claims.

>> mr. chairman, i can't account for the previous 10 years. i do know there is a history here. the two large departments each having their own electronic health record, which happen to be two very good, maybe the two best electronic health records in the country and trying to bring back old church together to say we're going to have one and it's entirely possible and i grew to you. it's not technology. its leadership here. between secretary pineda and i. we have, in the last year, met five times -- four times. we are going to meet again in september. we are here today testifying together. this is a great signal to both of our departments. prior to that, i recall meeting with secretary gates four or

five times. 717 months, the two secretaries of the largest apartment had sat side-by-side in direct communication on issues like this but the integrated electronic health record being the primary topic of discussion. it has taken us 17 months to get to an agreement that the secretary pineda and i have signed that describes the way forward. the way forward for us is a single joint comment integrated electronic health record. each of those words mean something. the key here is an agreement that it will be open and architecture, nonproprietary design. that is a significant change from previous discussions, which were wrapped around which proprietary contract to her were we going to be interested in establishing an arrangement

with? i believe that was part of the challenge. the fact that we have agreed on a common set i think is groundbreaking here and both secretary pineda and i have agreed to move forward on this. >> thank you very much. the gentleman's time has expired. if you could complete the record on those questions, that would be good. mr. smith. >> thank you, mr. chairman. following up on the comments mr. filner made, exit interviews are notoriously difficult to get people interested in. i've met with folks to see how we have about the spigot now they have a book this day. the bottom line is, what are your thoughts on what you need to do to get the servicemembers to pay attention to the most important things. it strikes me like were overwhelming and i just glaze over. if you had to explain it to them

in 15 minutes, what are the critical pieces of information you want to give them? how can you make that better? >> real to secretary should psyche as well. you know, i remember when i got out of the service i couldn't wait to get out of there and i didn't want to spend a lot of time having people tell me what i was or was not going to do. in this instance the best way to try to bring these opportunities is the counselors were assigning individual can't others as part of the transition program. there was a time individually with them. the successor to get their attention and try and get them moving with regard to the potential benefits available to them. >> just very quickly, i would echo secretary pineda here. when i got ready to get out of the military i couldn't wait to get out of there either. i would just say if we look at

this as a transition assistance program, i think we combine it with a little different attitude. ever look at this as an education responsibility of preparing folks for at least the next phase of their lives, to make right decisions,, whether it's education, whether it's a work choice and certainly from the va's point of view, we are entirely interested in getting as many departing servicemembers unrolled with us, whether or not they have a requirement for health care today, having been enrolled in five or 10 years down the road when issues crop up, we have the evidence necessary to deal with it. we need to look at this says more than just assistance, but this is preparing them, making them career ready for the next phase of their lives. >> thank you very much.

>> mr. filner. >> in a democracy, where you need obviously the support and other people, the cost of war is a pretty important item to understand and treating our veterans is obviously part of the cost abortion because it are. i've tried on several occasions to add an amendment to any war appropriations on 15% to 20% surcharge because that's the difference in them budgets for veterans. nobody wants to bar of money for veterans. so it's not looked on kindly. but part of the cost of war, you know, we have statistics with 6000 killed in action -- i'm sorry, 5000 killed in action since 9/11 and almost 50,000 wounded. yet those who have showed up at the va for help and i know there's different definitions in circumstances they think is close to over a million. why is there such a disparity -- and it's important for the

public to understand, what is the cost of war. how you account for a million veterans seeking help for problems and more in only 50,000 considered casualties? >> since you know how to manipulate the two minutes, you're looking at mcu don't have to answer. >> and it clearly is the impact of war over the last 10 years and how it's affected those who have served. and when they do return, when they come back to reality is that not all of them -- not all of them are getting the care and benefits that they should get and it's our responsibility to respond to those mean as they

return. look, the system is going to be overwhelmed. let's not kid anybody. we are looking at a system already overwhelmed or the likelihood is we tried down further troops sent over these next five years, assuming sequester doesn't happen, we are still going to be adding another hundred thousand per year and the ability to be able to respond to that in a way that effectively deals with the hope kerry shoes, benefit issues, other challenges, that will not be an easy challenge. and the cost -- you talked about the cost of war, this is inherently part of the cost of war, not just dealing with the fighting. it's also dealing with the veterans have returned and that was going to be a big ticket item for going to do this right.

>> i hope he'll just look at that as a way to really look at that issue. >> mr. bartlett. >> thank you. i must every count we are failing our veterans more than killing themselves and are killed by the enemy in afghanistan and the suicide rate is increasing, homelessness is approaching the percentage of vietnam veterans and that's increasing. unemployment is more than twice the unemployment percentage of the general population. the delays are and accept it will and after they are out, it may take more than a year. they are unemployable for the disability and it may take more than a year to get that disability. he said he mentioned that you hope that an 18 month review could be completed on time. i was just there, that does not

reflect the sense of urgency this challenge requires. what do we need to do in the congress to address this problem? >> goodenow, i think that the one thing i have seen is that although they share the same can turn with regards to our ability to respond to these issues. the challenges that as we try to make the systems work, there is a lot of built-in resistance to adapting and changing the way we do things. to the extent that we can work together to try to make sure that we push for these changes to take place and do it in a way

that effectively responds to the challenges, that is something about the congress as well as the administration has to push. we cannot accept the old way of doing things. things are going to have to change. things are going to have to be modified. people have to respond differently. if we expect the same old responses to problems are having, we'll have the same old problems. we have to change the way people respond to these issues. >> thank you. >> mr. brace. >> thank you, secretaries for being here. first of all, i want to thank both of you for being here because you have put your personal leadership in areas that have never been done before. the issue of women have been. port to those of you in the

military, both in terms of harassment and attacks on those kinds of things. secretary banana company than a starport there. secretary should psyche, your leadership and prioritizing homelessness among veterans, especially among women veterans is very much appreciated. i can tell you because veterans very much appreciate those priorities and leadership and not. so i know both of you face immense challenges, but reflect to a nonwhite miller said, i hope we continue to do these kinds of joint hearings, because this truly is an important -- i think one of the most important thing for both of these committees can focus on. just echoing what might chairman, chairman bartlett

said, can you post comments on where we can be helpful in terms of these two committees. >> i can't speak on the vap said this. actually congress has provided some significant assistance to va. in 08 and 09 are enhanced by congress. since then you had advanced appropriations. not all agree who is a good move, but it provided us an opportunity to have a two-year look at our budgets. unwanted assuredness for the health care piece of our budget, every year and october, whether or not there's a continuing resolution, we are able to find our health care requirements and

sowed their isn't a gap and care for veterans. in those ways, and meaningful support has been serrated. i would also say that we are dealing with issues that grow over time and some of them very quickly if your dental health, ptsd. the budgeting process is based on knowing requirements blowouts and methodically react into growth and trend. when you have large growth in a short period of time, budget process is not quite as agile and it's a bit reactive. and so, our efforts to try to harmonize, the reason we are here to say that va has some good ideas on what to expect and put that into the budgeting process. >> thank you. mystery bikirakis. >> thank you, mr. chairman.

thank you am a secretary banana and secretary should psyche. you both mentioned prevalence of ptsd and tbi and i believe we need more research to establish better type of search tools and treatments. through what channels either dod, va and privacy are sharing research findings and collaborating on direction of future research? >> i would just offer in 2009, the dod and va hud is first mental health summit, a joint effort to bring our mental health programs to the same table to have a discussion. 28 strategic findings that came out of that. those findings we continue to execute today. while there was a broad look inside that discussion, were

issues on ptsd, tbi, we spend about $30 million in the va budget on research for ptsd. we learned a lot from dod because they have extensive experience in this area in terms of diagnosis and dealing with ptsd with foreign nations come with people and formations in combat going back to calm her. so there is much that we learn from our collaboration with dod, through our research. more to be done to be sure. >> what we try to do is to do mental health assessments, both before and after deployments so we can identify and try to treat somebody who might have a problem, specifically with ptsd. we've done about 600,000 of these assessments.

our greatest limitation is the number of care providers are simply not sufficient for the demand that we are competing with va and private health care systems to hire these people, but that is a real -- that is an area of tremendous need in order to address the money problems we are facing. >> thank you. >> thank you very much. i went to thank you both for your service and being here this morning. quick question and i want to read from a veterans service organizations under the actually sent to senator webb just last week. the only branch of the military to show a marked improvement decreasing the number of persons taking their own life is the marines. they should also be praised for

her very leadership in addressing the problem in implementing the of yet to be motivated to take any substantive action. i've been to iraq and afghanistan several times and i've let the generals in the eye and asked them, what are they doing personally to help these tbi, ptsd in the second question is do they need any help. i get the same answer over there as they do here in d.c. everything is okay. we don't need any help. but the interesting thing is some of the lesser rank came out to me after i asked the general that question outside and inside we need about my home. he suggested i talk to the clergy to find out what is happening. and i did. that trip in every trip since then. i am finding that our servicemembers are not getting

the hope that they need. and my question, particularly after the kidnap this letter that was sent to senator webb that appears marines are doing a good job, so why is this so different between the marines, army and other branches and can you address that? >> obviously there is no silver bullet here. i wish there were to deal with suicide prevention. to look at programs to try to address this terrible epidemic. if you look at the numbers, recent totals have about 104 can earned 102 pending in 2012. almost one a day we are seeing. that is an epidemic. something is wrong. i think one of the areas --

look, part of this is people are inhibited because they don't want to get the care that they probably need. so that is part of the problem, trying to get the help that's necessary. two, to give them access to the kind of care they need. the three, and again i stress this because i see this in a number of other areas too and with good discipline in good order and trying to make sure that our troops are responding to the challenges. it is the leadership in the field. it's the platoon commander, platoon sergeant. it's a company commander, company sergeant you the ability to look at people, see these problems, to get ahead of it and be able to ensure that when you thought the problems, you're moving the individual to the kind of assistance that they need in order to prevent it. conference in close touch with the people. that's probably one of the

reasons the marines are doing a good job. overstress even the other services to try to develop that training of the command said they too are able to respond to these challenges. >> thank you. mr. thornberry. >> secretary panetta. there is a cover story in "time" magazine within the past couple weeks and some statistics really jumped out at me. one fact they said is 33% of military suicide had never deployed overseas at all. and 43% had deployed once. but 76% of united together. i'm wondering number one, are the statistics accurate? and number two, what does that tell us about the problem if were focused if they never deployed at all on the third of the suicides. maybe you're not looking at all the factors.

