he was writing his four books about the iraq and afghan wars, including interviews with the president? >> i don't understand the administration's incestuous with bob woodward. i've been reading this ever since the watergate days. i haven't ever had a discussion with governor romney, but i find that extremely disturbing, too. but the leaks we have seen our unprecedented. look what happened to israel that was part of the cyberengagement with iran. do they want this clique made? >> i worked in israel. the idea of leaks not have been in the israeli government. that's routine. it happens every day.

>> let me just parse. >> you say that the israelis like the fact? >> these leaks didn't come from israel and you know what. the president was very careful when he said i'm so offended. we didn't know a legal leaks. we've declassified things at the last minute. the fact days the president picking targets for jones, was highly classified. the fact that we engaged in the cyberattacks coming events and meetings with senior pakistani officials in abu dhabi heard american security. the president should take him into a special counsel, p. should've instructed everyone everyone in the white house to respond to every question, is the fate they should outweigh the agreement they did during

the leaks and should be forward we need to get to the bottom of the period dianne feinstein made a statement impacted off after she was -- >> identified the white house says the source. i believe ever reported in this town knows one of the source. >> it should probably say the government a lot of money if you took a look at david sanger's in the back. he lists all the people he spoke to at the white house. so there is no need to go through the entire thing. it's all there. it's all open and public. >> i think it's very important. nobody else outraged about national security leaks for the country. this feels average. the truth is the president is going after this aggressively

and i've no doubt delegate to the to the bottom of it. >> a while ago i was at a forum with ambassador at large can see right dealing with syria on the atrocity prevention board. during the q&a there is a question about what it hopes the board if he is better intelligence leaks -- i mean, sharing and steve made thoughtful response i further think the obama administration has figured out how two of the national security adviser talked to david sanger. >> let's move on to defense spending. michele, question for you. the president in an effort to sidestep sequestration requirements coming into play at the end of this year has proposed a $500 billion defense cut over a 10 year period of time and the question that i ask is based on a congressional budget office study, which says

that if the president got his way, it would be almost impossible to get everything he wants in his own defense policy because you would not money. so how do you reconcile that? >> i'm really glad you asked the question because there's a lot of confusion including governor romney's. so first of all, the president is not advocating $1 trillion of defense cuts, number one. two, their are two separate issues. the first is a budget control act that was passed this past year by a bipartisan majority of congress. all congressional republicans who worry about defense issues all signed on. $487 billion of costs over the next 10 years. that was the planning assumption for the budget that the administration had developed for fy 13. secretary pineda was clear, and this is very hard, but after so

many years of growth, we think it's possible. just to be clear, that leaves the fy 13 defense budget at five under 25.4 billion and asked why envisions the budget will grow to 567 billion change. so it is not cutting the baseline of defense. yes, it's coming war funding as the war ends in transition happens, but it is slowing the growth of the budget. just for a factoid. it's always nice to introduce facts. compare the bush administration, defense spending base budget, 479 billion. this is not some devastating radical horrible cuts this is a reduction in the pace of plant growth. so that is the budget control act and what the administration has said yes, we'll look at the law congress passed.

second issue comes sequestration. sequestration is hanging over our heads at the congress fails to come up with a $1.2 trillion debt deal, right? the administration, the president has posed a balanced approach, putting both revenues and deep spending cuts on the table to avoid sequestration. if congress fails to act in right now the republicans in congress say we won't test this issue to after the election and even then we may not allow revenues to be part of the equation. but it's sequestration goes into effect, then you see another half trillion cuts in defense and everybody, the president, the secretary, everybody agrees that would be very devastating for u.s. national security and they want to avoid at all costs. >> thank you. that is helpful.

rich, governor romney has said many, many times that he would not like to cut the defense budget, but at to the same time be inconsistent with lower taxes. within the framework of the problems that the country has to date with respect to the national deficit, et cetera, i don't know anybody who says you can't raise defense spending, cut taxes and accomplish anything with respect to the national debt. so how do you do that, sir? >> i should introduce you to more people. >> look, i heard the same thing in 1979 and in 1980. on the economy was crippled with double-digit inflation. >> you think is the same as in today? >> no, it's worse, but it can be

done with the government's been clear about if he thinks we have to rebuild our navy. and he thinks obviously with the philosophical difference with president obama and governor reagan on the economy -- governor romney and president obama on the economy, it is one that's the american people are intensely interested in. he wants to keep discussing the issue and make a decision on the two alternatives. that creates rather you create growth by more revenue. i don't want to -- spending on the stimulus and other things he would argue are a waste of money, versus trying to support and unleash the privacy or for

growth. i would suggest that the president would like to have the debate just about taxes versus no taxes. that's why they're trying to posture that is. there's reasonable legislative proposals to deal with the defense portion by mccain and graham and others. the administration refuses to engage them because they went up only about taxes. we're willing to have that debate in the context of a larger economic discussion, but we don't think that the current path, which allows the tiny nation of our defense capabilities allows what's necessary in this century of leadership for u.s. interest in the interest of others. >> you think it is possible short of an agreement on the economy and the fiscal cliff that is described for the end of this year, you think it's

possible short of an agreement to increase the navy and increase the army and put more money into defense? do you really believe that? >> i believe we can, should come in even have an adequate defense. >> where should we get to money from? >> we will have one of our economic advisers go through the details. >> i don't think that's appropriate. >> please, give me your answer. >> wiki go back. there's a difference of view. the presidency was frequent attacks were, provide more stimulus and that's going to have results. the president doesn't want that discussion with the american people. he wants a discussion on taxes. >> two small facts. again, the president's current

defense project is coming down somewhat in size with the end of the war in iraq and the transition in afghanistan. it will still be larger than it was at the point of 9/11 before the wars begin. weaker the army to prosecute these wars. they can reset a letter sized slightly larger than when it started. especially larger than when it started. and full support behind the president's budget proposal. i think that's very important. the other thing is history should warn this debate. at the end of the clinton administration had a surplus and a very robust economy. you then have the bush administration put in place many of the same policies that governor romney is now advocating economically. and at the end of eight years, and you had a profound deficit and debt problem. so we have tried this before but does the word.

>> i understand the desire to run against governor reagan. -- romney. [laughter] i think i need a break. sorry. this part is over now, this bird here, but would love to have core questions. not only questions here, but from the spillover crowd here. please when you ask her questions come identify yourself. please be brief. if you make a speech i'm going to cut you off in a field where panelists to try to be brief and the answer we can get as many people as possible. right here starting. a microphone. thank you very much. >> thanks very josh rogan, foreign policy magazine. dinner at particular time in thank you for for your service. i wanted to ask you about the fact that a lot of criticism about governor romney's foreign

policy during the scan come from republicans themselves in today so kristol published a long piece on the weekly standard, criticizing governor romney for saying he would hold a national security meeting during the first 100 days of his presidency. overall there's a feeling that governor romney is the protest national security in favor of the economic message and fails to offer specific details. wondered if you could react and tell us what his priority of foreign policy in this campaign. >> good question, mr. rogan. governor romney, if you read this but, no apologies, in his first three chapters he laid out his division of an american century in what was required to be able to satisfy. he amplified and refresh that in the vfw speech yesterday. there's an understand about details. we tried to answer questions,

journalists like yourselves are others. but in the end, what he needs to do is present a world vision minister radically different than president obama and his rest of how he would approach, whether it's stealing with iran afghanistan not. i think my friend, bill kristol, will never be satisfied that there's enough detail in a state to be provocative, so don't write columns that are challenging, but we feel we are laying out a vision for where america should go and it's detailed in the same at other challengers are and is comfortable. >> right over here, please. >> thank you. correspondent from washington d.c. >> speak directly into the microphone, please. >> okay, better now.

i have a question for both of you. but if your candidate wins the election? [inaudible] >> i'm sorry -- i did not get that. >> specifically with regard to nato? >> we are not hearing you without a microphone. >> was at new york and afghanistan for so long, greece is also a member of nato -- >> thank you very much. >> for the obama administration, it's been a very important policy in europe at the door to nato remains open and the country is developed democracies as stable as contributing to the

security of europe, that the door should be open in principle. i think there has been in private is a robust engagement with macedonia, working military capacity building exercises and so forth is a partnership for peace and so forth. so i think i would expect in a second term that policy to be continued. >> thank you very much. yes, right here. but their growth. >> jonathan berger from congressional quarterly. this is a question for mr. williamson. i'd like to answer your question that mr. someone asked you earlier and that is where the money is going to come to to rebuild the navy and to raise the defense budget. or would that money come from? >> as the governor said yesterday, the vfw.

in order to have the sort of american century envisions and to have america in a position internationally. the first stop is to renew and we need you to make the economy. he believes that will come through allowing incentives in the very a different approach on regulation, eliminate uncertainties, including obama cared that will all contribute to a stronger economic growth in the united states and that while we have many important issues to deal with at home, if were unable to protect their security interests, the u.s. government

is failing in its first responsibility to the american people. >> and rich, just to follow that up, until that happens -- that does not happen in one day, as soon as the government becomes president one day, in that period of time, whether it takes three years, six years or 10 years, where do you get the money and order to deal with what it is that he says is so vital? that is my problem in understanding this. >> you are entitled to your view. >> no prior poem. >> you are entitled to your view of your problem. >> analyzer and it appears, whether it's a billion dollars stimulus bill, whether it adds burdens burdens on the privacy or through overregulation, whether it's dodd-frank, obamacare, et cetera, you stifle

the growth of the fact is you've had the slowest economic recovery since world war ii. you've had the highest -- the longest rate of unemployment over a percent since the great depression and so the policies you seem to feel are the only ones aren't the only ones. >> i was asking a question. yes please, right there. >> thank you. i am a washington correspondent for south korea. i have a question for ambassador briand fan. based on governor spratt on north korea, what is the main difference between your approach to north korea and that of the obama administration? by specifically, what you think about the six party talks on north korea's program and food

aid? >> thank you geared >> north korea is a tremendously difficult problems in on a bipartisan basis their support for the six party talks. there's a support for the other regime for the other by partisans as to the tasks and discussions with beijing to put more pressure on north korea to abandon their nuclear program. clearly it has some quirks. governor romney has not outlined a detailed a contrary policy. we recognize this president bush does and as president obama does that china is a leverage point to try and get change we have to continue to try work and hope to. >> i'd like to put in a question

here. a columnist from india, cerutti peer but with the romney's policy on china, now what you need different from what it is that president obama is pursuing this question? please. >> one of the strengths that governor romney as a successful business career in international business activity in the first foreign-policy debate in spartanburg last october, zero, he said we have to be tougher on the ways in which china is chilled in the field. he said he called for us to go to the death eto. at the time he was dismissed, since then the obama administration has taken on one issue, but that is indicative that he would like to -- he looks at china for someone who is now played by the rules financially, whether it's the support of their currency come the support state controlled

businesses, whether it's in various trade aspects. and he said he will use the wto and other leverage points on china. and then on human rights, he has taken further position where the obama administration is moot. we all remember the secretary wouldn't raise. he has made good progress in my opinion and the governor's opinion. but from day one, president obama would raise human rights issues. he also said we could be more forward leaning in dealing with issues in the south china sea, which after i think it was 14 incidents with philippine ships in a wiki at phnom or vice versa , beginning last summer, secretary clinton did take some initiative and has tried to give some talks going.