>> those numbers are accurate as far as we know. what you are seeing seeing is that reflects the larger problem of society because the fact is suicides are on the increase in the rest of society as well. so problems with drinking, problems of finances, problems within the family, problems with dealing with conflicts that they are confronting. problems of dealing with just the general pressures that we are seeing in a society that stealing obviously with economic pressures than at the same time social pressures. all that is impacting on families and that's true in the well and that is what we see this occur not just windows to play to the battlefield, but we see it but those in families that are here. >> it seems to me that puts a different perspective on the scope of the issues that both the gentlemen have to deal with

if it's not just combat, but the entire gamut of those problems. thank you, i got that. >> thank you. mr. secretary, do you know if there's any correlation between this age group in the military committing suicide and those not in the military at the same age group committing suicide? >> an important question. the cdc publishes every year the top 10 leading causes amongst americans. the last reporter and as a continuous track between age groups 15 -- in the age group 15 to 24, suicides is good third leading cause in the script 25 to 934 is the second-leading cause of death. and so, suicides are a national discussion here. and when you recruit out of that

population and could youngsters to the stressors, we are all familiar and combat serving uniform. yes, suicides become a matter of great focus, interest and importance to the secretaries. i guess the follow-on question is how do we try to find who are best suited to serve, but i no longer have those responsibilities. >> thank you. ms. sanchez. >> thank you, mr. chairman. and thank you gentlemen for being before us today. in preparing for this hearing, asked my staff back in orange county to go through the casework we have with respect to veterans and transition. although we have a great relationship with our va hospital and long each in one of santa ana and when it anaheim on

our district, the reality is that most troublesome area with respect to these cases involves quality and the lack of health care for servicemembers transitioning from active or haven't been called a and are now in the veteran road if you will. in fact, a lot of veterans come to our office and express real concert about not receiving treatment or having to wait for a specialty doctor. it would be an ecology where were short staffed or something of the story. the other week concern is the issue of being prepped for surgery and then someone doesn't show up out of what other and the surgery has been postponed. it isn't until these people come to my office; directly that were able to get every scheduled. so my queion is, how are you

addressing these types of concerns with respect to health care? and wyeth for surgery scheduled? why are people showing up to be on the surgery team? and more way, why does it take pressure off us to call and i said rescheduled? >> author questions, congressman. if you'd give me the details, i'd be more than happy to research both your frustration in mind. i agree with you. >> my second question is with respect to homelessness. we have a lot of great organizations helping us with that, but they are the one sense. is there a new grant program, not for local five o. one c. threes to help that? be met with provided grants -- grants for the past two years. two years ago, $60 million worth of grants were provided under

the supportive services to veterans families find. just recently announced the serious investment of 100 million in the 13 budget we have a request for an increase to that investment as well. >> thank you so much, mr. secretary. >> thank you, mr. chairman. thank you to both of you gentlemen for being here today. the president announced a new model of the tap program. as we understand, i will be required to attend a one day, dat separation class followed by three damping the workshop on a one-day va benefits briefing. other training and non-jobseeking such as readiness for post secondary education will be offered as voluntary and not subject to mandatory provisions of the law. this is hardly tailored approach

that would meet the needs of those whose post discharger to attend school or business. offering non-climate related instruction as voluntary ignores the fact that it's difficult enough to get supervisors to allow servicemembers to attend a current preannounced decors, much less seven or eight days away from the unit, especially if they are preparing to deploy. we make all eight days including the voluntary non-implanted mandatory? >> i think we've got to move in that direction. you know, we are doing nine pilots that are basically going to test this out. we are hoping to complete those pilots by november ambler, you know, just exactly what we have to require, mandate, how we have to revise it. but my sense is the only way it works is to make it mandatory. >> a model that the marine corps is using and giving the options

to those who are about to discharge, is that a model worth looking at as well? >> i would think so. >> seems that i would give flexibility because not every service member is going to be coming out, planning on just going into the workforce. >> thank you. i yield that. >> pfister walls. >> thank you, mr. chairman. if i could think of chairman sindh ranking members for making this happen. by taxing us transition from a smiley thing appears like it's happening. and to both of you, you have my deepest gratitude and the people in the first district for defense of this nation. i've got a tough one here i know it troubles those of you. the issue that came out in the gao reported a 26,000 soldiers discharged on a personality disorders. my question is brought to the fact that vietnam veterans commission to study a gala while school about what we're doing

about that. my question, probably to you, secretary panetta is to correct those veterans who may have brought it improperly discharged with personality disorder diagnosis? >> we are conducting a complete review of this area. you know, we have responded to the situation that took place up in washington and that was the focus of the gao report and that is what concerns us a great deal. as a result we not only went over to their, we ran a review elsewhere to make sure that the same kind of problems have not occurred elsewhere. you know, it is important that we determine why someone would get this diagnosis and then it would be downgraded. i mean, there may be some legitimate reasons for it, but in this instance it happened to too many people in that raise tremendous concern.

>> my concern, and surely curious and now secretary should psyches is that one of the biggest problems here as it's not benefit compensation. it's the inability to take care for existing and it could've been whether existing or exacerbated by the combat experience of their time in the military they are not getting the care through the wonderful folks at the va and how do we get that? d. adjustment disorder has increased and so, i thank you goes for paying close attention to this. i yield that. >> mr. jones. >> thank you, mr. chairman. mr. secretary, pineda, two years ago, the house had a provision that said if you have served this country at war and you come back home in your in the process of a medical review of your condition, but in that period of time he self-medicating future

self trouble, so therefore you are given less than honorable discharge before people would finalize their decision, the house position basically said that individual if you're given less than honorable discharge, go back to the department of defense and review your medical records and maybe change and i would like to know how you're handling this issue in contacting those who are maybe given less than honorable discharge. >> congressman, let me respond to directly through the department because this is the first time i'm familiar with the issues presented and i want to give you an accurate answer. let me give you that answer for the department. >> that would be very satisfactory. thank you very much. i yield back.

>> mr. davis. >> thank you patch for your uncurled leadership to work and coordinate these programs. i wanted to ask you about ordination and about resolving misalignment between the coronation programs between the dao in the va puget sound throughout traps and trying to get over those. what is it that's causing these problems? either one of my colleagues mentioned it seems to be creating more confusion than anything else >> the biggest problem here is these things have developed on separate tracks and as a result, you know, you've got to bureaucracies that basically developed their own approach to dealing with these who stands to make it familiar with them. that's what they use. there is this coordination. there is a strange work together

and that's the fundamental problem. >> would try to switch off occasionally. one of the other issues i really wanted to ask about was counseling. the coronation programs as well as transition gps program the president has proposed and moving forward on call for counselors and we know the problems in mental health, but how are we planning for the kind of counselors that will be needed for this because clearly though because trained in many ways, understanding small business, et cetera, how are we planning for the immersion of the folks who will be critical to this year we don't really have them in any great number. >> that i think is to have counselors familiar both with veterans in defense areas. what are the benefits? what are the opportunities available and be able to present that. so it's going take training of the people who are parted to

counseling to those involved. >> is there a cost factor involved that we need to address? >> there is a cost factor involved. >> may i suggest it's all there may be great toddles around the country. we think we have been in san diego to take a look at the models have beheld full. thank you does. >> pfister for us. >> thank you mr. chairman, secretary panetta and secretary should thank you for being here. also, thank you for protecting valor for those that have earned it. my question is a little more theoretical. what prompts this is the waco claims regional center in tax base, which is the worst in the country when it comes to adjudicating regional claims. what can they do if ids does the work? what are you thinking about in terms of a new paradigm to fix

this issue? both of you can answer or either one of you. but it seems to me like we've got cultural issue is that ken be having assistance. you're doing your best to get the system strike, but what are we doing to fix the cultures that we do what we promised our military men and women veterans and their service. it just seems to me they spent all of our time insistence. can you help you with that? >> let me interrupt you you answer. are you thinking about a pilot program so what are you going to do? for is a clean sheet of paper? was the way for the specific ideas to fix this? >> congressman, i just want to be sure and answering the right question. waco claims what sounded to me

like disability claims that would normally handle. ids is a joint program that dod and va, the ids question that you have here. we have piloted a ds. we started off with 27 sides. these are dod initiative with pam support with 149 sites now, fully operational across the nation and i think we both have controls that will drive this to the target, which is 295 days for a process. this sounds like a lot of time. on the one hand when we did our systems independently, sequentially, dod first nmda, right now with an integrated disability evaluation system, that is down below 400 days and were targeted on 295.

when we get to 295, which is going to be a bit of work, and it sounds like a long time, but involved in the 295 days is care and surgical procedures that veterans have been injured are still going through and there is leave associated with that whenever a surgery occurs, an individual is provided x amount of days for recuperation made so to speak. all of that is factored into the 295. so in the 295, while it sounds large, it is a treatment and transition program. i think we have the right model here. for this and incumbent on us is to get to the target as we've described. in the 295, vhp for that is about 100 days. right now we're 145 days. we've been as low as 103 and we

get a surge from our friends in dod and vhs. do we know we can get to 100 days that we are proceeding. >> mr. forbes. >> thank you, mr. chairman. secretary should seki, we know for now the va tap dowd and made about 904,000 claims and over 125 days. 1.25 minus projected for 2013. my question is, can the current system handle the expected reduction demonstrate project in the president's budget and under sequestration? and if you could give me yes or no answer on that and then elaborate anyway you want to to clarify. >> your number is higher than mine, but i will accept them. it's a big number. nearly 900,000 by my count. let me explain why the inventory, the total number of claims in process and that that

portion of that 65% or so, 550,000 of those are backlog, why these numbers result. in the last year come the va has made three significant positions. the ford agent orange surveys connection for three new diseases. we overdid gulf war elements, nine new diseases for veterans who have been waiting in the case of gulf war veterans 20 years since the conclusion of that conflict for vietnam veterans, 50 years. we also granted the third decision was combat combat verifiable service connection for anyone who serves in combat and has been diagnosed with verifiable ptsd. ..

even though i have been exempted and it has my attention. >> thank you mr. chairman. >> mr. secretary, you just said that possibly administrative costs would be affected by sequestration and the president the other day at vfw said no, no veteran issues would be touched by sequestration. can you explain to this committee because there is still some conflicting information that is out there from the

active omb director letter that i got back in june. how much is va going to be affected by sequestration? >> i will go back to i believe what you received in that letter that va is exempt from sequestration. i don't have the letter in front of me mr. chairman but i think administrative costs were -- >> so it is your understanding no benefit function program account would be subject to only administrative costs? and again, if you would like to take it for the zero. >> i think this would be one that i would best provide to you in a response for the record. >> thank you mr. secretary. >> thank you, ms. bordallo.

>> thank you mr. chairman, secretary panetta secretary panetta and secretary shinseki thank you very much for being with us this morning. secretary shinseki, we talked about suicide quite a bit but can you provide us with an update on your veterans homelessness? can you give an estimated number of? is it as serious as you would side in what program do you have in place? >> congresswoman, i think you may be familiar with the fact that we in the department of veterans affairs have established 2015 as a point in time where we intend to and veterans homelessness and when i say and federal homelessness there are two pieces. one is the rescue, getting everyone off the street, into programs and get them treatment for substance abuse or

depression, training for employment and moving on with their lives. what want and in 2015 is prevention. prevention will be ongoing. what do i mean by prevention? right now we have about 900,000 veterans in the g.i. bill programs, and that is colleges, universities, community colleges, trade schools, and a youngster who fails out of that program right now in this economy is at high-risk of homelessness. so our prevention effort is to make sure youngsters get into school and stay in school, graduate and have been opportunity to go out and work. a housing mortgage program, last year about 90,000 veterans mortgage owners -- holders who had defaulted on their home loans, we were able to differ

roughly 75% of them from being of type -- if evicted from their homes, and that is with va's financial counselors getting in there and helping them get control of their finances, lowering their monthly payments and asked bending the payment period. the return to us is that we are able to then ensure stability and we will deal with these veterans as homeless veterans otherwise and our records indicate that are homeless veterans health care costs are about three and a half times what the health care costs are for veterans who are not homeless. so it's an important aspect of this and while i say we were able to save 5%, there is still 25% we did not save and we have got to just do better. >> thank you. >> mr. johnson. >> thank you mr. chairman and

both of you, general's shinseki and secretary panetta, i have come to respect both of your commitments and your heart for our veterans. i will tell you though that i am not convinced that all the members of your organizations, your departments share that commitment, and will follow through with the commitments that you two are making. i understand that you can't account for the last 10 years mr. secretary and i understand that you have got to bureaucracies that don't necessarily like to be told what to do and get along all the time. but i will submit to you that another five years is unacceptable. it's unacceptable to me and gentlemen that ought to be unacceptable to you. this is not a matter of can-do or should do. this is a matter of want to and

will do. this is 2012 and one of the underlying issues mr. secretary quite honestly is lack of an overall information technology architecture. you and i have talked about this before, and it still doesn't exist today as far as i know. i pointed that out and my committee has pointed that out. organizations outside that have looked at the va's i.t. department have pointed that out. you know i am just not convinced that five years from now, given that -- i don't know where you two will be but my fear is we are going to sitting right here talking about the same issue again because we are not going about it with the discipline that is needed. i come from an information technology career of over 30 years. i worked at u.s. special operations command is the director of the cio staff.

i know what it takes to get this stuff done and five years gentleman is totally unacceptable. i don't really have a question for you. i just want you to fix this for crying out loud. >> congressman, primarily roger baker and i have had this discussion. i will work with you and we believe we have a good marker on an architecture. obviously, we will come back and work on it again. >> mr. turner. >> thank you mr. chairman. to both of our secretaries, thank you for being here. i appreciate your leadership and secretary panetta i want to particularly thank you for your work on sexual assault which i know you are working in coordination with the secretary of the va and the throughout dod to both prevent sexual assault and address the victims and

thank you for your leadership there. many of the questions you have received from members have been about servicemembers and their families transitioning out of the military. secretary panetta one of the most important things for the servicemembers in transitioning with their families is to obviously keep their family together and that raises the issue of custody. chairman miller and chairman mckeon and chairman wilson and also i want to acknowledge chairman skelton, former chairman skelton and -- on her work in the issue of custody in this committee. the house as you are aware have passed a times legislation or protect the custody rights of servicemembers. the va committee passed six times and you had sent a letter suggesting a compromise in senator boseman is going to be dropping in the senate and i wanted to ask for your support for that and also to tell you we will need your additional assistance. the uniform laws just brought out a draft uniform bill that

would change the state laws, actually reversing the progress we have made in favor of taking servicemembers custody rights away. we hope to have your support for senator boseman's legislation mr. secretary. >> i appreciate that. as indicated to you at in my letter i support the efforts that you have made. you have provided tremendous leadership on this issue, and i will do the same with regards to the members on the senate side. >> ms. tsongas. >> thank you mr. chairman and thank you both for being here today. like others before me, congressman turner i want to thank you secretary panetta. i appreciate very much the effort you have made over the last several months to improve the treatment of survivors of military sexual assault and secretary shinseki i was so heartened to learn of your recent interest in the

documentary film, the invisible war. as you say, that was during military service and ends up in the va. that movie so painfully highlights the multiple bureaucratic hurdles survival of such assaults which are all too frequent across all the services must endure to prove that their physical or psychiatric symptoms are connected to an incident of military sexual trauma and shows that too often victims are unsuccessful in pursuing their claims for assistance. to address one aspect of this problem the fiscal year 12 defense authorization act included language that required the secretary of defense in consultation with the secretary of veterans affairs to develop a comprehensive policy for the department of defense on the retention of and access to evidence and records relating to sexual assault involving members of the armed services. this policy is to be in place by

october 1, 2012. can you both comment on the status of this policy? i would also welcome any further thoughts you may have on how these claims can be processed faster and more accurately. >> well, it's a very important issue for me. i'm not going to wait for the legislation to try to put that policy in place because i think it out to take place in providing that kind of guidance and assistance to those that have been victims of sexual assaults so the they get the kinds of support that they need in order to not only get the care they need it if they want to continue their career, to get the support system that would allow them to continue their career. i think it's fair to say that secretary shinseki and i are going to work together on this issue to make sure that we can deal with this on both sides not only the defense side but the veteran side for those that ultimately move in that direction. >> thank you both and i look forward to seeing that wolesi in effect. >> mr. denham.

>> thank you mr. chair. mr. panetta, mr. shinseki both deceive -- glad to see you both here. by the way thank you for your support on the veterans jobs this weekend to law. a good bipartisan effort that we worked on after afghanistan trip. another issue that came up during that same trip was working with our veterans on active duty that were transitioning back and had disabilities and further conversations with general law stick afterwards, he had said that this was the number one issue, the evaluation process of those disabled before they get discharge, making sure not a day goes by that they are having to wait for disability or the issue of 20,000 non-deployable men and women that are disabled on active duty. he said it was the number one issue dealing with legislative

issue that needs to be taken back to 1940 and the question i would have for you is what would be your recommendation and what is the legislative fix that you need us to pass that would help with this overall disability evaluation system? >> my view is that one of the most important things we can do is address the needs of our wounded warriors and the ability of those individuals, if they want to stay in the service we have to do everything we can to help them stay in the service. if they want to move bond and become something where we end the va have to work together to make sure that transition is as smooth as possible. we have a tremendous amount of focus on this. i guess probably the one key is again helping us in terms of funding to make sure that we have the funds necessary to

complete these evaluations and give them the assistance they are going to need once they move on. that is the key area for me. >> outside of funding is there a legislative fix that you are looking for? >> at this point i have to tell you, think we have the pieces we need. we just have to, i mean, we have got large numbers and we have to do with them but the programs are in place. the assistance is in place. we just have got to make sure that we provide the resources necessary so that we can do what we have to do to help them. >> thank you. >> mr. wittman. >> thank you mr. chairman. secretary panetta and secretary shinseki thank you for joining us. secretary panetta i want to ask you how we can better align military to civilian jobs in transition especially as it relates to licenses and certifications. out give you a great example. take a highly trained combat

veteran that comes back to the civilian side and wants to become an emergency medical technician. unfortunately as you know the certification presents -- prevents her him from doing that come has to go through lengthy schooling, take lots of debt. many times they could be teaching the class. how can we better align the skills that are attained in the military to parallel what they could be pursuing on the civilian side and that is one of many categories i i know you are where up and it's really a matter of taking that military job description and figuring out how do we get some paralleling with what they do in the military versus outside? >> is a great point and something the first lady has dedicated a lot of time to. we have got to -- we have got to push states to try to develop common standards with regards to accreditation in these various jobs. these guys come out and they have got great skills.

they have worked in these areas. they have done tremendous work in their particular skill area and to come out and have to drag them through a whole process in order to be able to take the skills and make them applicable, there are a number of states that are willing to basically take these individuals and take the accreditation that we provide and incorporate that at the state level. we have got to get all of the states to recognize that kind of credentialing. >> mr. secretary is is there something we could do the deal edisto as these people come out and become a trained medic at the same time they get the certification would get something it within the military to say by the way now you have a credentialed. or to have some kind of way that there is an equivalency there because they are obtaining the same skills there there is a what outside. >> that is a good point and one of the things we are looking at is can we develop some kind of certification within the military that would then be

transferable in terms of them getting a job. >> it seems like if you just align thing that aligned with the outside. >> that's right, good point. >> thank you mr. chairman. i yield back. >> mr. courtney. >> thank you mr. chairman and thank you both witnesses for your parents are today. secretary shinseki i wondered if you could talk for a minute about an initiative that falls under today's hearing that i think it's very exciting. an example of the work of va has been doing with health i.t. which is the blue button program which again is something that again i think you've surpassed even the air in terms of really trying to get patients control over their own medical situation as well as make a smarter system and our health care delivery. >> i would just say that's one of several i.t. initiatives but blue button is the one that has received a lot of attention and there are civilian health care

systems now that are adopting the concept and that is with this stroke of the mouse on the internet you are able to access your personal data regarding health care and you can download your records, take those records and use them as you would with your own private physician. it has tremendously grown in size into the millions and we think this is also helpful for the earth in having that kind of concept capability. >> the nice thing about it is it's -- control, moving one provider to another and again just congratulations to you and your team for really leading the way for the whole health care sector really in terms of that initiative. and i know comments that come up and i'm running out of time, the

knee issue of regional icing, and merging is an issue in connecticut as well and i look forward to working with your department to try to solve that problem. >> we will do that. >> ms. buerkle. >> thank you mr. chairman and thank you both for being here this morning and for your service to our nation. it's an honor to have it both here. my question has to do it, you have heard references to the chalela commission in five years later after they issued this urgent call to streamline and make sure we have single point of reference for the care and services of our military, we have two very distinct entities. we have had multiple hearings trying to get insurance as to how you are going to get this together so we can make sure our veterans get the services without being overwhelmed by an extremely complex system. so i would ask both of you today, please, how

specifically -- what are the goals and what is the plan to get these two entities under one roof so you are complying with the chalela commission. i thank you both. >> the federal recovery coordination program has been in existence since 2007 at and as secretary panetta indicated earlier, two good departments launch and essentially developed good programs it don't quite harmonize. we have a task force but the specific direction of study brings harmony to these programs. where are we duplicating one another and where are we doing things that we should not be doing. it will have a good look and in the next couple months i would be happy and i think secretary panetta would be as well to make our people available to provide the results of that.