their disappointment at the recent meeting. governor romney has said that's a start, but we have to be firmer on the freedom of the sea. so there's differences of approach in the economic issues and you can express more forward leaning confrontational approach on china. >> thank you, rich. michele, can i follow up and ask you, how do you judge the seriousness of the rising set of problems concerning the south china sea quakes >> i think we have to take them very seriously. there are a number of countries that every service claims, territorial claims in the area and these disputes have the potential to erupt in conflict is mismanaged. we've seen a very aggressive posture of fishing vessels themselves for it and i think

they have gone to axion and the president has made very clear that we cannot see use of force to resolve these disputes and i think the fact that the u.s. has shown a, the u.s. naval presence, exercising freedom of navigation across the board, it is given confidence to partners in southeast asia that they can stand up for themselves and for the rule of law and for resolving these disputes peacefully. i do think more needs to be done, but i think this is an area of the world to watch. it is one of the areas we thought a lot about in making the decision or when the president made the decision to rebound towards asia pacific, given how much that area controls trade flows and

contributes to our economy. >> way in the back on the left. one behind, yes. >> are shot mohammed of reuters. can you explain to us what are the primary factors behind the administration's rejection of arming the syrian opposition mdc and the see any circumstances to which they may change? and mr. williams said, the romney campaign has said mr. romney would not grant objections from the nda sanctions to countries like china if they fail to meaningfully cut imports from iran. does that mean that her brother the romney would not recognize the security waiver >> i didn't know you were asking two questions.

>> early on, the earliest concern was lack of clear information and reliable information on exactly who the opposition was, where the arms would go, how would you control that and the very real risk that there were al qaeda elements and other extremists as some of the american armed supply could fall into the hands of terrorist organizations to know is a very serious downside risks down the line. i think beyond that, the focus of this administration as i said before is really on trying to create the basis of a political conditions for transition and so the focus on working with the opposition has been to give them communications, logistics, medical, all kinds of coherent and effective, but to keep up in the past four assante sat down in the transition to have been. the last element as we have had

some significant success in preventing russia from resupplying rearming the syrian military. i think if he were to launch a major american weapons supply program to the opposition, we would lose leverage with russia and could basically open the flood gates to the resupplying the syrian military in full and that would just be pouring flame -- pouring fuel on the flames of what is looking like an increasingly deadly conflict. >> just be clear, there are no russian arms currently going to deicide regime? >> there's lots of things on the boat, but we have been able to stop the shipments going and to say they have repaired a bunch of helicopters that are sending the same period were able to get the russians to turn those around.

>> other equipment is still coming in. >> very sound, the summits been stopped and turned around. >> questioned the back back behind the camera. due to a eric lax >> i am firm on his ear about god tonight say that american and just for the three at ministration. what is going on with thinking about bosnia and kosovo inoperative southeast europe. it is a big problem for your. thank you. >> ostia, close to the tremendous kosovo continues to have incredible tensions.

they are engaged through the u.s. dea and the u.n. and the european union in this area as end with a greater capacity. so i think the balkans and police in macedonia is seen to be a precarious situation. but for kosovo to be sustainable and has to have an economic viability, which it doesn't have now and hopefully once you have economic growth there and progress and the governments, they will diminish and you'll begin to have a more sustainable, stable state. >> thank you very much, rich. right back there, standing. the gentleman standing. ..

>> i have another question from the overflow crowd and i'd like to ask michelle about this.

this person asked what are the candidates approaches to european relations and the euro crisis specifically? can you help us with that? >> well i think president obama has spent a lot of his time and energy revitalizing our alliance and partnerships across europe. certainly europe has been, we've gone to afghanistan together, libya together. done tremendous amount of work. it is hard to find a policy area where we are not lockstep with allies like the u.k. and with our nato allies more broadly. i think that obviously because of the interconnection between our economies there is a great concern in the united states about the euro crisis and the administration has been very engaged working with european leaders trying to help them take the steps necessary to solve the problem. i don't think anybody envisions any kind of u.s.

bailout. i don't anybody anybody thinks that's necessary but i think i, one of the things was curious to me in governor romney's white paper there wasn't a single mention of europe or nato as far as i could find. so i mean the sort of, i'm very interested in understanding sort of how, maybe we'll learn more on this trip, but how does, how does the governor view europe as a priority in our foreign policy given that it is really the foundation of our most important alliance relationships? >> rich, what about that? >> well i think in both of the response to questions and in various speeches over the last year and in the theme of the importance of us to renew and keep our friends and allies close he has talked about europe. it's obviously that is where he going on this foreign trip both with respect to the u.k. and in poland. he has expressed concern in the libya incursion the

largest economy in europe, germany, basically sat on the sidelines. that there were only a few players that came in and i think that with all due respect shows a certain tension within the nato alliance and the need to work at it but he feels that europe has been and remains our most important alliance. he will reiterate that message when he is in london meeting with prime minister cameron and others. he will also be reiterating it when he goes to poland and gives a major speech there. >> rich, does he have any specific ideas about the problems of the euro? >> well the euro, jim baker said a long time ago it is real hard to have a single monetary system when you have 17 fiscal systems and they're now bearing the fruit of it. the europeans are going to have to sort this out and there's a tremendous tension obviously on the germans who are being asked disproportionately to try to

help the mediterranean states. he hasn't, he hasn't felt it was appropriate for him to prescribe solutions but we recognize how difficult it is. he has talked about that and the importance of trying to keep europe economically strong. >> question right here. thank you. >> scott herald of the rand corporation. i would like to ask police flournoy and mr. williamson, comment on two strategically important countries. countries that are important economically. japan and india. japan we haven't heard i think from governor romney whether he would support it. pp for japan and india is a country we've all been looking at as a possible security partner. i wonder if you could comment how you see that going forward. >> start with michelle. >> let me start with india. i think this is an area we have had a lot of frankly continuity and bipartisan

support. india is a important security partner today. we are, our military relationship has never been closer. they are, that is, growing, i think they exercise more with the united states than with any other country. we're growing our cooperative efforts on countering piracy and other things in the indian ocean. it is a rising democracy. it is a very, very powerful partner for us in the asian region and we have so many common interests and so many common values and i think administration invested a lot in that relationship. the president's first state dinner was for the indian prime minister. japan is also critical ally. i think that we've not only continued to invest in that relationship but i think when, after the tsunami and the nuclear accident the way we were there for japan it was, you know, it was something that our military forces who were there were

so proud and happy to be able to help and to be able to be there in a moment of need and i think that is only solidified the relationship further. we're having very productive discussions about the future of our posture and how to adapt that to the new security environment. those are going very well. i think both of those relationships are very vibrant and very strong under this, continue to be so under the last, under the last three years, four years. >> i would just reiterate what michelle said. i think one of the successes of the bush administration was to strengthen and renew the relationship with india and it has been carried on and that is a good thing for india and a good thing for the united states. the governor has been clear he recognizes importance of japan and the republic of correia to our security interests and our also economically and its partners. and has expressed his desire to strengthen and work on that relationship. >> in the back right there.

in the middle. yes, yes. yes, you. no, you, right there. standing up with your hand up, yes, yes. thank you very much. >> thank you very much. my name is nagala i'm from the ivory coast. i've been here since the beginning. we did not hear anything about africa. you heard recently in africa the forces of the current president have attacked a displaced people camp and hundreds of people were killed. and i just wanted to know how the current president or the future president of america will make sure that the injustice stops in africa and how this will be stopped in ivory coast. >> thank you very much. >> that is one and the same person i should answer the question both current and future president. [laughter] but, no, i think, i think this is a, this administration has, and this

president has spent a lot of time and energy on africa. actually president visited the continent in his first six months in office. he has been laid out a very sweeping set of policies that deal not only with very important issues like food security and development assistance and so forth but also continued democracy development, rule of law. i don't want to get into the particulars of the situation in ivory coast today because i think the white house is actively engaged on that and i don't want to sort of insert myself as an administration official and i'm not one anymore but what i can say is anytime there is violence like this it is on the radar screen. it raises serious concern and i'm sure there will be appropriate action taken. >> rich, as a question also from the overflow crowd and concerns turkey. another key country. what kind of thinking has

governor romney been involved with looking toward turkey? how would he improve the relationship? what does he think about its importance, et cetera? >> right. turkey obviously has growing importance. they have had 6 1/2% gdp growth in the recent years. something of course we like just a fraction of back home. and they have become more assertive in the region trying to play a larger role. it has come up in the context of discussions about syria and the need to work closely with ankara and on both our strategy and our support with turkey's efforts to protect its border. as we know they allowed so many of the opposition to have offices in turkey. governor romney recognizes turkey's unique role as both a nato country and in the broader middle east region. it is obviously a country that the united states has a

great interest in developing and strengthening the person until relationship with, even though we've seen on some items we're not always going to be in agreement. but i think most of our discussion has been in the context of the crisis in syria and he clearly has an appreciation of the pivotal and critical role that turkey plays there and in the region. >> do you see the obama administration strengthening even beyond where it is today, the relationship with turkey, in general but also specifically with respect to syria? >> well i think the, turkey is a very, very close partner right now on syria and those, engagements are daily and intensive. and we've been working very well together. i think the administration has recognized the new and growing role that turkey is playing, particularly looking east. they have been very important on syria. they have been very important on iran. but i think we've also taken

pains to continue to make sure that they stay anchored in europe and in nato. and i think the president's missile defense program that has now been adopted and then, endorsed again at two nato summits. having turkey be a critical part of that, agreeing to host the radar, is very key as has continuing to have cooperation with poland and romania and spain, all of whom who will be hosting elements of a system that will provide more capability, lower cost and be deployed sooner than the predecessor system would have. >> we are honored to have a question from martin indig if we can get a microphone to him. >> i wonder if i can step up and widen the lens a little bit and ask you a more general strategic question about strategy to candidates. president obama has placed a

lot of emphasis on shaping an emerging global order in which china, india, brazil, other powers, will have a seat at the table and he has worked quite hard at this kind of multilateral approach. i wonder, first of all, whether governor romney has a different approach to the rise of these powers? and whether president obama in his second term, if he has one, will make, still make this a priority? >> rich, why don't you start. >> yeah, sure. i guess, first it's important to make the comment that governor romney believes it is important to engage. he thinks it is important to seek multilateral cooperation, collaboration, cord nation. and to recognize that the relative powers are shifting with the rising powers in

china, india, brazil. and that that means shifting some of the way you do business. having said that, i think there's a fundamental difference in how they view the world. i think the president has a very legitimate perspective with engagement, confidence in multilateralism and deference to international law. as one person wrote, one commentator wrote, the president went to china thinking his ideas and eloquence would bend their behavior and the chinese found that curious and looked at their interests. i think governor romney believes all countries look at their interests and they should and that that means sometimes you have a different way you work with them. so there is a difference in