>> secretary shinseki and i share the same frustration. we have been working on this and frankly we have been pushing to say why can't we get faster results? likened we get this done on a faster track and the bottom line is frankly we just have to kick and make it happen and that is what we are going to do. >> i would suggest in your opening statement you it's mentioned commitment and we look to our military as the example of their commitment to our country and we should be committed to them. i thank you is very much. >> dr. heck. >> thank you mr. chairman and thank you for your long and distinguished service to our country. secretary panetta i'm happy to hear of your initiative on the web site realizing any web site would have -- and myself and senator brown have introduced legislation so

hopefully we will be able to gain your support in that. we have heard a lot about the disability evaluation system something that was far too long in coming and i'm encouraged by the pilot results and impact i in fact i have two students having set them ablaze in october to support those efforts in keynes this. we have seen in time things start to creep back up and even though there has been customer service has increased over the legacy system it is a low bar to overcome and we are hearing a lot about the fact that the program is somewhat complicated and convoluted. other than volume driving the creep in processing times going back up, what other issues are there that are causing that process in time to increase in what can we do to help you decrease those times? >> i think i indicated earlier that we have a target 295 days. within the dod's portion on that

is the medical care of seriously wounded and injured individuals who still have their -- completed and also recuperation leave is part of that so it's a little bit -- individuals have some control here and also i think secretary panetta alluded to this. these youngsters know the military health care system. they know it very well and they are very comfortable with it. it is world-class. they know the va health care system lesson there is a point in time where decision has to be made to make that psychological commitment you are going to leave the military. we at the va can do a lot to help educate peak both to become comfortable about being able to let go before taking the next one. and i think that will help streamline the process.

as i say, we have both agreed to this 295 day target and we are moving to that point. >> mr. johnson. >> thank you mr. chairman. thank you gentlemen for being here. secretary panetta knows how much i appreciate his service to the nation over the years and i certainly thank you against sir in public and general shinseki i have not had the opportunity to spread my love for you publicly, but you are a true gentleman. you served admirably for the united states army, became a four-star general, became the secretary of the army or chairman of the army. >> army chief of staff. that is what it was.

and in that capacity, you put in place strategies, very innovative, that have held us in good stead up to this point. you are a forward-thinking leader and you are also a courageous and honest leader. i would be remiss not to point out the fact that during the run-up to the war in iraq, you took a public bashing from high-level members of the previous administration for your assessment as to the number of troops we would need to effectively occupy iraq in the aftermath of the war going in. and you paid the price for that.

it said that you were perhaps forced to resign early, but nevertheless, the underdog is now on top and you bring the same innovative, strategic thinking to your new post that you had in the old post and it is definitely needed and i think it's going to pay off, and i am glad that your department and the department of defense have both become more integrated in how we address the needs of our servicemen and women as they make the transition from a military force -- has my time expired already? okay, i keep hearing --

do you want me to move on from what i am saying or what? >> your time has expired mr. johnson. >> has my time already expired? >> a minute ago. >> two minutes, k., i'm sorry. thank you for your service and i yield back burkas be mr. chairman just a small point here. i thank the congressman for his complements. i heard you say there were more than one individual who held that opinion and that was not forced to resign. i serve served you know a full and complete tour as the army chief and was very proud to do that. >> thank you. i stand corrected. >> mr. johnson i'm trying to save you from yourself is the next person up is mr. runyon. >> i don't think i need to be saved from myself. >> you haven't seen mr. runyon. [laughter] >> thank you mr. chairman and gentleman thank you for being here. i am going to touch on the ide ids process.

i know in secretary panetta's opening statement the last sentence of that particular paragraph, or the end of the ideo statement, you were going to have the senior level working group in coordination with the va and provide recommendations on how to move forward. i know secretary shinseki knows that i happen to chair the subcommittee in the house va committee and we just had a hearing on this back in march. i asked the dod to acknowledge the specific roles that va has in the process and distinguished the roles that the va and dod carry out. i have also been briefed by the gao that they have great concern of the overlapping responsibilities of the two, which is -- there are couple of issues and time is run out but i want to bring them both to your attention.

specifically dealing too with the medical evaluation narrative summaries. the lack of clear and complete diagnosis of the sherpas member which a lot of times -- servicemember which a lot of time is an unfair decision and the arbitrary time of seven days to challenge that come are refuting that decision. i think sometimes to get a complete medical of valuation unique come i don't think that's possible. dealing with the lack of, i don't know, quality control has been used a couple of times by some dsl's but not so much they are reaching out to the veteran and i know some of the dsl's brought up instances where the process went a lot smoother because they understand the process a lot better and it was just something, some points i wanted to bring to both of your attention. i yield back.

>> mr. scott. >> thank you mr. chairman and secretary panetta you mentioned earlier one of the problems was the limitation of the number of health care providers. i've got cement permission i would like to share with you. i represent georgia which has a tremendous number of veterans and one of the medical providers gave me this list. is actually list of reimbursements versus medicare reimbursements and i will give you a couple of examples. the exact same code medicare reimburses about $2000 in tricare reimbursement in the 630-dollar range. that is one of the reasons that many of the private sector providers out there are having to limit the number of of our veterans covered under tricare so i will just share this with you. it's not that they don't want to see them. it's that when, if they are the only person that is signed up in

that area then it becomes a huge -- and their privacy and quite honestly the practices -- i will lay this out for you and we will go from there. mr. shinseki if i had a second copy i would give it to you and i can get a copy for you as well. but we have to beat around this bush and a little bit. we beat around this issue about two bureaucracies that resist change. my question and for anybody who wants to take it is, the men and women serving this country be better served if the health care benefits were handled under either one of the agencies instead of both of the agencies that have had to make that transition? >> well you know i have thought about that a lot but i think the reality is we have got the systems in place.

the veterans are very tied to their health care system and the benefits that they received there and obviously dod is very tied to our system, but i don't think that ought to inhibit our ability to bring these two systems together. let me put it that way. i don't think we have to create another monster. i think all we have to do is be able to get both of these tw systems to work together to get it done. >> mr. chairman, may i add a little bit here? two huge departments. we are already collaborating both in bringing together in and a number of locations joint and integrated activities. north chicago, federal health care center. the director is a va person. the second-in-command is a navy

captain and we are learning a lot from that, and we look for other areas where we can do this and there are several other examples of that. we look at bundling acquisition, large acquisition decisions. we are working on right now trying to see whether there is a benefit to bringing our pharmacy programs together. so, i think there is a great opportunity from efficiencies and a business standpoint. where i would be cautious about saying we are going to create one system here, or the goal to war requirement has with it a whole list of preparations that you have to have, confident leadership who would have been trained how to do this in combat from the top of the organization down to the youngest medic in

that formation. that is an onerous responsibility and that is a culture we don't want to change. we have the best go to work medical capability anywhere and that has got to be a primary function here. >> ms. hanabusa. >> thank you mr. chairman. thank you both for being here. a special aloha to general shinseki. my question is for you, general. in day seven of your testimony you talked about of course the higher the hero act which the president signed into law. do you have any statistics or any report that you can give us as to how that is coming along and in that same light, you talked about removing the impediments with dod and i would like to know where we are with that as well. thank you. >> on the higher heroes that, i

would say the one piece, the wrap this up and running. we have veterans -- this is between, veterans between ages of 35 and 60 who have exhausted their unemployment benefits, have the capability for one year of training and a high priority work area. that is up and running. and the tens of thousands of people have signed up. in the transition arena, both secretary panetta and i are working on this very hard. we think we have a good plan being put together and in our case we are still looking at the details about it. i am not sure i have addressed all of your questions congresswoman, but was there

something i missed here? >> no, i will follow up with any specific questions that i may have for the record. thank you rama gheni you bet. >> i thank you with the view for being here today in your service to our nation. yesterday we had a hearing or just a briefing on the suicide problem and i would like to share with you come both of you wall, because of time his data which was very impressive about multiple deployments and how that affected a soldier. number two i know i've been to red lake's twice and it is clear when you are a freshman freshman congressman as i was two terms ago, when you're codel when it was four below oh, i have been there and the question is how is that interactivity between dod and doj doing now?

i was there about a year ago but i know it's up and running now, but how is that working? >> it just gets better all the time congressman. a new concept ringing two good teams together and integrating them. i would say that the area of challenge is the single electronic health record, and for the most part there are great workarounds but when you get to some places like pharmacy, because of the sensitivity to the safety aspects of that, there are a lot of checks and rejects and i don't think we have solved all of those issues and won't until we get this integrated into the electronic health record. so one team, veteran or active servicemember works into the door and they go wherever, so in terms of the provision and access to care i think it's first-rate. is the business aspect of this

is still require a lot of work and the integrated electronic health record will go a long way to solving that. >> mr. chairman chairman nye beddoe wounded warrior in my office yesterday who lost a leg and i personally cannot do enough or going know you all feel exact same way and i certainly appreciate your service. mr. secretary i will ask you any further questions -- from time to time. >> mr. coffman. >> thank you both of you for your long and distinguished service to our country. secretary panetta, i just want to commend you, a secretary in the department of defense, for your work and dealing with combat stress. i have served in the marine corps, in the first gulf war, and the iraq war. i remember obviously in 1991

before i left the theater and 2006 they were excellent as well. i tracked the improvements in the department of defense in terms of the active site and working with our military personnel in these new programs and i think that we are doing the best we can. and you see, the department of department of defense sees post-traumatic stress disorder as they a wound however secretary shinseki, the va sees it as a disability. the signature wound of this war is post-traumatic stress disorder and it seems that we have a disability centric approach and not a treatment centric approach and the veterans administration. wouldn't be wise if we invested dollars in treatment and reform the current system that was both compassionate, more compassion i

think to those who served our country, instead of the taxpayers saving money in the long run by again investing in treatment in the short-run and being able to allow veterans to see mental health practitioners within their private communities and not rely upon the va. i would love it if you could respond to me now but also respond to me on the record because of our limited time. >> i would he happy to provide a more detailed response for the record. congressman, let me just say, i'm not sure when the decision to treat this as a wound occurred. but i think we have all used ptsd disorder as a descriptor for many many years. we are closely linked to dod and we will go back and look at this. on the one hand i don't disagree with what you are suggesting that i would offer that we treat

ptsd. we screamed every veteran who comes to the va for ptsd, tbi, substance abuse, sexual assault and so we have a pretty comprehensive record of who to treat and then we set about treating them. >> there is no requirement for treatment once the disability determination is made and i think we really need to rethink that and take a look at that again. all the mental health professionals that i talked to feel that it is treatable down to a level to where it's no longer debilitating. we need to rethink and potentially reform this again to be more compassionate for those who have served our country in repairing their lives and also i think in the long run certainly the taxpayers of this country. >> i don't disagree but it's not just a disability. >> thank you mr. chairman and i

yield that irk us be ms. spear. >> thank you mr. chairman. thank you for the extraordinary contributions you have made to this country. thank you for being here today. i'm going to try to cram three questions and so i'm going to move fairly quickly. there is an addiction that often occurs while numbers are still in the military that also continues once they are in the va system. what are we doing to try to deal with this addiction problem? the for-profit colleges for many of our g.i.s are accessing, there are some bad actors and i want to know if you are sharing the bad actors with each other both from the department of defense and the va and finally i want to tell you about a 24-year-old iraqi veteran who started community college and is starting community college next month. he wants to go to law school. his presence worries that his foot operation will make it

difficult for him to get to class on his community campus. he and other veterans in my district all would like more time to complete their studies under the post-9/11 g.i. bill. i would argue that a one-year extension would be in order for veterans with service connected disabilities. i would like your opinion, both of your opinions on that. >> let me just very quickly try to take all three of them on. on addiction, i myself have asked our people whether or not we have medication policies that lead to addiction and we are looking at it. i know that both dod and the d.a. look at this. i was speaking publicly at one point and i asked the question, are we great just enough to ask the question whether or not our medication policies create other

problems and got a response out of the audience, so i think there's something here and we are looking at it. on the for-profits, we do share that information. in our case we found three bad actors and we cut them off. we will continue to look at that but i would just say no bad actors. it's just not for-profits. there are others that we need to be sensitive to. more time for individuals who are severely injured as you indicated. va has a program for rehabilitating seriously injured folks that is a little more liberal and very capable, and i would like to ensure that the individuals you are talking who are aware of the vocational rehabilitation. >> whether or not we can extend

the g.i. bill for severely disabled veterans so itoes not collapse in the four or five years that is presently the time limit in which they have to access those benefits. >> i would say on the folk rehab, let me come back to you on the record to see if the amount of time we have the vocational rehab. it stipulated into law how much time is available. >> it think it should be modified. it would get this bad additional time in the event they are dealing with the serious ones that your veterans are dealing with. >> thanks mr. chairman and thank you gentlemen for being here and for your leadership and what they are doing is so important now in terms of bringing us better transition. i would like to make a couple of comments here just based on my

experience initially as a private in becoming national guard over that 24 years raising to the rank of colonel including brigade command. now the vantage point of serving in these responsibilities that i think over time, the department of defense has really done incredible work before servicemen and women, before theyp ate in terms of education and training and understanding what's out there and all these efforts to integrate, the dod and the va but what i think is missing is that back home, just when we think we are making a difference we learn of a new case. somebody in a village or town that i was not even aware was struggling and they are spiraling down. we are looking to make it different than getting them into a community of caring included the va, the vfw and the american legion. my colleague and i, my colleague

from vermont have been working on a program that is doing very well from the national guard, the yellow ribbon program and seeing if there are ways we can learn from that to provide better situational awareness to state officials that are -- in new york for example we have it to the county level. many times they just don't have the information knowing that a veteran is coming home. sometimes they get them a year and a half after they come home but they don't have it before they get home and that is to say a service man or woman is coming home and that when they get home. so we are very enthused about what you're doing. we don't want to duplicate what you're doing but what we are looking to do is sort of evaluated and see if there aren't ways that we could have at least a framework. the dod, the va and transitioning this framework to the state apparatus. so i wanted to mention that and make you aware. we work with your offices and they are doing great work on this. finally thank you for your work on agent orange but i would tell you we are not done.

we have navy veterans from vietnam that don't have coverage and we are working on that effort as well. thank you very much. >> mr. larson. >> thank you mr. chairman. general, you continue to support the hud-vash program that is well used in washington state especially in my district are go the housing are partnering very well with others to make that happen and secondly started a program in my office to assist some of our committee colleges to translate the skills and abilities that veterans bring into the private sector language of what they need, especially as it applies to aerospace manufacturing and aerospace skills needed. what we found that some of our community college is to not even know there actually was a translator available on line.

there's the fellow in my office if we hired, a 30 year chief, retired after 30 years in the navy as they command master chief. his job now is doing outreach to community colleges all over the state because they come to this one aerospace training center and let them know how it works. you might want to use that as the department of education dol. finally where does this one kid who comes home, he is discharged from the military and goes home to arra town. he is not enrolled in the va and has trouble adjusting and commit suicide. asking you what is being done to reduce the likelihood of that kind of thing happening again?

>> this is part of the reason the secretary is sitting here in our efforts are to create a warm handoff. by and large across-the-board when departing the military but especially for those who have indicated while they are in uniform that they have mental health challenges. we need not to discover that the hard way. this handoff would give us the opportunity to compare be a significant mental health treatment capability so that there is a smooth transition for this. >> i would agree with that. in these situations, you have to ring the bell. you have got to say there is a problem here. and the key right now is to be able to -- there are those problems, to make sure that individual gets into the health care system and then to alert the va so they pick it up when

we try to make this handoff. that is one of the things we are focusing on. >> the mr. chairman for one second. the translator you were talking about congressmen, we at the va have created one called d.a. for vets and i'm pretty sure -- there are five others that touch on various aspects of translating skills. >> mr. stearns. >> thank you mr. chairman and let me compliment you for bringing these two committees together. i think this is fabulous. i've served on the veterans committee for 24 years so i think this is the first and i think it's a very good idea. mr. panetta and mr. shinseki, welcome. i'm going to ask you some of the basic questions that the gao has reported that it basically takes 200 days with a 68% accuracy to

address the current backlog. we are hoping, i think the timeline is 2015 to get to 100 days with 98% accuracy but the question would become, how can you do this if wesley almost 700,000 new servicemembers are coming in? i mean come on now, how are you going to do this with 700,000 new members, new veterans coming in? how are you going to cut the backlog and have an increased accuracy by 30 or 40% and i will start with you mr. secretary. >> we are in the process of piloting now with the veterans benefit management system. the first automation tool we have had in va we are still paperbound today. all these many years later. >> i'd don't want to enter up to you but when steve bullion who is chairman of the committee, he had a bill that was going to

solve a problem and this was many moons ago. so when you indicate you have this for the first time, i'm just saying i thought that was implemented sometime ago but you are saying it wasn't. >> i would have to go back and refresh myself on what chairman blow your's commitment was. there was no automation tool ever discussed in the last three and a half years and in fact the testimony was that we were building this. and it was going to require close collaboration with dod. we get paper from dod and we are paper round process. so in order to go paperless and the va it's going to take coordination between both departments. we are piloting that automation tool today and we intend to have 16 regional offices, automation on dbms by the end of this year and by the end of 2013 dcms and

all of our 56 regional offices, 14 and 15 on the backlog. >> mr. stearns we created the bat log in large measure. we made a decision that added a quarter million claims to the existing inventory. be made a decision on combat ptsd that had happened millions claims to the inventory. somewhat say why would you do that? it was the right decision to do for veterans that have been waiting for many many years. we are going to work the backlog now. automation is the key that we are after. >> congressman, what you pointed out is a hell of a challenge. we are not kidding anybody. what you have pointed out is exactly the concern is we are going to be adding more and more to that list so i think the key for us is if we can develop the systems to deal with what we are dealing with now and make those work it's going to make it much easier as additional individuals

come on board. if we don't get through this, if we don't deal with it and make it work now than it's going to become an even worse problem. >> thank you mr. chairman. >> our final question are today for dr. shinseki you are recognized for two minutes. >> thank you mr. chairman. i have a question on the nature of the collaboration between the department of defense and the va on reducing the backlog. can you tell me more about that? are you working together for this? can you comment on that? >> that is one of the fundamental challenges that we have taken on by both departments to address that back log and try to make sure that those of us are trying to work in a way that reduces those numbers and you know i think the secretary has done a great job

on the veterans side to reduce the number of days there. we are working to try to reduce the number on our side and to be able to try to provide this kind of seamless relationship so that overall, we can deal with this huge backlog. is a problem and we recognize it is a problem and i can tell you we are doing everything possible to try to see if we can -- >> is staff talking every day than? >> yes, they are. when we save backlog here, there are two or three transition programs from dod to va. most of us are familiar with primarily a transitioning of seriously wounded and injured folks out of uniform and then to veteran status so that is probably only 7% of the people in the military.

we have two other programs called benefits delivery at discharge and quick start, again transitioning individuals out of the military. together those two programs account for maybe 6% of the number of folks leaving the military. so the vast majority is this large discussion of backlog that i was responding to mr. stearns on. part of that backlog is created by decisions we have made and that we have testified to. agent orange, combat ptsd, all the issues but to understand that creates you know a volume of claims we are going to be better able to deal with it as we get automation in place, so that is an important step. we need to get that program funded and hold onto i.t.

funding dollars that we testify to. the second piece of this is, this collaboration of dod and va sitting side-by-side making sure we have warm handoffs, it's one thing to know that their 100,000 people coming out next year, but if they all come out on one october that's a different problem than this being scheduled out for 10 or 12 months or if they'll come out in one location, that is different than being spread across the country. we will match up -- va will match up whatever the -- is and that is why this collaboration is important. >> thank you. i see the my time is up. >> gentleman thank you for being here today and spending two and a half hours with their two committees. we appreciate you being so generous with their time to answer some very important questions. i would ask unanimous consent that all members have five legislative days to revise and extend their remarks. without objection, so ordered.

with that, the committee is adjourned.

..

>> to treasury secretary appeared before the senate banking committee to outline the financial stability of the state council's annual report and answer questions about threats to the u.s. economy and the financial system. this is two hours, 10 minutes. [inaudible conversations] [inaudible conversations]

[inaudible conversations] >> good morning. order.d this hearing to to bury we welcome secretary-treasurer guided air to deliver the initial stability oversight council annual report to congress as required or the wall street required to enact.ry having recently marked the two-year anniversary of wall anf street reform, i believe we havt made the important progress to

enhance our financial system. critics are quick to point out that the unfinished rule, that the improved regulatoryas structure was not going to repair overnight. in two years, we have a mechanism we in place to unwinde failing unbacked financial terme the regulators have proposed rules to enhance n. credentialsl and to foreign nations largest, most complex financial institution we have moved and have improved consumer and investor protections among other efforts. the financial stability oversight council is a key part of these efforts to enhance financial stability and eliminate regulatory gaps. it manages the process to designate financial firms as systemically important,

coordinat coordinates inner agency and monitors developments in the financial markets and provides reform for all of the financial regulators, federal and state, to identify areas that need to be addressed to strengthen our nation's financial stability. i look forward to hearing from secretary geithner about fsoc's progress. the fsoc has had some challenges, too. the office of financial research fsoc's data arm is yet to have a confirmed director despite the president nominating a well-qualified candidate. without the certainty of a director in place, they have struggled to attract the staff needs to put the systems in place to raise red flags when our nation's financial

institutions and economy are in trouble. i urge my colleagues to confirm bill clinton werner in this role as quickly as possible. the fsoc has also had many successes. the annual report we're reviewing today is solid and provides important insights into the workings of the council and identifies many important issues of concern and provides recommendations for the regulators to address these concerns. from the banking committee's oversight perspective this report provides a tangible way to measure the fsoc's progress. the fsoc also recently designated eight financial market utilities as systemically important. this is a huge step forward and

is another example of how wall street reform is hoping to provide financial stability. the fsoc has finalized the criteria and is in the process of designating non-bank financial companies systemically important and other critical steps. the fsoc also has a finger on the pulse of the economy's most important issues. for example, as we can see from the public minutes and the annual report, the fsoc has been focusing on the situation in europe, an issue that this committee also has been monitoring. as i have previously stated, i asked secretary geithner to come prepared to speak about libor. as the president of the new york fed in 2008, he raised early warning signs about the

integrity of the libor submission process and called on the bank of england to specifically eliminate incentive to misreport libor submissions by the banks. shortly afterwards, shortly therefore the cftc began the investigation leading to an international effort where selden in the recent enforcement actions by the cftc, doj, and fsa as initial investigations into this matter continue, i hope we can have a conversation today about what happened during the crisis and how going forward we can have more reliable benchmark rates that accurately reflect the cost of borrowing in normal and crisis periods taken both borrowers and investors.