approach where we would argue or suggest that governor romney is more in the tradition of truman, kennedy and reagan and that president obama has a differ pretty much, a different way to look at it and the american people will judge how successful it has been. >> i have to say something. >> michelle, please. >> spent hours watching this president make decisions in national security council meetings and so forth. he is, first and foremost a patriot and a pragmatist. he starts with american interests but he also believes that we have to be, it benefits us, it advances those interests when we had also true to our values. when we say respect for international law, that is not something somebody else created, we created the international system that came out of world war ii. it is based on our values and our notions of law. so when we respect that, we are advancing our own

interests in keeping that system. it has to adopt to -- adapt to accommodate new players. we need to find ways to integrate a rising china and so forth. but this is not some vague, abstract, sort of whyistic notion. this is very essential to who we are. you don't have to choose between pursuing interests and being true to your values. you can do them both at the same time. that is exactly what he has been doing remarkably i think over the last four years. >> wish he had done it more in syria. >> would you like to comment on that? >> again, i think we have been very clear on the differences on syria. you know, this is a president who was one of the first if not the first to call for assad to step down, to recognize the horrors of what was happening, to put millions of dollars of humanitarian assistance on the table and to lead the

friends of syria effort, to help bolster the opposition, get them to be cohesive, so that they have a viable chance of transition. i think we've been consistent with our values in the way we have approached syria. >> what i would like to say as we wrap up and i'm terribly sorry to those raising their hands but our time is up and we have to fold but this has been a wonderful discussion. we ought to take it on the road. what do you say? thank you both very, very much and thank you all for coming. [applause] may i just ask, may i just ask, that you all reef main seated while the panelists have opportunity to leave. it will just be a minute or so. thank you again, very much.

[inaudible conversations] >> on the road to the white house has taken republican candidate mitt romney overseas to visits to europe and israel. he has been in england this week. tonight he will be at the opening ceremonies of the london summer olympics. israel is next followed by meetings in poland. representing the administration at the olympics, first lady michelle obama. she is in london to welcome american athletes as they arrive. she will also attend the opening ceremonies. governor rom of course has a history with the games having run the 2002 salt lake city olympics. join us tomorrow night for a look at his leadership and tenure. that gets underway at 8:00

p.m. eastern on c-span. >> we'll have more live coverage this afternoon with remarks from former president bill clinton. he is addressing the week-long international aids conference here in washington. live coverage starts at 4:25 eastern. also on c-span today the clare boothe luce policy institute is hosting a seminar on conservative

leadership. speakers include former presidential candidate and house speaker newt gingrich. that gets underway at 1:00. that will be on c-span. >> let me begin to open up the discussion by asking it this way. what exactly is the nature of the clash between macarthur and truman? is this, is this a clash

over policy? is this a problem of personalities. >> treasury secretary tim geithner was on capitol hill this week testifying before the house and senate lawmakers as part of the financial stability oversight council's report on the state of the u.s.

financial system. the 10-member board created under the dodd-frank financial regulations law. the primary task being to monitor the nation's financial system for any excessive risk and instability. during this hearing before the house financial services committee wednesday secretary geithner also responded to questions about the impact of britain's libor interest rate manipulation scandal and its impact on the global economy. massachusetts congressman barney frank, who serves as ranking member on the committee, was a coauthor of the dodd-frank law. >> the hearing will come to order. the committee is honored to welcome secretary geithner to deliver the annual report of the financial stability oversight council. as previously noticed under committee rule 3-f-2, time for opening statement is limited to eight minutes for each side of the aisle. without objection all members written statements

will be made a part of the record. the chair now recognizes mr. fitzpatrick for one minute for an opening statement. >> thank you, mr. chairman. thank you, secretary geithner, for taking the time to be with us this morning. we're all interested in avoiding the next financial crisis and i think we can all agree the best place to start is by doing no harm. this committee spent a lot of time examining the effect of dodd-frank on the ability of small banks on main street to comply and compete in light of the new and additional burdens that have been placed on them. it is the opinion of many that the law favors big banks and hurts small banks which in turn hurts small business which a group to whom we're looking for job creation in the future but the more immediate issue remains lack of growth in the economy. higher and increasing marginal tax rates reduce economic growth by creating strong disincentives to hard

work, savings, investment and entrepreneurship. just last week ernst & young reported increasing taxes would do more harm to our economy. i hope that the fsoc will begin to examine proeconomic growth policies americans are waiting for. lower budget deficits, smarter regulatory policy and tax code simplification that lowers rates and expands the base and we all look forward to your testimony. thank you, sir. >> thank you. the chair now recognizes mr. duffy for one minute. >> thank you, mr. chaerl, for yielding. secretary geithner i know we're here today to talk about the stability of the nation's financial system. as i travel around the northwest corridor of wisconsin i can tell you my constituents feel like the financial system is far from stable. they're concerned about the economy and as we go through the hearing today i guess i would like to hear your commentary on the libor scandal, the euro crisis, the american debt crisis,

the american jobs crisis, the american economic growth crisis, the codification of too big to fail in dodd-frank, and i want to hear your views on why you think this has been the longest and lamest recovery since world war ii and what we can do to turn the ship around. i yield back. >> thank you. miss hayworth for one minute. >> thank you, mr. chairman and thank you, mr. secretary, again for appearing before us. and your work and your comments about the fsoc are so important and i share the concern that mr. fitzpatrick has raised and mr. duffy has raised regarding having a robust economy in the face of the new regulations that are being promulgated as a result of dodd-frank. the office of financial research and fsoc, i know are working together to formulate the designation of non-bank financial companies as systematically important

and i have a letter. i would ask unanimous consent to be introduced into the record, regarding some concerns in terms of the coordination between fsoc and the ofr and of course the entities themselves so that we do not create a disruptive or a, if you will, enterprise compromising situation through promulgation of rules that may not be practically applied in the real world that we face global competition and the rest and indeed, sir, you have advocated for global cooperation in terms of extra tear torre alty which i think is very important stand as i hope you will share with the cftc as they contemplate those rules. i look very much forward to your testimony how we go forward in a way that will be least disruptive and enhance the economy. >> thank you. miss maloney, for three minutes. >> first of all i would like

to welcome secretary geithner and thank you for your extraordinary public service. this may be the last time that you testify before the financial services committee and i really want to make sure that my appreciation and certainly the appreciation of many americans are expressed to you and the gratitude for steering us through the worth financial crisis in our lifetime and certainly in my lifetime. i would like to hear today about what it costs this country last summer when we went up against the debt ceiling and the crisis that ensued because congress could not make a decision. hundreds of millions, billions of dollars, what it meant to american families and i would like to know what would happen financially, if we come up to that cliff again this summer? what is it going to mean for

american families and how much did it cost america during that crisis. i also want to note the statement made earlier today by sandy weill, the former ceo of citibank and he said earlier this morning on a "squawk box", cnbc's, what we probably should do is go and slit up investment banking from banking. have banks be deposit takers. have banks make commercial loans and real estate loans. have banks do something that is not going to risk the taxpayer dollars, that's not too big to fail. sanford weill, former citigroup chairman and ceo said today. i feel that is a very strong statement, stronger than the volcker rule, calling for the strictest volcker rule

possible. a return really to glass-steagall and certainly the goal of this committee and certainly the treasury department is not to have this type of crisis again and the steps, your reaction to that and i feel a hearing, the statement is something, we should certainly act on. in libor, i would like to hear your statement about what you could do or what you couldn't do. england is a separate sovereign country. to what extent can our country impose requirements on a foreign country. and i would like to hear about the car industry. how was it that the treasury department, with others were able to save 1.4 million jobs, and turn an industry that was failing, into an industry that is now employing, expanding, and exporting?

that is a terrific story of success. thank you for your role and leadership in achieving that for american workers, and many other ways, my time is expired. thank you. >> thank you. mr. renasi, for one minute. >> thank you, mr. chairman. good morning mr. secretary. thank you for being here today and thank you for your service. in your testimony i look forward to hearing exactly what the fsoc has done to make our financial system stronger and more secure. one of the most obviously lessons of the financial crisis was the system had become too complex for banks and their regulators to effectively manage. we have become overly reliant on a web of bloated government agencies that were incapable of covering all the cracks in our system. however instead of simplifying the system and reducing the amount of jurisdictional bickering between regulators we decided to double down on a failed system. instead of consolidating number of regulators and

providing clear responsibilities we rewarded the failure of certain agencies and added three more bureaucracies for good measure. today i hope to hear from you what fsoc has done to strengthen our regulatory system. i would like to hear what has been done to end too big to fail and rein in the reckless behavior that led to the financial crisis. most importantly i would like to hear what fsoc plans to do who hold regulators accountable for being asleep at the wheel during the financial crisis. thank you for being here today and i yield back. >> thank you, mr. dole, illinois, for one minute. >> thank the chairman. secretary geithner, thank you for taking your time to be with us today. our bipartisan objection, objective has to be to maximize private sector job growth and global competitiveness while also insuring economic stability. regulations are obviously necessary but they must be sensible and balanced. the rules must be transparent, unambiguous an objectively enforced. anything less leaves us with many unnecessary and

potentially negative consequences. diminished global competitiveness, erratic enforcement, potential regulatory favorite tism, and weaker economic growth and job creation. unfortunately in many respects our regulatory environment isn't sensible or balanced. i don't think that any of these are controversial points. for example, president obama has called for a rigorous cost benefit analysis of existing regulations and proposed regulations. so i'm particularly interested in how fsoc is coordinating and correcting ambiguous, conflicting and unnecessarily burdensome regulations in addition to addressing jurisdictional battles among regulatory agencies. i'm also concern and interested whether you might recommend ways to simplify, consolidate and streamline regulatory agencies themselves. "the new york times" called dodd-frank's failure to do so a lost opportunity. i think we might also have some bipartisan agreement on that point. i yield back. >> thank you, mr. schweikert

of arizona. >> mr. secretary, almost on the same thing you've heard from some of the other opening statements, we're engaged in a little project in our office where we're trying to build a flow chart of all the regulatory mechanics, all the touches to those who are regulated and trying to predict some of the rule promulgation and the chart is becoming absolutely byzantine. shouldn't we be coming together to move toward a single point of contact from regulatory environment, something much more simple and understandable? has dodd-frank, maybe in good intentions created a structure that is absolutely unworkable for the future? and just as sort of a personal side area, i have great interest in, i would love, if you have a second, to touch on bonds being issued by the united states. should we be moving much, much, much, further out in the way back to the excuse of super bond considering

where interest rates are outside of the curve right now. thank you, mr. chairman. >> thank you. the ranking member, mr. frank, is recognized for five minutes. >> mr. chairman, as my retirement approaches, certain amount of nostalgia is inescapable. i try not to indulge it but i am overwhelm wit it today. it is 2006 all over again. when i was about to become chairman of this committee after the 2006 election was besieged by "wall street journal" and wall street people and chamber of commerce pleas we deregulate america. if we did not dismantle sarbanes-oxley and cut back on the oppressive regulation of financial community everybody would soon be in england or in hong kong. of course what then happened was the worst collapse of the american economy in a very long time, precisely because of the lack of regulation. and people seem to have forgotten that. i'm hearing again the problems in the american economy are too much regulation. ben bernanke, who i will,

remind people, when george bush, president george bush had an important appointment to make, he sent for the usual suspects who were always ben bernanke. he appointed ben bernanke to be on the board of governors of the federal receive in his first full year. then he made him chairman of the council of economic advisors. then he made him chairman of the federal reserve. ben bernanke stays on as chairman of the federal reserve as the most bipartisan person in this city. and he testified before us and as my colleague mr. heinz and others noted he listed the head wins against the american economy. excessive regulation of the financial industry wasn't one of them. he said there were all kinds of factors and he was asked and no, it was not a significant headwind. europe is significant call headwind. my colleagues on other side of the aisle have tried to retard of some, including mr. bernanke to retard that. not enough freedom for the

people who isers responsibility for this problem. we're being told to back off. we're being told that de, the regulations are too complicated for these poor people on the financial industry to understand. well you know what was too complicated for them to understand? their own raz dell dazzle shenanigans. that is what got them into trouble. i do want to address this question of consolidation. people said we created all these new agencies. there were two agencies that had pretty much similar functions. the office of thrift supervision and office of comptroller of the currency. we consolidated those. we got rid of one operating agency and created one new operating agency. fsoc is not new agency. coordinatings council. office of research is not new agency. they get information which i understand people don't want us to have. we created one new agency. called the consumer financial protection bureau. for the first time we took from existing bank regulators the function of protecting consumers and made it their primary job and it has been working very well although i think we've

had 11 hearings now oversight hearings which we complained there is no oversight of this institution. that is not their complaint. their complaint it is standing up for consumers as it recently did regarding capital one. i will acknowledge there was one major flaw in our structure, that i wish i could fix. we should not have a separate securities and exchange commission and commodities futures trading commission. the biggest single gap we had in the american financial regulatory system was the decision to not regulate derivatives at all and we made a major breakthrough in the financial reform bill by regulating derivatives and we are just now getting those rules in place partly because 10 people had to be involved. five commissioners of the sec, five of the cftc. and derivatives are split. the problem is that that split reflect as deep tult cultural and economic split in america. the commodities futures trading commission was created many years ago to

deal with protecting theoretically farmers. the securities & exchange commission, the finance committee. i would very much like to get that consolidated. i notice republicans talk about consolidation. they left one out. they talk about consolidating bank industry and the bank agencies. i want to go back to the fundamental point. the notion that the problem in america today with the financial institutions is too much regulation, you know, once a week we get a demonstration that is not true. the banks are lying about libor, a disgraceful, pattern of behavior of simply lying. mr. dimon of jpmorgan chase, a very well-regarded justifiably well-regarded executive loses control of derivative trading of billions and billions. just like aig they don't know how much money they had lost. capital one admitting they had vendors who were cheating people and only an independent consumer bureau was able to step in. there have been problems in the past. we had a comptroller of the currency who frankly was not a good regulator in the

sense of being tough on the banks. we have a new one, mr. currie, i think you're going to see a great deal of improvement but the notion that our problem is too much regulation, i guess i am struck by the percosity of people who make the comment. that is very articulate statement apparently from people born sometime only in 2009. >> thank you, ranking member. mr. green, new york, is recognized for one minute. >> thank you, chairman and good morning, mr. secretary. the american people were told when dodd-frank was signed into law that they could rest assured these regulatory failures were going to be a thing of the past yet over the last two years we've seen massive scale regulatory failures. we witnessed a collapse of mf global, over a billion dollars of customer funds misappropriated. in the last month we've seen the collapse of pfg commodities, close to 200 million in customer funds

missing. now we're learning obviously of tremendous manipulation of the libor interest rates. that is something regulators might have known as far as back as four years. so i'm very interested in hearing from you, mr. secretary, how do we get the american people to feel that these 400 plus new regulations on the dodd-frank will give them the comfort and certainty that they need to invest and come back into the markets? but as someone that really does believe, as i think most americans believe, we have the strongest economy that was ever built and is the envy of the world, will dodd-frank make it stronger, more robust capital markets and will it lead to more american jobs? thank you, and i yield back. >> thank you. and our last statement will come from the gentleman from texas. >> thank you, mr. chairman. the crisis of 2008 was caused by a number of factors but i think at this point that we can say with confidence that a lack of authority or information by regulators was not one of

them. instead of advancing a true reform of our regulatory structure, dodd-frank doubled down on the failures of the past by elevating the influence of the same agencies that missed the last crisis. this notion that a new super council of regulators will predict the next financial calamity is a fallacy. all it does is further distract regulators from their core duties which is to police financial markets. we've already seen an example of this with mf global. this is harmful for our financial system and our economy and i'm eager to look into this matter further and i yield back the balance of my time. >> thank you. before i recognize secretary geithner, let me say that the secretary hasn't indicated he must leave at noon today. to accommodate as many members as possible to question the secretary the chair announces that he will strictly enforce the five minute rule. members who wait until the final few seconds to ask a

question of the secretary should be advised that they will be asked to suspend when the red light comes. so that we can allow other members to be recognized. without objection, mr. secretary, your written statement will be made a part of the record. you are recognized for five minutes summary of your testimony and the ranking member is recognized. >> i ask unanimous consent to say hooray for what you just said and i hope you will strongly enforce it. >> thank you. i know i will have your cooperation. thank you. >> mr. secretary, you're recognized. the only thing that will not be strictly enforced is five minutes on your statement. you can -- >> chairman backus, ranking member frank, members of the committee thank you for giving me another chance to testify before the commit teen on the recommendations of the financial oversight stability. >> needs to be little louer, mr. secretary. >> i'm also to try to address the range of other

comments and questions you raised in your opening statements. as the council's report outlines we have made significant progress in the united states repairing and reforming our financial system. we have forced banks to raise more than $400 billion in capital to reduce leverage and to fun themselves more conservatively. the size of the shadow banking system, the parallel banking system has fallen by trillions of dollars. the government has closed most of the emergency programs put in place during the crisis and recovered most of the investments made into the financial system. on current estimates the tarp bank investments, to, will generate an overall profit of approximately $22 billion. credit to the business sector is expanding and the cost of credit has fallen significantly from the peaks of crisis. these improvements made the financial system safer, less vulnerable to future economic and financial stress, more likely to help, rather than to hurt future

economic growth and better able to absorb the impact of failures of individual financial institutions. but of course we still face very significant economic and financial challenges. the ongoing european crisis presents the biggest risk to our economy. the economic recession in europe is hurting economic growth around the world. and the ongoing stress in financial markets in europe is causing a general tightening of financial conditions, exacerbating the slowdown in growth. here in the united states the economy is still expanding but the pace of economic growth has slowed during the last two quarters. 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 ongoing reduction in spending at all levels of government and slow rates of growth in household income. the slowdown in u.s. greg could be exacerbated by concerns about the approaching tax increases and spending cuts and by

uncertainty about the shape of the reforms to tax policy and spending that will ultimately be necessary to restore fiscal sustainability. these potential threats underscore the need for continuing progress in repairing the remaining damage from the financial crisis, and enacting reforms to make the system stronger for the long run. the regulators have made important progress over the last two years in designing and implementing the regulations necessary to implement the financial reforms you call dodd-frank. nine out of 10 of the rules with deadlines before july 2nd, 2012, have been either proposed or finalized and the key elements of the law will largely be in place by the end of this year. we have negotiated new, much, tougher global capital requirements with even higher requirements for the largest banks. we now have the ability, the authority, to put the largest financial companies under enhanced supervision

and prudential standards, whether they are banks or non-banks and also the ability to subject key market infrastructure firmses to tougher prudential standards. the ftc and cftc are putting in a new framework for derive oversight providing new tools for combating market abuse and bringing derivative markets out of the shadows. fdic has new tort in place for proteching the taxpayer and failure of large financial institutions and the consumer financial protection bureau worked to simplify and improve disclosure of mortgage and credit card loans so consumers can make better choices how to borrow responsibly. this process reform is a very complicated process. it's a complicated and challenging process because our system is complicated, the financial system itself is complicated because we want to target damaging behavior without damaging access to capital and to credit. we want the reforms to

endure as the financial market innovation evolve over time. and because we need to coordinate the work of multiple agencies, not just here in the united states but in the financial centers around the world. now beyond the reforms enacted in dodd-frank, the council has put forward a number of recommendations to help strengthen our financial system going forward. reforms are necessary to address remaining vulnerabilities in the short-term funding markets, particularly to mitigate the risk of potential runs in the future on money market funds and to reduce intraday credit exposure in the triparty ripo market which is the secure funding market. regulators should establish and enforce strong protection for customers funds deposited for trading. financial firms and regulators should continue to improve risk management practices including by strengthening their capital buffers, stress testing disciplines, internal disciplines around complex trading strategies and other areas. the council recommends

further improvements in the quality and the availability of financial data. the office of financial research will continue to lead this effort as it has done so impressively over the past year. finally the council continues to support progress towards comprehensive housing finance reform that will be designed to bring private capital back into the housing market. these recommendations will build on the very considerable progress made by the members of the council over the past few years in making our system safer and stronger, more resilient, less vulnerable to crisis with stronger protections for investors and for consumers. we have a lot of work ahead of us, however and we need your support to make these rules both 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 thank the other members the financial stability oversight council and the staff and their agencies for all the work they have done over the past year not just on this particular report.