while this committee will continue to exercise oversight we at any time lose sight of the fact that the libor issue at its core is about fraud. there are some who seek to put the entire blame on the custom instead but it would be a mistake to shift it away from the individuals and efforts who committed fraud accountable. our economy continues to face challenges and it is unlikely we will be able to stop every future crisis but i do believe because of the work of the fsoc and wall street reform we are readily prepared. i would like to send it to senator shelby and opening statement. >> as you said, mr. chairman, secretary geithner comes before

the banking committee today to report on the work of the financial stability oversight council. the council as we all recall was established by dodd-frank and is required to report annually on the state of the u.s. economy, there et cete threats to financial stability and the council's activities. in this year's report the council describes a stag naturing u.s. economy with a mere 1.9% growth rate in the first quarter and a federal deficit exceeding 7% of gdp. it also reports that u.s. households have seen lnl modest income growth, that access to mortgage credit is constrained and that investment is restrained by continued subdued confidence and elevated uncertainty. their words. as the council reports, the unemployment rate is still above 8% while labor force participation has fallen to its

lowest rate in 30 years. nearly four years into this administration not even a council headed by its own treasury secretary i believe can hide the president's failure to revive the economy and put americans back to work. also troubling is the council's view of dodd-frank. its report describes at length all of the new dodd-frank rules but fails to mention their enormous cost to the economy. nowhere does the report mention that these rules will require americans to spend more than 24 million hours and billions of dollars every year to comply with them. if the council wanted to understand why unemployment is high and mortgage lending is

constrained, an examination of dodd-frank would have been a good place to start. more fundamentally the council's report overlooks the serious structural flaws in our regulatory system which dodd-frank only made worse. for all of the president's talk about the need to reform wall street, dodd-frank is merely strengthened the advantage that large financial institutions possess in our financial system. first, dodd-frank imposes huge compliance costs on banks, confering a competitive advantage on the large financial institutions that can more easily bear that burden. as a result the banking system has and will become more concentrated in the largest firms thanks to dodd-frank. second, dodd-frank failed to address the preferential treatment that our largest banks receive from bank regulators. for far too long regulators viewed themselves as advocates and not supervisors of large banks. they have developed cozy relationships with their banks

and actively sought bank supported regulatory changes such as lower capital requirements. those close relationships, however, cause regulators to ignore red flags from subprime loans to insufficient capital to dubious securitization practices. regulators adopted a mindset that none of their large banks should fail on their watch. consequentially, regulators orchestrated a series of billouts to benefit our largest banks including the 1995 bailout of mexico, the rescue of long-term capital management and most recently here tarp. unfortunately, dodd-frank preserved and codified the preferential treatment for large financial institutions. dodd-frank solidified the close relationships by maintaining preexisting prudential

regulators. in contrast the regulator for the smallest banks, the ots, was abolished and also protected the big banks from bankruptcy by creating a new resolution mechanism toen sure that large institutions do not fail. in all the while dodd-frank did nothing to make financial regulators more accountable. instead, dodd-frank, i believe, made it more difficult to remove regulators who become captured by their banks. for example, the structure of the consumer financial protection bureau makes it effectively impossible to remove its director. i have said many times through the years nothing focus on the mind like the specter of being fired. not one regulator however was held accountable in the wake of the financial crisis. to add insult to injury the same regulators that missed the warning signs were then closely consulted on how to draft dodd-frank. in fact, staff from the very same agencies that failed us

were detailed to congress to help write the bill. this is the type of thing that outrages the american people but says sadly business as usual in washington. >> secretary geithner no stranger and played a key role in financial regulation for the past 20 years. recent news reports about his handling of the alleged libor manipulations suggest that he, too, may have tempered his response to what can be characterized as a significant problem within the banking industry. accordingly today's hearing gives secretary geithner before the banking committee an opportunity to explain when he first learned of the allegations of libor manipulation and how he did everything he could to protect the american taxpayer from any potential harm. secretary geithner, i believe, will also have an opportunity to explain to this committee and the american people how the president's policies are

improving the economy. it shouldn't take too long. thank you. >> thank you, senator shelby. in order to get to the questions of our witness as soon as possible, opening statements will be limited to the chair and ranking member. i want to remind my colleagues that the record will be open for the next seven days for opening statements and any other materials you would like to submit. welcome back to the committee, mr. secretary. you may begin your statement. >> thank you, mr. chairman, chairman johnson, ranking member shell about i and members of the committee. thanks for the chance to come before you today to talk about the council's annual report. as the council's reprt outlines, we have made significant progress repairing and reforming our financial system since the crisis. we have forced banks to raise more than $400 billion in capital, to reduce leverage, and to fund themselves more

conservatively. the size of the shadow banking system where much of the risk was concentrated has fallen by trillions of dollars. the government has closedes most of the emergency programs put in place during the crisis and recovered most of the taxpayers investments made in the financial system on current estimates as you know the tarp bank of estimates will general rate an overall profit of approximately $20 billion. credit is expanding and the cost of credit has fallen significantly for businesses and individuals since the crisis. these improvements have made the financial system safer, less vulnerable to future economic and financial stress, and more likely to help rather than hurt future economic growth and better able to absorb the impact of potential future failures of large financial institutions. of course we still face a number of very significant challenges. the on going european crisis presents the biggest risk to our

economy, the growing recession in europe is hurting economic growth around the world, not just in the united states, and on going financial stress caused by the crisis in europe is causing a general tightening of financial conditions exacerbating the global slowdown in growth. in the united states the economy is still expanding but the pace of economic growth has slowed significantly during the past two quarters and in addition to the pressures from europe and the broader global economic slowdown, u.s. growth has been hurt by the earlier rise in oil prices, the on going reduction in government spending at all revels of government, and slow rates of growth in-house hold income. the slowdown in u.s. growth could be exacerbated by concerns about the approaching tax increases and spending cuts and by uncertainty about the shape of reforms and frankly the political will of this town to put in place reforms to both tax policy and spending that are necessary to restore long run fiscal sustain ability and these potential threats underscore the need for continuing progress and

repairing the remaining damage from the financial crisis and enacting financial reforms to make the system stronger for the long run. the regulators responsible have made important progress over the past two years designing and implementing the regulations necessary to implement financial reform, roughly 90% of the rules that have deadlines before july 2nd have been proposed or finalized and the key elements of the law will largely be in place by the end of this year. as part of this we have negotiated much tougher new capital requirements on the largest banking system including higher levels of capital on the largest banks. we now have the ability to put the largest financial institutions under enhanced supervision, sufficienter prudential standards, whether they're wangs or non-banks and we have the ability to subject key elements of the market infrastructure to tougher and more carefully designed safe guards against risk. the sec and the cftc are putting in place a comprehensive

framework of oversight to the redid i have rifs market, providing neutral from combatting market abuse and bringing this market out of the shadows. the ftic has designed an innovative way to put large financial institutions through an equivalent to bankruptcy while protecting the taxpayers from the risk of any loss and protecting the broader economy from the fallout of those failures and the consumer financial protection bureau worked to simplify an approved disclosure of mortgage and credit card loans so consumers can make better choices about how to borrow responsibly. these reforms are very complicated. it is a complicated process. it is challenging in part because our financial system is very complex. it is challenging because we need to be careful to target damaging behavior without damaging access to capital and credit and it is complicated and challenging because we want the reforms to endure as the market

evolves and innovates and challenging because we need to make sure we're coordinating the work of multiple agencies not just in this country but across the major financial centers. beyond the reforms enacted in dodd-frank, the council has put forward a list of additional recommendations for other changes to help strengthen our financial system. further reforms are needed to reduce vulnerabilities in wholesale funding markets including to mitigate the risk of runs the money market funds and reduce interday credit exposure in the tri party market which is an important secured funding market. regulators needs to establish and enforce strong protections for customer funds deposited for trading. financial firms and regulators need to continue to improve risk management practice with stronger capital buffers, better stress testing disciplines, and better internal risk management disciplines and controls for overco complex trading and hedgg

strategies and recommends further improvements in the quality and availability of financial data. the office of financial research will lead this effort and i appreciate the chairman reminding people we hope the senate will act on the nomination of richard berner to that office. and finally they continue to push for progress on comprehensive housing market reform. these recommendations will help build on the considerable progress made by the council over the past few years in making the system safer and stronger, both more resilient and less vulnerable to crisis with better protections for investors and consumers. we still have a lot of work ahead of us, however, and we need your support to make the rules strong and effective and we need your support to make sure the enforcement agencies have the resources they need to prevent fraud and manipulation and abuse. i want to convey my compliments and thanks to the members of the financial stability oversight council and their staff and i want to emphasize again that we look forward to working with

this committee and with the congress as a whole to build on this progress and address the remaining challenges we face in the financial system. thank you, mr. chairman. >> secretary geithner, thank you for your statement. we will now begin asking questions of our witness and will the clerk please put five minutes on the clock for each member? with regard to the libor issue last week i asked chairman bernanke what he knew, when he knew it, and what did he do about it? secretary geithner, you stated that you were aware of weaknesses and vulnerabilities with libor, that you made recommendations on this matter in 2008. were you aware of any actions, any members of the president's working group took after they

were briefed at that time in light of the recent enforcement action is there more that should be done? >> mr. chairman, in early 2008 as the financial crisis intensified, as concern about the strength of banks in europe in particular and as those banks found it harder to borrow dollars when they needed to borrow dollars, you saw the libor rates increase. libor as you know is a reference to the london interbank offer rate which is a rate set in london by the british banker's association which is an average of estimates of what a group of banks predominantly foreign banks might pay to borrow in ten currencies at 15 different maturities. at that time as the rate went up, there was a lot of concern in the market about the design of the rate and the potential that created for missreporting and the incentives banks faced

to under report as they faced particularly foreign banks faced higher borrowing costs. at the new york fed we took a careful look at those concerns in the market and many of those concerns made it into the press, the wall street journal and the financial times wrote about this in april of 2008. we looked at those concerns and we thought they were justified. we were very concerned about them, and on that basis we took the following steps. we briefed the president's working on financial markets which is a group composed of the secretary of the treasury, the chairman of the federal reserve board, the chairman of the sec and the cftc among others and my staff subsequently briefed the treasury and the cftc and the sec following the initial meeting and flat to that because again this was a rate set in london by the british bankers association, i raised this directly and personally with the governor of the bank of england and wrote a detailed memorandum to the governor outlining a series of reforms to reduce the

vulnerability in the rate. the bank of england was very receptive to those recommendations and indicated they supported them and would act on them. it turns out roughly about the same time the cftc nish aid the far reach willing confidential investigation that as you have seen ultimately resulted in the initial settlement announced earlier this month. that investigation which is still on going has come to involve a range of other regulatory authorities. now, if you think about what's ahead, i just want to take a minute and outline what we think is important and necessary going forward. in addition to this on going enforcement investigation which of course is very important to the integrity of our system because a simple important necessary test for any financial system is do we have the capacity to hold people accountable when they do these

kinds of things. the investigations are still very important. in addition to those i want to highlight some of the additional work ahead of us. the council and the relevant agencies are taking a very careful look at the potential implications for the functioning of a financial system of these remaining challenges. they are a careful -- we are carefully examining -- this is the members of the council, carefully examining other survey-based measures of financial prices or interest rates to assess whether there is any other potential out there for the kind of problems we have seen in libor. these entities are carefully examining potential reforms to libor and alternatives to libor. a broad global effort is under way led by the chairman of the financial stability board which is a group that includes all the world's major central banks and market regulators like the sec and the cftc and the global

counterparts and also examining reforms to the system. now, in addition to these additional challenges ahead, we need to take a very careful look as a council of how we deal with the circumstances in which a confidential investigation enforcement action reveals evidence of behavior or practices that could have implications for the financial system as a whole. this is a challenge because as you know, we have to have very careful safe guards to protect the confidentiality of those investigations and yet i think we have to find a way to make that information if it has systemic implications available to key members of the council and in this context we're taking a careful look at that. finally, we have to take a careful look at other parts of the financial system which where the markets rely on private organizations composed of

private firms like the british bankers association that have quasi regulatory or self regulatory role. as you see in this case we have be to careful to make sure the system is not relying on associations of private firms that leave us vulnerable to the kind of things we have seen. of course it is very important to the integrity of our system that the enforcement authorities have the resources they need to do their jobs. if there is a small town in america and its population grows by ten fold or 100 fold in a five year period, you need to increase the size of the police department. it is absolutely important to do that. now, the members of the council i am very confident will be fully responsive to the oversight conducted by this committee and other bodies in congress to examine this particular set of challenges and how we're dealing with them going forward and we'll continue

to keep the committee informed as we pursue the things i just outlined. >> there has been continued criticism about wrong doers on wall street not being held accountable by enforcement officials. we now know that investigations have been on going on this matter since 2008 and so far there has been one major settlement. i want you to commit to me and the american people while the administration makes sure that those found to have be involved in libor fraud are held accountable and prosecuted to the full extent of the law. >> absolutely. it is very important we do that. i am very confident that the department of justice and the relevant enforcement authorities will make sure they meet that objective. >> there have been additional

developments this week in europe that have been troubling. do you think recently announced policy changes out of the euu like the banking union have gone far enough towards solving the european financial crisis? are there additional steps that the u.s. should take? >> europe is working through, working to put in place a mix of very challenging reforms, reforms to i can ma need to do more to restore confidence in ore financial system to in the financial system to do more to make improved prospects for economicto mak growth. we need to do more to make sure

countries to reduce reforms are able to borrow a sustainable there st rate. so there's more they need to do to underscore their commitment, comm which is to do what is necessary to make sure monetary unions work and hold together. v but very challenging crisis for the period the solutions have tl be designedutions have in europe they have to be willing to live within the live constraints constraints and make sure they work and pay the financial costs of this working. they'll have to be designed and worked if europe if they're going to work. what we can do is what we're doing is to make sure we're working, encouraging them to go as far as they can to protect the rest of us from long and damaging european recession and there are specific areas where we can help them financially in ways that are very much in their interests which, for example, the federal reserve is doing with their swap lines. that helps reduce the risks that european banks cut back on

credit around the world and hurt prospects for growth here in the united states. a lot of challenges ahead. they're making progress but they have a lot more to do. >> senator shelden. >> thank you, mr. i remember which. mr. secretary, you referenced libor. we all have. tell us why libor in the setting of libor rates is so important not only to the american people but to the world financially and what it does and how many approximately how many billions of loans are involved and billions of dollars involved in that. >> as i said, libor is set in ten currencies, not just the dollar or the pound sterling. 15 different maturities. it has implications around the world in part because there are a variety of financial contracts, mortgages is one example in the united states, but around the world that reference that rate. so it is important for that reason but it is also important

of course because we have seen a devastating loss of trust in the basic of trust and confidence in the integrity of the financial system so when you see a system vulnerable to banks misreporting, that can have more damage to the basic confidence people have about how the system works than any of the direct finance implications of the rate itself, and that's why it is consequential. >> historically a lot of banking has been based on trust, has it not, integrity, so when people realize that some people were perhaps manipulating the libor rate or manipulating this and that or fraud here and there, it hurts the whole financial system. it hurts us all, does it not? >> i agree with that. as i said, i agree with that completely. >> mr. secretary, going back to when you first learned about

possible manipulation of libor, was that in 2008, early 2008 i believe you said? >> that's my judgment looking back at that time which is again it was these reports in the market and in the press and concerns started to come when the rates started to go up as the financial crisis intensified. >> who did you notify besides merve king who was chairman of the bank of england about your concerns and others concerns about the manipulation of the rate? >> as i said, i briefed what's called the president's working group on financial markets which means the body includes the secretary of the treasury, chairman of the fed, chairman of the sec, chairman of the cftc, other officials, too, and then my staff briefed the treasury and the sec and the cftc after that and that was important because although it was clear that the reforms to this problem were going to have to come in

london, it had kblixzs for us. >> but we had banks that fed into that rate, did we not? >> at that point 16 banks were part of the sample. three of those banks were american banks. >> okay. do you know, did you follow up after notifying the working group you talked about and did you noich the attorney general of the united states and the justice department? >> we are the new york fed and my colleagues and former colleagues are carefully looking through all of the records of what the -- whom the new york fed staff informed at that point. >> did you, sir, as president of the bank, did you personally inform or direct someone on your staff to let the justice department know about the implications of probably manipulation of the rate? >> to the best of my knowledge what i did was inform the president's working group and

those regulatory bodies and the reason i did that is those are the bodies which have a range of different authorities that relate to market manipulation and abuse and so that was a very important and necessary thing to do. >> did you think when you first learned of possible manipulation of the rate, did you think this was a big deal? a real thing? >> i absolutely thought this was a problem is why i took the initiative to do the things we did. again, the problem was you had a rate in london over seen by the british bankers association where banks were asked to provide an estimate of what they might pay to borrow and then there was an estimate that was averaged over time, and that itself created this vulnerability to misreporting, so it was for that reason that we were concerned about the problem in this context which is

why we took the actions we did to brief the broader regulatory community in the united states and to encourage the british to fix it, to reform it. >> going back to the justice department, do you have any knowledge yourself of when the justice department got involved in this? was it late? was it recently? was it after the british hearings and regulators were involved? what? >> it is something you have to ask them and the enforcement agencies. my recollection from what other people testified is the cftc's investigation which they started about the same time, april of 2008, ultimately came to include the sec and justice as well as a mix of regulators in london and elsewhere. >> does the federal reserve bank of new york have the authority to oversee misconduct by banks

that would be under your jurisdiction? >> the congress has given the federal reserve in this case the board of governors a range of different enforcement powers. those powers are given to the federal reserve as a whole and the reserve banks like the federal reserve bank of new york do play an active role in enforcement cases working with the board of governors when they implicate our direct authorities. >> thank you, mr. chairman. >> senator reed. >> mr. secretary, when you reported to the presidential working group including secretary paulson and chairman bernanke and chairman cox and i think chairman luken, did they direct you to do anything? did they indicate that they would do anything? essentially what was the reaction? >> no, but as you now know the cftc did roughly at the same time i think in response to the similar concerns we had did begin this investigation ultimately involving other

parties and again it took quite a bit of time. these typically do. these are complicated things. you had the cftc and ultimately a variety of other regulator enforcement authorities undertaking a very far reaching investigation resulting in very tough enforcement actions. >> one of the things i think this illustrates again is the rather ambiguous position of the president of the federal reserve bank of new york. this was brought to your attention. did you communicate with mervyn king on your own volition? were you directed to do so? >> no. did i that on my own. >> why would you do that if you were not responsible for or clearly responsible for the policy of the united states with respect to libor or anything else? you were simply the chosen by -- >> i thought it was --

>> the banking community of new york to regulate that pang. >> i thought it was the responsible thing to do because it had broad implications not just for london but the united states and i thought that was the appropriate and necessary thing. >> again, i think one of the things we tried to attempt in dodd-frank was to clarify the position of the president of the federal reserve bank, the only person that has a statutory position, i believe, in the open market committee by making that position subject to confirmation and a point by the president and confirmation, and ironically it was rejected and in fact on a bipartisan basis by all of my colleagues here. that was one of my ideas that just didn't get any traction. i think you would have been better served had you had much clearer authority and been on a level with the secretary of treasury and with the chairman of the federal reserve and had clear enforcement responsibilities. what's your view?