i want to underscore again we look forward to working with this committee and this congress as a whole in the important effort of building a stronger financial system. thank you, mr. chairman. >> thank you. the chair yields himself five minutes for questions. mr. secretary, it is widely reported that you discovered in 2007 that the world's biggest banks were manipulating libor. your own recommendations maude in may of 2008, the following year, indicated your recognition there was an incentive to misreport. that obviously raised, races substantial questions is about the honesty of libor submissions and the presence of fraud. when did you alert the u.s. treasury and the justice department of the possibility that libor was being manipulated or rigged and to whom did you state

those concerns? >> thank you, mr. chairman. in 2008 as the financial crisis intensified and there were broader concerns about the financial strength of banks, european banks were having a tougher time raising dollars. those libor rates began to rise. and there was a lot of concern in the market that the way the rate was structured made it vulnerable to misreporting. those concerns were widely available in the market and they were published in "the wall street journal", and financial times among other publiccations. this was in the string of 2008. we took a very careful look at these concerns. we thought those concerns were justified and we took the initiative to bring those concerns to the attention of the broader u.s. regulatory community including all the agencies that have responsibility for market manipulation and abuse. >> that included treasury and the justice department? >> i briefed the president's working group on financial markets. the members of that group

included the cftc, the sec and the fed. >> how about the justice department? >> justice is not a member, a member of that committee. and -- >> let me ask you you were aware the possibility of fraud? >> we were absolutely aware, not just of the reports that banks were underreporting or misreporting, but the nature of the rate, again this is a rate set in london, overseen by the british bankers association and it's a rate that is an average of, constructed average of estimates, principally by foreign banks of what they might pay to borrow in 10 currencies at very different maturities. >> three u.s. banks. >> three at that time, three of 16. now three of 18. but we were aware of the risk that the way this was designed created not just the incentive for banks to underreport, but gave them the opportunity to underreport. >> right. >> that was a problem. >> all right. you know, i know that you

went to the british regulators. you actually, but what action did you take, you were aware they took no action, i believe? >> well, let me again, let me explain what i did. our first instinct was not just to brief the broader regulatory community including the enforcement agencies but to bring this to the british it. i personally raised this with the governor the bank of england. and i sent him a very detailed memorandum recommending a series of changes and then -- >> let me ask you. he has denied having any, any evidence of rigging or misconduct but according to what you supplied him, that, his testimony would not be correct, is that right? >> well, again, i felt that we did the, important, and fully appropriate thing which is to bring to the attention not just of the people in washington, not just the reports and the

concerns that were broadly available in the market and in the public domain, but also of the, that the range of problems in the way this rate was designed that created that vulnerability. we brought those concerns to their attention. >> sure. >> and we felt, and i still believe this, that it was really going to be on them to take responsibility for fixing this. >> let me ask you this. you reported to the president's working group in may of 2008. what action if any was taken at that time to address the concerns that libor was being misreported, that the existence of fraud and rigging? >> what the cftc did in roughly the same time frame is to initiate a confidential, but very far-reaching investigation ultimately took four years, which resulted in the very, very strong, appropriately strong enforcement response you saw announced earlier this month. ultimately that investigation brought in the sec and the justice and other agencies. >> let me ask you this last question. you used libor to set the

aig 182 billion dollar, and also the $100 billion talf now we know those are understated. does that work to -- of the taxpayer? >> we were in the position of investors all around the world. in many cases you have to choose a rate to decide, use as reference to what you're lending in that context and we did what everybody else did which is to use the best rate available at the time. now, we are all taking a very, very careful look, this is matter of litigation as you know, not just the ongoing enforcement investigations, about to what extent the rate was moved up or moved down or actually affected in any way. don't know yet what the results of those discussions will be and i can't speak to them but you're right, to point out that we, like, investors around the world,

had to, had to take advantage of the rates available at the time and we chose libor at that point as did many others. >> thank you. mr. frank. congressman frank. >> thank you. mr. geithner, i want to get the context because what's happened here is that some of the leading financial institutions of the world based in an outrage just fashion. these were not bad guesses about derivatives. these were not overconfidence about mortgages. this was conscious deception in their own self-interest and it was done not just by individuals but by an association that was given powers to self-regulate in some ways. as i hear some of my colleagues talk about the need for more self-regulation and less prescriptive regulation, libor comes to mind as a very strong refutation. part of this, and this is troubling to me and it hasn't happened yet this morning but i hope it doesn't, but in the press and elsewhere there has been an effort to blame you all this beuse you happen now to be the secretary of

treasury in the obama administration. there is, seems to be extraordinary. you are an important but not one of the top officials i don't mean to denigrate you, presidency of the federal reserve is an important institution. it has been given more importance recently than it ever has before. people want to say you were running the world back then. you had a chairman of the federal reserve who was setting libor, using to set the rates. mr. bernanke was in charge of aig. i had secretary of treasury paulson. this all happened under administration of president bush and president's working group was the group you reported was president bush's working group. mr. copps at the sec and mr. paulson. i stress that because there was a failure to be tough enough with these private sector people who were doing this but the notion that it was really all the problem of the president and the federal reserve of new york is very striking. i want to be very clear. you reported this to the president's working group on financial reform.

who are the members of that group? who were they in 2008? give me names. >> chairman of the federal reserve. >> mr. bernanke. >> chairman of the f the tc. chairman of sec. >> secretary of the treasury? >> and the secretary of the treasury. >> so did. >> chairman. fdic i think at that stage occasionally but those are the core members. >> these are all bush appointees. i think this is problem not of regulators and but right sector and british banking association. if people want to point fingers at regulators all those people were presidential appointees confirmed by the senate. you were not a presidential appointee? >> no. >> these are five or six people above you in the organizational chart to whom you reported what you found and maybe things weren't done tough enough although i am struck that you note that the cftc to its credit did begin the investigation

which culminated in this. so we have a situation where private banks formed in a british association but with american bank participation, grievously misbehave. you hear about it. report it to the financial working group consisting of bush appointees, many whom i value highly, that i worked closely in 2008 and some people are dissatisfied not enough was done. if that is the case, does seem to me responsibility should be broadly shared. let me ask you this question about too big to fail. the legislation as you know says that if a large financial institution can not pay its debts it is put out of best and that no money can be spent by the federal government on the process of putting it out of business. i mean death, these are death panels. they weren't nor old ladies in the health bill. they were for big banks in the financial bill. ceo are gone. shareholders wiped out of the board dissolved. that's what the law says.

the law also says if there is any money that has to be spent to wind it down responsibly you and your successor is mandated and authorized to recover i it. what i raid from the president of the federal reserve and of dallas and his staff, that that's not going to work because if there was a failure of a large institution, there would be overwhelming pressure on you or your successor to provide federal fund to keep that institution alive. do you think that's likely? >> unlookly but i wouldn't have the authority. >> you would be breaking the law to do that? >> again the congress, what congress did is, change the law to limit the authority available to the regulators to protect an institution from its mistakes. >> they're then put out of business. by the way there are some now on the more conservative side lament that. there is new book from

mr. conrad, managing director of bain, just got a copy sent me to me by "the national review" complaining we have restricted the ability of the federal regulators to intervene to save them too much. i appreciate your point. if a larger institution failed you would have no option under the law but to have it fail. if anything had to be done to put it out of business you would get the money back from the banks? thank you. >> thank you. mr. hensarling. >> thank you, mr. chairman. good morning, mr. secretary. i'm, still don't quite understand your answer concerning the fed's use, new york fed's use of libor. on the one hand, i think you have said that quote, we acted very early in response. we were worried about it. we were concerned about it. but it appears that the early response was to keep using it. which means that it appears you treated it almost as a curiosity or something akin

to jaywalking as opposed to highway robbery. i think i just heard you earlier in your testimony say, quote, unquote, it was our best choice. there are other interest rate indexes out there. how can a number that you know has been manipulated, how can that possibly be the best choice? >> well, again, we were concerned about this and we did the important, very consequential thunk of bringing it to the attention of the full compliment of regulatory authorities that congress has given responsibility and authority for market manipulation abuse and -- >> but you weren't obl bited to use it? the new york fed was not obligated to use libor, yes or no? >> of course not. >> okay. >> but we had to make a basic choice among alternatives at that time and i think that was the right choice back then. >> between a manipulated number and nonmanipulated number? >> i wouldn't say it was that. i would say this was a rate

that was structured to misreporting. what we tried to do is try to initiate a reform of the process with the british but also just to make sure the other relevant authorities made use of it. >> in fact, mr. secretary, we have a limited amount of time. i would like to ask another question here. as i reviewed the annual report, i see a lot of discussion of the european debt crisis. frankly i see very little discussion of the u.s. debt crisis. we know that on a nominal basis this country is now racked up more debt in the last three years than in the previous 200. we know our debt-to-gdp ratio exceeds our economy. even in the president's own budget, after the 10-year window, his budget states, quote, the fiscal situation deteriorates badly. the president has previously said that the major driver of our long-term debt is medicare, medicaid, our health care spending, nothing comes close.

yet, and that was in 2009. i have yet to see a reform plan for entitlement spending out of this administration. you testified before the budget committee in february of this year in response to budget committee chairman paul ryan, you said, that he was quote, right to say we, meaning the administration, are not coming before you today to say that we have a definite solution to that long-term problem. what we do know is we don't like yours. that was in february. i assume i haven't missed any of the news clips that the administration has come out with a plan. so if the president says this is the major driver, we know that, the head of the federal reserve has also spoken about our unsustainable spending driven by entitlement spending, i look at this report, i can not find one

mention of the word entitlement, not one mention of the word medicare, not one mention of the word medicare, not one mention of the word medicaid. again yet your own budget says, quote, fiscal situation deteriorates badly. how can this not be cited as a major factor that could disrupt u.s. financial stability? and when, if ever, is the administration going to move on this? >> congressman, as you know the fsoc council's job is not to recommend to the congress long-term reforms to entitlement spending or recommend solutions to our long-term fiscal crisis. we agree as you said that our fiscal deficits are unsustainable. >> mr. secretary, if i could, what is chapter 3 of this report all about? annual report recommendations. does this not impact the competitiveness and stability of u.s. financial markets? our fiscal unsustainability? >> we identify in the report as i did in my statement in summarizing the report that this, these broad, long-term

fiscal risks are a significant risk to the american economy and ultimately they're for to the financial system. we highlighted that basic risk in the report as was appropriate. >> you didn't make other recommendations. you make no recommendation what actually driving cord to the president of the united states the debt crisis. >> i think it would be strange thing to ask the fed, cftc to recommend a detailed medicare reform plan. that would be a strange thing. so you're right to say it's a risk. the council is right to highistic light the risk but i don't think it is correct to say the council should have laid out reform recommendations for restructuring a -- >> i'm out of town but perhaps next time you can help me with a highlighter because i don't see it. >> thank you, mr. hensarling. miss waters. >> thank you very much. . .

so please go ahead. >> let me just say a bit about the broader question. in the detailed recommendations we gave to the british, we identified a series of specific things that would make it untenable for this rate to be affected by the banks incentive to lower your there've reported cost of funds. we gave them again very specific detail changes for doing that and they must have been adopted. more of those have been adopted

in sooner you would've eliminated the risk going forward. right now -- let me highlight a few things important given where we are today because you're going to want to know what is next, what's ahead of us. so let me walk ahead of data filters give me a minute. the to read and relevant agencies, which means the fed and the fcc and the cftc are in the process of taking a careful look at how to address any potential implications of this remaining challenge for the financial system. these bodies are carefully examining other survey-based measures of interest rates and financial price is overseen by private financial firms to assess any potential, therefore missed rorting similar problems. they e carefully examining broad range reforms that alternatives to libor. there is a all the world central

banks and market regulators together in a global effort to review potential reforms. we are considering how to deal with the careful and delicate question of how do we make it possible for enforcement agencies that are undertaking a confidential investigation that reveals behavior that could impact the financial system as a whole, how to make it possible to share that information with appropriate protections in safeguard with the relevant agencies that have responsibility to the overall functioning of the system. very important question. we need to take a very careful look at parts of the system where we rely on what the market realized still on informal private parties run by financial firms like the british bankers association that have some formal or informal self-regulatory rule are very important question her colleague

referred to earlier. we need to all make sure that these enforcement agencies have resources they need to do their job. they give a specific example. a small town with the police department, population increases by 10100 times. you need to increase the size of the police department. it's a necessary responsible thing to do and if we do that we were powerful deterrent, tougher enforcement will come early with broader effects for all of us. in addition to reach of those things, of course we will cooperate fully and be fully responsive to the request of the committee for broader information of course will brief the congress on the progress of each of those efforts looking at reform in implications and how to benefit the system in the future to similar problems like this. >> given those recommendations in the problems we have had with the economic letdown in this country, what else can congress

do to ensure that the interest rates that are being paid between the banks is fair and equitable and somehow will not negatively impact the person who's taken out a mortgage in the united states? >> again, what you should do is what you are doing, which as you are conducting oversight of these agencies in the sufferers and you should ask for periodic up dates from this agencies on the reforms underway to address that risk. that's fully appropriate. we welcome an effort to more fully responsive to it. >> thank you very much, mr. chairman. i yield back. dr. paul. >> thank you, mr. chairman and thank you, mr. secretary. i have a question about the president's working group on financial markets. there's an article that said the fed brief the president's working group on financial in

june of two dozen eight and during that time your president of the new york setting june of the way. >> it was made that we briefed them and i was the one -- >> what did the article say june, but okay, may. he said the fed raised the working group. does that mean your data or someone else from beside quiet >> who is on the agenda of the meeting and i went to provide -- i was in a number, but i occasionally went. in my stats subsequently briefed officials of the treasury and separately official said the fcc and cftc. >> you're the chairman of the group right now, correct? >> yes, chairman of the council. >> in relation to the meeting had ended and see that sense, and keep detailed ratings? >> wiki minutes and me put this in the direct record with

whatever the appropriate ligase to make sure we have reviewed. >> how often do those meetings lead to policy changes or you make a decision and the fed goes out and does some thing or getting involved, how often does that happen? >> the council is in the early stage of implementing that the congress gave it to testing authorities. when a specific responsibility for things like designating financial market utility and systemic implications. that's a specific responsibility for fsoc has really backed down. and so this is something many of you spoken to to make sure you're not leaving much gas in the system in agencies have similar responsibilities work together, not again to each other. that's a more general responsibility, not specific. >> on libor, i do want to get into the details of fraud and who committed crimes in who should be punishable and not. i want to talk about the

principle. the principle here is people are complaining because they believe libor whirs fixed, the interest rates were fixed and netted in a fit. i don't think there's a big argument i'm not a for the big talk about and that's what our clients was actually penalized. the dismissal whole lot like what the federal reserve does? aren't they fixing interest rates over time for the benefit of special individuals? i mean, if the market goes down, there's interest rates and is banks get into trouble, interest rates are lower. right now interest rates are zero and banks get a lot of free money and they turn around and put it back on the earned interest and they buy treasury bills and they're doing quite well. it seems like there's a tremendous amount of manipulation of interest rates for the benefit of some individuals. this manipulation of interest

rates harms people who save money. if they are and can't can't earn anything, it seems like in the sense of morality and economic policy, our monetary system is every bit as guilty as what were you accusing libor of doing. the fed may be protected or rules of lives, but isn't there a similarity of dashes and they're we should question about manipulation of interest rates for special benefits as some individuals as the fed does this? >> no, i would not make any comparison. i don't think the remotely similar. the fed with authority congress gave it -- >> am not talking about authority. i'm talking about what they did. >> what the fed is doing this with responsibility congress gave it to keep low and stable over time and unemployment will over time, it is using a set of

tools to achieve the subject is. that is a fundamentally different thing from behavior to misreport the price they're paying. >> i don't think we'll resolve out. would you support change in policy where the fed could buy treasury debt directly so it didn't go through the bond brokers within their church commissions on this? would be better for the american taxpayer? >> for the fed to directly finance? >> yeah, why can't they buy from the treasury? and said we have 20 or so bond dealers and they make commissions on this in the fed goes out and buys these bonds and bond dealers make money off this. >> well, let me be careful to answer that question. i personally am a strong defender of two important principles. one is to make sure they have strong independent politics, but

also to make sure there's nothing in the relationship between the fed and treasury that would raise concerns. the federal reserve is directly finance in the fiscal deficit of the united states. there would be something very damaging to the fed's independence, credibility of monetary policy and fiscal credibility of the united states. that's not what you're supporting, i know that's not what you're applying for maybe i should talk to you in more detail about the market functions. >> thank you. ms. maloney. >> thank you for your service. it is absolutely huge if any one of his call for the breakup of the big banks and i would like a detailed answer in writing on what does this mean to the financial crisis of investment banking and banking has been saturated. but what that is meant for aig, bear stearns, lehman, what

cobia, all of the big banks? i want to use all my time at crazy speeds were in right down, which is libor and also the crisis and what it meant in financial loss to the american family last summer what could have been in the future? but specifically on libor, was this a british problem for united states problem? >> it was a race that in mind then that in implications far beyond lending, not just united states, the financial markets around the world. >> it was a set pain association are professionals in the united states or elsewhere? who sat at? >> it was set by the bakers association, which is a group of banks. >> were you aware of any other members of the president's working group following this issue? >> as i said, we briefed that broader set of relevant agencies said they were aware in the

public domain. as you know come to cftc started at that time a very far-reaching , and to their credit come investigation ultimately balked at authorities. >> did the new york fed or the federal reserve have enforcement authority in any way? >> in new york fed has a range of authority, but the enforcement powers of the fed rests with the board of governors in washington, not with individual reserve banks. but the other agencies that are part of our system -- it's a complicated system if any of abuse have said and father range of other authorities and responsibilities for things like market manipulation and abuse. >> well, could you have taken any action by secretary of treasury against parkways? >> as secretary of the treasury? >> or head of the new york fed at the time. >> i don't think secretary of

the treasury abstract enforcement and is given that two other agencies, which is appropriate. >> is your taken action against parkways at the new york fed? >> vinny i believe and i thought a lot about this as you would expect, which is a necessary appropriate things early in the process. >> ball, could you put this in context and to set the other things you are working on in 2008? i know that i was getting calls from my constituent that there is a run on the market. there is a fear of a complete financial meltdown peer what was it like for you? were we working on in 2008? can you put this whole into the context of what was happening at the time? >> at that period, we were -- it got much worse later. but at that point, pressures and

the financial system here and around the world were very acute and they were creating the real risk of a broader run, broader collapse on the american financial system. the recession was many quarters old at that point, overseeing the economic effect of it and was certainly get dramatically worse. and of course we had a lot to do at that point. but on libor again, we worried about this. we were concerned about it and that is why we did it that point despite the other preoccupations. >> could you comment also on the debt ceiling crisis this country safford through last summer? what did it cost our country? what did it cost american families? and what would happen if we had yet another debt ceiling crisis, if we went over the cliff again in terms of paying commissar for income increase in debt and

deficit, increasing unemployment, could you explain what the impact was last summer and what could it be if we can get together and come forward within a reasonable agreement? >> the threat of default that hung over the u.s. economy in that period of time of june and july of 2011 was very damaging. it caused economic growth to slow atteberry early vulnerable time in cuts that prices to fall sharply, doing a lot of damage to the saving of the average american and cause a precipitous drop of consumer finance, magnifying the slowdown in growth and the shock was larger than you see in a typical recession, very damaging him a very substantial completely avoidable, not necessary and would be irresponsible to put the country through that again. >> my time has expired. this may be the last time he testified before us. thank you for your public

service. >> the chair recognizes shadowing from north carolina for five minutes. >> mr. chairman, thank you very much. mr. secretary, thank you for being here today. i've said many times in the district here today that they too worst mistakes made in congress for the iraq war, which is very necessary and the repeal of glass-steagall. i was here with many of my colleagues saw the diocese today that president bush and secretary paulson called on congress to bail out those who in my opinion were gambling on wall street with the taxpayers money. and we bailed out those in troubled. i didn't vote for it then, so i won't blame them on that one. but it seems that every time that the financial institutions get in trouble, they come to the congress and the taxpayer and

say, we need for you to help us out. well you know, mr. diamond in the last career for weeks forced to acknowledge they made it $2 billion mistaken investment i guess. then it later became $10 billion. and the american people are just tired and sick and fed up with how. i think a lot of it quite frankly if i could vote today to eate public financing, we might wring some sanity to this issue that we're talking about the financial institutions and really have oversight that we should have come and barak were to change the way we finance campaigns and you can't change it if you want to. but my question to you is, isn't it time to have a discussion in a debate about the reinstatement of glass-steagall?

>> congress thought about that very carefully in the dodd-frank discussions and i'm sure they'll consider it in the future again and that's an appropriate thing to do, but the reforms congress enacted were very tough and very strong against just the risk you just said because they force banks to look much, much more capital against risk and the large banks hold much for that small banks. that's a very important thing. they limit how large banks can get as a whole. that's a very important day minister colleagues said earlier, they deprived the institutions of government from the ability to come in and rescue a bank from its failures. all we can do is try to protect the economy from the failures banks will inevitably make and they will make mistakes. our job is not to prevent them. they can try to do that. our job is to make sure when they make sticks it out in peril the american economy and safety

of people saving to make it harder for businesses to borrow. this law was the toughest, most far reaching, most comprehensive set of protections against the same concern than the u.s. has ever or contemplated. should we keep looking at what more we can do to make the system safer? absolutely. you should always go back and examine those judgments in this case, but it's a very tough set of against the rescue said that we should give those reforms a chance to take affect in to work. >> mr. secretary, i appreciate your comments. i think for too long though, we continue to -- i mean, i was one of the few republicans to vote for dodd-frank. it was a decision that i needed was more good than bad in that legislation and if it is properly implemented that maybe would do what was necessary to bring some honesty and integrity

to the markets, so therefore i hope that most of my colleagues look at dodd-frank a chance. maybe certain aspects need reviewed and that's true in any complex legislation. but i continue to say that i would hope that we would take a serious look. i joined ms. captor and h.r. 4089 to reinstate glass-steagall. i think that and i'm not trying to interpret your words, but it seems like to me that it would be in a benefit to at least have a hearing from experts, you being one, about the possibility of reinstating aspects of glass-steagall for certain types of banks. the wit that, mr. chairman, i think the secretary for his answers to my questions very much. i yield back. >> the chair recognizes the gentleman from illinois, mr. gutierrez for five minutes.

>> thank you very much. worst of all, i would like to go back to how did you find out about the manipulation of our clays and the train for manipulation? >> well, as i said earlier, there was a lot of concern in the market and talk in markets, much of which is ultimately published in major newspapers of record about not just the potential that banks could misrepresent what they were paid to borrow, but they were actually doing that. so we first learned about those concerns -- in the early parts of spring of to thousand nato reacted very quickly, congressman. >> and you learned about it through published news media reports? >> now, as you one of the things the new york fed does is spend a lot of time talking to people the financial markets about what's going on. since a basis on those reporters

it's not just was in the public, but in the price. >> so what you did -- what did you do as a consequence of that publicly or privately in order to respond to what you were seeing were manipulations in the transfer rate? >> we took a look at the basis for those concerns and then we briefed the relevant numbers of the american financial oversight bodies coming in the treasury, state, fcc, cftc and others. and then we brought it to the attention of the gradation wrote them a detailed memorandum with very specific detailed recommendations for how to fix it. and they responded affirmatively to those recommendations, said they shared the concern of the supported recommend nations and would pursue them.