>> well, i think i would say it this way. we had the financial system before the crisis where you had a huge amount of risk and activity that had important implications for the average american, american economy, that grew up outside the basic protections and safe guards and authorities we have put in place after the great depression to deal with these kind of problems and that was a terribly damaging problem for us, and neither the federal reserve bank of new york nor the chairman of the federal reserve board or even the chairman of the women of the sec and cftc had authority at that stage to deal with that huge growth of risk and activity and as you saw a lot of manipulation and abuse and fraud that came out outside the safe guards of the banking system, so the crisis was so severe in part

because of that problem but of course also because within the banking system the constraints on leveraging capital were just not sufficiently prudent or careful or conservative. >> you now feel given the dodd-frank legislation that you have a much better capacity to deal with issues like this? >> i do. i think the as i said in my opening statement, it is not just that we forced $400 billion more capital into the baning system and negotiated much tougher constraints on capital and leverage globally with much tougher requirements on the largest banks so the large banks have to hold much more capital against risk than do small banks. we have given the authorities the ability to make sure that where there is risk outside that in derivatives or in the financial market infrastructure or in large institutions like aig, that are not banks but still present risk, that we can put similar constraints and leverage on them, too. i definitely believe that

dodd-frank has put us in a much stronger position than we were before the crisis even recognizing of course that you have to get these rules right and there is a lot of work to do still to address the remaining challenges. >> let me raise the final point in a few moments. because of the ubiquitousness of the line or, this presents huge potential liabilities to the banking system back then and right now. on one side you might have a borrower benefitting from depressed rates and then have you a bond holder that is not receiving what should be the rates that they contract for. obviously was that a -- first, was that a consideration in your discussions with the presidential working group, that there could be huge potential liabilities for manipulation of this rate by particularly bond holders and then moving to today, is that a potential going forward now where you have actively consideration of suits

against multiple institutions by numerous bond holders? >> absolutely that was a concern then and that's a critical concern going forward. as i said in my opening statement or initial remarks to the chairman's question, one of the issues that the fed and the sec and the cftc are working on now and which the council will review is make sure they're carefully examining not just the remaining implications for the integrity of the system but reforms and alternatives to make sure we address the remaining problems, the critical focus of the remaining work ahead. again, that basic vulnerability and reality is what motivated the actions i initiated in 2008. >> thank you. >> senator. >> thank you, mr. chairman. thank you, secretary geithner for being here with us today. i want to switch to the housing issues. in your testimony you state that as we move forward we must take care not to under mine the housing market which is showing signs of recovery but is still weak in many areas.

i am hearing a lot of concern about how dodd-frank will reduce credit availability in the housing market through some of the proposed rules for a qualified mortgage that increases liability and a qualified residential mortgage that requires a 20% down payment. recently the director of the cfpv said that if the qualified mortgage is drawn too narrowly, that could upset the mortgage market. that could be a notable example of a rule itself restricting access to credit. i would like your opinion on this. do you believe that there needs to be a broad qm definition? >> well, i want to just start by saying that i completely agree that right now mortgage credit is tighter than it should be, and it is tighter than the basic requirements put in place by fannie and freddie and fha for example, and the main reason for that is because banks and servicers given all the mistakes they made and the damage they

made feel much more vulnerable now to what people call putback which is the institutions protecting the taxpayer by putting back to those originators loans that didn't meet those initial tests, you know, no doc loans or some of the other loans they describe in that context. >> that's why we're working on the qm and qr. >> yes, but i think that concern is the biggest remaining cause of the fact that credit is tighter in mortgage than it needs to be and independent of that rule writing process ahead i want to make it clear that the fhfa and demarco to his credit and the fha are looking at ways even ahead of defining those rules that they can help address some of those concerns that is residual uncertainty about reps and warranties and putback risk is leaving mortgage credit harder to get for an average individual with good credit score than should be the case. you're right the rules have to be designed very carefully and what the chairman is doing but the other agencies responsible for the qualified residential mortgage rules are doing is

they're trying to figure out how to balance appropriately the obvious need for more careful, prudent underwriting standards, more standardization, better disclosure, with the need to be careful not to over do it, not to go too far. >> wouldn't you agree that in that context we need to be sure we don't define the qms too their rowly so that we don't restrict access to credit more than is necessary. >> i wouldn't say i agree with the objective completely. i think you want to make sure both of these two rules are designed together and carefully to reduce the risk you restrict mortgage credit more than it would be prudent to do and is necessary to do. >> mortgage lending more than would be necessary to do. >> i want to move to another topic since the time is short in these five-minute sectors. i want to get to the end user issue. you may recall that ever since the dodd-frank conference there's a debate about nonfinancial end users were intended to be exempted by the

statute. that is clearly what the members of congress intended. chairman dodd and chairman lincoln acknowledged the language was determined to hedge those funds to mitigate commercial risk. the regulators read the statute otherwise and have issued regulations now that do in fact require margin from those nonfinancial end users. and they basically take the position that notwithstanding their understanding of congressional intent, it was the exact language they feel bound by. because of that i introduced legislation to correct that and make it clear there's an exemption for the end users and when he was before the banking committee recently, i asked this question that i'm going to ask you, would you it be appropriate for us to correct that language and provide an exemption for nonfinancial end users so it's clear that is what congressional intent and what statutory

language requires. >> my own view, i don't think you need to do that. i think the way the statute was designed you gave flexibility and discretion to the regulators to try to achieve the objective you laid out. i think the concern is if you open this up too much, you're going to let the exception undermine the critical safeguards over financial institutions that the law was absolutely intended to cover. i don't think this requires a legislative fix. i think the law gives the regulators discretion to get that balance right but that's obviously something that we need to continue to look at and i would be happy to consult with you more and talk to you more closely about it to get a better feel for how they're defining that balance. >> are you saying that you believe that the statutory language as is gives regulators authority to exempt nonfinancial end users? >> i want to be careful how i say this. it's not my authority. it's the authority of the regulatory agencies.

i believe it gives them the ability and the discretion and the authority to define an exemption that i think meets your objective. >> you're not saying there shouldn't be exemption for end users. you say we need to get it right? >> i believe the law as you wrote it does try to make sure you're not capturing people in risk you don't need to capture. if you create exemptions and loopholes in this context, you'll undermine the broader safeguards that are necessary. that has to be our concern. >> you are saying you're worried if congress does thisthy may get it wrong and be too broad in this exception? >> i didn't mean to imply that. the balance the congress struck in the law was right and i think the regulators were given the ability to get that balance right. >> would you agree that if the law is interpreted to mean otherwise, in other words if regulators -- i understand the regulators to take the position that they do not have that

discretion. would you agree that the regulators need to have the discretion to address this issue and provide an appropriately formed exemption. >> i think i want to talk to them more carefully about it and come back to you and follow up. i just want to say in general we're trying to be very careful to make sure that we don't legislate -- this is not your intention. we don't legislate things that would weaken the overall protections in the bill and we think the law gave the regulators the ability to strike an appropriate balance in this context. >> you're not saying there should be no exemption appropriately defined for end users. >> they should implement the law as you intended it. >> thank you. >> thank you, mr. chairman. secretary geithner, welcome. in the council's report one of the emerging threats you identify in the fiscal policy outlook of the united states and uncertainty posed by the impending fiscal cliff over the

past year the constant dysfunction has caused frustration on wall street and this week a report was released showing the treasury department was forced to spend $1.3 billion in associated borrowing costs with actions taken to avoid the default last year. that was self-inflicted wound which was completely irresponsible and i don't like the situation we found ourselves in. we do need a long-term plan to get our fiscal house in order. there's no doubt about that. i also don't like having to tell folks that because folks in washington couldn't get it together to solve our country's problem it cost us over a billion bucks. that happened because some were willing to see the federal government default on its debt resulted as the downgrade by standard & poor's. there's a real cost associated with our lack of action on this

important issue. our debt and cost associated with it increase by billions every day in washington does not act. just this week we had a made in washington fight encouraged by interest troops over competing tax plans that we now have a little chance of being signed into law. instead of working to address the debt, we're no closer to resolving our problems. we can spend the next few weeks pointing fingers and blaming each other, if we continue to play political games, nothing is ever going to get done. we have to get a lot more urgent about this issue. the bottom line is we do need a bipartisan balance deficit reduction plan that is broad in scope and large enough to address the magnitude of the problem. it's going to have to cut spending and it's going to have to include revenue. we know there's only one bipartisan plan that's achieved this broad scale and scope necessary to begin to tackle the challenges before us and that plan was developed by the president's commission on fiscal responsibility and reform, a commission that the administration did not initially

support. and when we tried to create that commission through legislation, seven senators supported that idea and turned around and opposed it. i don't support everything in the commission's plan but it's a starting point and a real plan. the commissioner's effort is getting renewed support by a number of ceos. i'm encouraged the -- i'm concerned that the president has given only lukewarm support to these efforts so far and that came after the gang of six introduced a plan last july and it was evident there was wide support for it. given the experiences of the past few years, do you regret that they didn't get behind the frame work presented by the commission? >> i agree that this problem is not something we can avoid and

defer. the solution to this is going to lie in the broad frame of what bowles-simpson laid out. it will be tied to significant changes to reduce the rate of growth of health care under parts of spending. as you know the president of the united states in april of 2011 and september of 2011 in the budget in 2012 released in february laid out aetailed s a detailed set ofations bon recommendations, both unattache spending side that would meet deficitsic test of restoring sideainable level. i think it's very important to remind people that we face two

critical challenges. an economy is not growing fast enough and we need to make sure we're doing everything we can to make growth faster so we're healing the remaining damage caused by the crisis. we also have to get congress to come together in a bipartisan basis and agree on a set of reforms to start to restore sustainability. they have to be designed carefully to make us more competitive over the long run. doing things for education, infrastructure, private investment that makes sense but absolutely we need to get the country to come together around a set of these reforms. we have to demonstrate we can make tough choices in this area. you express concern about actions the senate took on the tax side yesterday. i want to speak in favor of what happened. what the senate did was to extend tax rates for 98% of americans but also demonstrate they're prepared to do the fiscally responsible and the fair thing by allowing those tax rates in the top 2% to expire

and i think that was a good example of what you can do that's good for the economy for certainty but also demonstrating that this town can make some tough choices to start to restore sustainability. >> my concern was more with the fact that if it ever comes to fruition. i'm not sure that we'll be -- i just want to ask one more thing. my time has run out. i think the country is ready for a long-term well thought out plan to take care of our deficit and debt on the long-term. i think the country is far ahead of washington, d.c. on tha the question that i have and congress has its own faults. i talked about it in my opening. the question i have is what have you learned, what are you going to recommend to the president when the time is right to push forth a real plan to get our deficit under control? >> i have been a long and consistent supporter of action on a balanced frame work of tax reforms to raise revenue tied to

long-term reforms across government on the spending side that are designed not just to protect the safe net but make it sustainable over time and preserve the ability for us to invest in things that will allow growth. that is just driven by a basic recognition that if we're going to do more for growth to make the economy stronger, we have to deal with long-term fiscal needs. if we do that alone and don't address this broad range of major challenges that middle class in america still faces, the erosion of competitiveness will leave the country worse off as well. we have to do both of those two things. >> thank you very much. >> senator croaker. >> i want to talk to you mostly about the things that we have the ability to look at and i know that in title 2 as we wrote the bill, there were lots of

words like liquidate throughout it. as fdic has come forthwith their proposal, what really is happening and i think you know this is in the large highly complex institutions they found they were so intertwined that the best way to deal with them was to let them to continue to operate and take the stockholders out and the creditors at the holding company level and not concerned about consolidation of banking on one hand it solves that problem but it doesn't said over and over and over we want to put the banks out of business. we heard leaders in the industry say that. the fdic mechanism really doesn't do that. it's a process where they in essence operate entities for up to five years and then re-ipo them and