>> to the best of your knowledge committee investigation led to the $453 million bind against barclays and the recommendation begins where? >> well, that is a question you should refer to the cftc, but i believe they said publicly that their investigation began in roughly the same time. in april 2008. >> so, if we look at the investigation, it begins at the moment in which you are made aware as head of the new york reserve and carry out your responsibilities. and then you inform the secretary of treasury, each of you currently hold of the situation. what was the response of the other major stakeholders in our market, and the protection and the oversight of our market to your comments about this? >> well, i believe they share concerns. and the british to share concerns hear the concerns we share to those the public domain

at that time were sufficient aces for the cftc to initiate the far-reaching investigation. >> i want to ask about the inner report, which i'm sure you're dying to get to. so identify risk of financial stability from our market discipline by responding to emerging threats at the u.s. financial system. tell us how you do it, how you're doing. those are your three major goals. how are you doing? >> well, i'd say it's a little early still. i'll tell you what i think the main challenges. we have a complicated system of financial oversight that involves different agencies. they are writing a set of rules that are very complicated by jeff mission has problems are complicated and we have a huge interest of the country and making sure they do that stuff

carefully with necessary speed, they do so in a way where they are not creating new opportunities come in new tabs in the system an incentive to move red square regulations are softer and that is the challenge. congress did not give the council of the authority to override the independent jurisdiction authority of those agencies. >> can you give us examples of measures to keep supertype? >> wrong question. >> i think you have to step back and look at the scale of change is that it didn't put in place in our system, not just by the measures we took in the financial emergency, but in the reforms. again, just a few examples of that. $400 billion more, we moved much more aggressively to any other country and any other time that i'm aware of to force these banks to hold much of our capital against the risk they were taking.

>> that's in direct response to the concept tikhon. into the authority of the law and what we did in the crisis. the derivatives complicated challenges and derivatives, these agencies have made major, major progress in a note reforms that bring more transparency to those market and give them new tools to combat the abuse. consumer financial protection bureau apart from you heard in public and new efforts to bring supervision to nonbank entities and consumer finance that they are good, too. they've taken very important steps to make mortgages and credit card forms easier to understand so individuals can compete for better terms and are much more aware of the risks of borrowing. those are the best examples. the fdic has put in place a very innovative framework with a huge amount of global support to implement this important objective of the law to make

sure that when firms make big mistakes, we put them out of her misery with no cost to the taxpayer with as little damage to the rest of the system. they deserve a huge amount of credit for a innovative framework using authority congress gave them. those things and derivatives oversight, consumer protection, which you call -- some people call bankruptcy for large banks, those things are very consequential, important reforms. we have a lot of work to do. housing finance system, a lot of work to do in that context. >> the gentleman's time is expired. the gentleman from illinois. >> thank you, mr. chairman and thank you mr. secretary for being here. which regulator dropped the ball with regard to aig? which regulator was in charge of regulating a hd fp, which is the

aig division that engaged in the nonexistent risk management at this credit default swap straight in and led to its near collapse? to insurance regulators in charge of that or was it the federal regulator ogs? >> i do not believe there was any competent authority responsible to that very global system. you are right to say that ots did have some broader system, but i do not believe their authority extended to the type of comprehensive oversight that obviously would have been -- was necessary. >> who was regulating aig right now? earlier this morning, the tired special inspector general entered a damning report about aig over say. t.a.r.p. found for more than two years aig has said no

consolidated banking regulator of its noninsurance financial business and the occ is now responsible for her the federal savings bank, but that is a tiny piece of the aag operation according to saint t.a.r.p., but not the rest of the country. the federal reserve did not regulate aig before the bailout and has not regulated it since. but the fed could take over if sigtarp -- or if sigtarp -- i take that back, the treasury -- until the treasury holds less than 50% of the -- of aig, then repeat the fed to take that

over. the meanwhile, aig is engaged in security when ian and invest in another things, mortgage-backed securities. this credit spot exceeds $160 billion. so the proponents of dodd-frank said the law was about ending too big to fail in regulating the financial industry that has become too big. the head after dodd-frank, there is no break you later. how is this possible? >> what they stayed and was very important, but this gave the united states the authority to designate a non-bank financial institution that could cause broader damage to the system like aig to tears the council of the authority to designate those firms and give the fed the ability provide that rod comprehensive oversight you referred to. and with that authority, the

council and its agents these are not carefully examining what should the firms up there to present that potential risk need to be brought within these broader, server constraints on capital letter h. the council in the process of doing not designated to be explicit of financial market utilities for the same reason and it's looking carefully at not just aig. >> you really haven't done anything about -- there's some oversight. he was in charge of regulating aig right now? >> what the congress doesn't give the council can ultimately decide to designate that authority and were moving to put that in place. >> does that mean there is no regulator now. >> that's true. that's why it's not frankly as for the authority to designate and make sure we use the authority because as you know, many of your colleagues referred to this when you think about how to apply these rules to

insurance companies, other types of institutions, you want to think about it carefully. aig is the dramatically different institution than in 2007. >> in addition, sigtarp said there's no way to wean off of sigtarp. creature plants admit the plane to sigtarp into congress click >> i'm happy to brief you, but we have our remaining financial taxpayers in the form of equity and no. we have sold a large chunk of that. we plan to sell as much as we can as soon as we can because they want nothing more than recovering taxpayers money. just remind the committee then this is a remarkable thing. on current estimates, the taxpayer will and a substantial positive return on the full scope of tens of billions of dollars to protect the economy.

>> the gentlelady's time has expired. you could just get back and writing on a questions, that would be great. >> i would be happy to respond and layout the bride you of how we get out of our. >> the chair from new york, this sunday from new york. >> thank you, mr. chairman. and thank you restrict aigner for your service. some stakeholders have the transfer and manipulation in which the largest bunch of the gesture meant of regional community banks. as you know, community banks are significant sources small business lending and we had to with this issue since 2008. the lack of access to capital for small businesses and as a result, we pass a small business funding bill. some have estimated that u.s. community banks have sustained

$440 million in damages for that year alone. my question to you is, how does an artificially low libor rate hurt small banks that operate on profit relying more on interest income that large banks? >> that is an issue that a lot of people are taking a very careful look at and it didn't under a litigation by a bunch of agencies that should take a look at it. i think a lot of take a little time for them to give you the basic question, that they be happy to do that. >> welcome to attend trillion dollars a month or in tax to libor, affect gene many financial products including herbage is an small business loans. what impact will the transfer have a knack sister credit for

all business is quite >> and on the go have any material impact on access to credit for small businesses. >> mr. secretary, how do we restore public confidence in the financial side or? >> we do it by making sure we put in place typos and give people resources and authority necessary to enforce rules and words of agencies find evidence of bad behavior should be punished for it. i should just say the obvious of the united states and those situations that dominated obviously have a long way to go in ensuring the trust and confidence of the american people and their ability to protect consumers and manage the risk they face. >> okay. thank you, mr. chairman. >> the chair recognizes mr. miller for five minutes. >> thank you.

good to have you with us again. fsoc conducted a comprehensive study on the asset management and 82 which we sent you a letter in a june and i would like to have some of the questions that puts you in the letter. what processes to receive formal input from the asset industry and other groups and when you anticipate they will conclude the study quite >> i don't know where they are. i know they're making progress on it and it is an important thing to do in part because council is to figure out what to do with designation authority for institutions if anything. and what they are doing right now is to take it anastacia other public information available about the risks in structure and what it means for the system and they'll take advantage relatively quickly of the new disclosure requirements, reporting requirements of the law passed in that context. but they aren't making progress and i welcome your attention to them we would be happy to --

>> maybe you can respond in letter because we have time today. section 175 of dodd-frank regarding global regulations but international coordination would increase costs, confusion and legacy. even worse they contradict the purpose of systemic risk. what are you doing to ensure the global sci-fi oversight is coordinated with regulators is not become worse contradictory to the foreign regulations and what impact does that have on this economy? >> review which her colleague is referring to is the requiring that we've negotiated globally to put on the largest firm, higher cap will requirements of their forest to hold more than sensible and fair given the risk of both the system. they negotiate uniform rules. that's not enough.

you want to make sure their forest on a common basis and that's a challenging process to have a level playing field. to what the fed is doing is trying to work out with other supervisors and central bank, ways to make sure that the rules are enforced in a consistent way. >> are you applying to regulators also? of course everyone wants to be a level playing field. >> and if we don't, and such are mental to our economy. >> in this area and many others if you raise standards in the united states and they been done lower and weaker outside the united states and the risk shipped to this market and ultimately was against you. >> recent rulemakers by the sad include the proposed capital standards, implementing the collins amendment and that they criticize there is are unworkable. one actions you think the feds need to take to ensure they treat insurers as insurers, not

tanks. that's a tremendous concern from the insurance industry today to get into an area that they were never authorized to get into. yet it looks like the language is coming out and should not. >> power this concern. what the federal reserve has sent in response as they recognize that if they were in a position where they had to apply these proud standards on capital and leverage to a financial institution that includes an insurance company, they have to make challengers to recognize specific differences in the insurance business from 19 and that makes sense. they understand that and are taking a careful look at how they would need to be attacked davis in the end is your colleague just referred, the council decides to designate aig as one example. >> well, i guess the question if i could be direct will probably

relieve concerned by the industry is. you agree capital standards need to be appropriately recognized a difference between banks and insurance companies at sydney beach to define but it don't splash over and to want companies either. i've been reading with more of our bankers and insurance companies, but the fact is concerned to splash over that they are seeing out there is going to have a hugely different impact on organizations in their prepared for it. >> i agree they have to be adapted and modified. not just in the capital area two. i am actually much more confident of that they're going to be able to, if faced with that meet, the phobia will to do it in a way to mitigate concerns. >> you need to be mitigated. >> absolutely. i think they can be. >> i understand your statement and i agree with that, but i'd like to see it implemented. i yield back. >> pajama manuals back.

mr. watt or five minutes. >> mr. secretary, you've got a lot of questions about libor and i think that's important because it obviously affects rates at which individuals are able to get love. so i don't want to minimize the importance of that, but i don't want to dwell on not. i want to deal with two other things that are significantly important in my community, one of which is you referenced on page four of her testimony, where he said the council recommends a set of reforms to address structural for her abilities, particularly in whole cell short-term funding markets such as money market funds. a lot of my constituents have funds in nested in money market fund. so i am wondering if you would just send or tell me where i can access what is recommended

preform sire so we can take a closer look at them. i won't dwell on bad either, but that's important also. but i do want to dwell on at automobile dealerships because the special inspector general for the troubled asset relief program came out with a report. i understand you all are disputing, but solutions that they've reached, but the facts are hard to dispute and those facts suggest that by june 10, 2009, general motors had terminated 789 dealerships -- i'm sorry, chrysler had terminated 789 dealerships and general motors had one talent

1454 dealerships. that is a significant impact in all of our congressional districts. i want to approach it from the minority is because the statistics indicate that the number of ethnic minority detailers was disproportionate in the number that were terminated and african-american and african-american and african-american dealerships were hardest hit with 55% from 523 dealerships on the 261. a number of those during my congressional district when i was practicing law 20 years ago i had five african-american owned dealerships in my congressional district that i

represented. they don't exist anymore. so my question to you is what leverage if any do we still have with these automobile companies to leverage them into being more aggressive in rebuilding those minority owned or leased in the new dealerships being a good, giving some preferences they had done historically to minority dealerships. >> i'd be happy to think about that? combat to you on it. i understand your concern with it. i would say we have been and the president has been clear that even though as part of our effort to save this industry and the craze says, we ended up owning and sale of a significant

amount of common equity. we have been very careful not to get in the business of running those institutions. the mag i understand that. and you know, i am not criticizing. i think it was wonderful wonderfully built up the item of beale industry paper would not have a domestic industry if we've not done that in my opinion. so i am not questioning that. the inspector general says the government had quite a rural in pushing the termination of these things. i guess what i'm asking words you to give some overdue to how we can now go back and how to restore. we can talk more offline. i think i have 10 seconds left in this five-minute interval here. so we can talk more.

i just want your commitment to brainstorm with us about how we might be able to address this problem. >> you have my commitment. >> i yield back. >> the chair recognizes mr. kerry for five minutes. >> thank you, mr. chairman. and mr. secretary. mr. secretary, versed on the trend for situation, you really can't have your cake inada two. you've been before this committee counts times before to test it and that this is the crime of the century so many are reporting, never once did you ever come and mention it as a problem. never once did you come and say this is such are going to do about it. never once did she say this is the regulation you propose congress to take. you work with the administration with the ranking member trying to pass a 2300 page dodd-frank into legislation. never once did you ever say this is a huge problem for medium-sized problem and they should be included. he never did that during the last four years in outcomes that this is a crime of the century continues to be be done about

it. the chairman raise the issue and why did you come in knowing these problems falsifications go outworking but the fed to set up to allow programs to the aig situation or use libor in marriage work the benchmark. msn switzerland there is you know, we're just like -- what did you say exactly? we did what investors it elsewhere. borges like investors around the world. mr. secretary, you're not like investors around the world. what the secretary of treasury of the united states of america. you had the authority for four years to come to us, lay out the problem and solution for four years you didn't do anything about it. the banks may admit problems and i'm not defending for one minute, but were looking for the secretary of treasury to not come in after the fact that he would every of the regulator has come in and point the finger at someone else.

your comments also said when people do wrong things they should be punished. if the private bank attempting to commit the been punished in the situation hundreds of millions of dollars. someone lost their job because of this. when is something going to happen with the regulators who did something wrong here? what if they didn't catch this ever do anything about it, change regulations, will they be fined? a regulator on the top down is their job, mr. secretary? >> congressmen, in my judgment, the regulators did the necessary appropriate in this context and started the process very early. the next thing we did. again, what we did -- and again these concerns were in the public domain. i'm saying we did not take all responsibility for this. having the entities turned and believed they were problem, we took the initiative to brief the

broader regulatory community till they had the information come even that was in the press and push the british to resolve it. we did that very early and very quickly. >> the regulators implement any changes with regard to reporting of the information for division between trading and reporting information? to the banks take action to make sure the information when you set up new programs that you were guaranteed and assured now the problem had been solved? >> as i said in my other remarks, what is going to have to happen is the burger set in motion a set of reforms. and the cftc initiated at that time a very far-reaching confidential investigation that ultimately included the icc injustice. and as we've seen resulted in an enforcement action. >> the same justice department,

would be notified and indicated were not at the table so you got to fight them. >> i'm taken aback at the fact that there's so much finger-pointing by the regulators after the fact. now you're here by this hippie designation with regard to the banks. but every scene as a result? those with over $50 billion of assets have been tested a bit too big to fail. we seen a doubling down, why does that occur? thing of the designation too big to fail will find their sons are cheaper and consolidation in the street. why in the world would we extend this consolidation come of this problem to the nonfinancial sector? i will close on this. is it my way what ago. all drug legislation to prevent this. there's no reason to look at management firms, finance companies and designate them as too big to fail to spread the problem we have in the banking sector over the sector, allow them to get cheaper funding

because of this, allow them to swallow a better lesser entities. what would you want to do that? >> we have no intention of doing that. the law does not allow us to do that we would not want to do that for reasons he said. and i don't think -- i respect your concerns. don't think you are right to believe the designation itself will confer a financial advantage. that may explain why. the purpose of this authority is to make sure that institutions that could threaten the broader economy are required to a capital against risk and horror of capital against rust and other institutions in the market would force them to hold. i think if you listen carefully to the market -- >> i think you will find that hard to justify the view that the designation of something firms are welcome and come with an advantage. you spend a lot of time trying to prevent us from designated

firms because they're worried it will come with constrained that will be tough on non. but understand your concern, respect views and i'm sure we will in the future. >> the chair recognizes mr. sherman for five minutes. >> trying to understand. rajesh banks i do the british banking association. other regulators screwed up and didn't catch them. even though they got extraordinary outside help from an ocean away. and so, since the british -- some british bankers life in some screwed up, the solution is obvious. we've got to blame america. in particular we've got to find some american week of blue, preferably one of the opposite political party. i for one can not part of the blame america first crowd.

what happened in london has cause i know a lot of private contracts, adjustable mortgage rate et cetera to be out by perhaps half a dozen raids et cetera. that is not anyone consumer and in many cases the consumer benefited in some consumers that ordinary investors for her. today we have attorneys, american attorneys who have forms. they have mortgage form, contracts and they've all got plugged in their libor, one or another kind of libor. it's natural for them to want to have a dollar denominated sensitive mechanism in their contracts. but i think now most of them would prefer to have one that is not a result of a few private act varies acting privately.

they prefer to have a government released rate or maybe one that is tied to a public market, option market that is so broad it can't be manipulated. a few of my own party have suggested that any return to the practice of law, that therefore when i get -- go back to my old forms and they say libor, what alternative benchmarks are available? everyone else is taking a look at just that question and there's lots of potential alternatives to this. the challenge though it is not finding any rate that captures the government's cost of funds. ..

in your opening statement you said, as we move forward, we must take care not to undermine the housing market. which is showing signs of recovery but it's still weak in many areas. a few have suggested one of the great things we can do for the

federal treasury is to limit the home mortgage deduction and eliminate the property tax deduction. that would no doubt drive housing prices down, and i wonder whether a decline in housing prices would be bad for the economy, bad for the deficit, but particularly bad, given the fact that, today, we're not just a government, you happen to own a couple of large companies, fannie and freddie, and obviously if home price goes down, forkses go up, and the loss on each foreclosure goes up. so, obviously, home mortgage -- losing the home mortgage deduction would bring in some money, but what effect it would have on the federal government through its effect on the economy and fannie and freddie? >> i think you were right in describing the effect, and i think it's important to remind people that we have a very long way to go to repair the remaining damage in the housing mark, market, and our

overwhelming obligation is to do everything we can to give people a chance who can afford to, to stay in their homes, transition to other type of housing opportunities, take advantage of short sales, and then repair and heal the terrible damage still out there, that has to be overwhelming responsibility still, and we're going to continue to use all the authority we have, but also to encourage congress like we have in considering legislation to make it easier to refinance if you're underwater, do things like that, that would help the broader objective. need to be sensitive to those, and we want to make sure we're not making the long-term problems worse for the country and the taxpayer and we'll be attendant to that, too. >> thank you. >> thank you, mr. chairman, mr. secretary, good to have you back. mr. secretary, i want to go back to april of 2008, and i think that's when your -- when you

were president of the federal reserve bank in new york. you first addressed -- started addressing the issue of libor. were you aware in the fall of 2007 that some informal e-mails were coming into the new york fed saying something, something is up with libor? >> congressman, i do not believe that i was aware of those specific concerns before that period roughly in the spring of 2008, but in response to your request and others, my colleagues are going back at the full range of things available. we'll share that with you and make sure you have that. >> i was looking at your response back to the bank of england, about this disclosure, and basically i thought what you made in i think five or circumstance bullet points,

instructional recommendations how libor should be more reflecktive. here's my issue with that. if it was -- if they were having structural problems, i thought your e-mail was appropriate. what was being disclosed here was thought that this rate was being manipulated. mr. ziddy said the regulator has the obligation to make a criminal referral if he suspects a crime may have occurred, and how manipulating libor didn't rise to that level was puzzling to him and it's puzzling to me. >> i think you should think about dish thought about this in two different ways. one is you had a rate set in london overseen by the british bankers association, which, because of its design, could it not just be incentives to

underreport but the opportunity to do that. that was problem for a lot of different reasons. opportunity. it created for fraud and manipulation. not just underreporting. so it was very important that there be an effort to fix those problems in the rates, and of course our first instinct was to do go to the british, and they said, we agree with you, we're on it. now, we didn't know whether that was going to be sufficient or not. so we also did, i think, the appropriate thing. again, we did it at an early stage, even though these concerns were in the press, and we went and briefed the relevant authorities with enforcement authority and responsibility for fraud and manipulation. so that they would be -- have the ability to choose whether to act on those concerns -- and we thought the combination of the concerns in the public domain and the efforts we took directly with them provided more than

enough basis not just for action but to pursue the behavior that was obviously so consequential. >> well, talking to machine begins berg, and he said where they got their information to proceed was from knock the new york fed but basically from the wall street journal article that prompted them to open up enforcement action. but it wasn't just a british problem. i mean, you know well -- you have been involved in the financial markets for a very long time. you're very knowledgeable. you had to know that, midsting lie bork -- libor, some people were losers and a lot of financial transactions are tied to that and indexed off that, and the outcome of that transaction is based on that.

so. in their domestic u.s. banks that are a part of that. >> well, absolutely. i agree with you. this rate had implications for not just the united states but for financial markets around the world and currencies, and that's why we did what we did. we did not view this as something that was some small isolated problem with impact limited to london. and you're exactly right. what we did was try to push them to fix it, reform it, fix is a bad word in this context -- and to make sure the u.s. enforcement agencies and authorities were able to focus on -- >> let me interrupt you there just a minute. did you -- after the june memo, did you ever follow up and say, hey, what have you guys done since our last conversation? >> we did and my colleagues did, and the british bankers association, at three separate points after we acted in this context, announced some changes

to that process, but obviously we don't think they went far enough. >> gentlemen's -- gentleman's time has expired. >> mr. secretary, i want to go back to something i think mr. sherman was talking about, and i understand and agree that libor is very important. but what i plan -- twinning divide between wall street and main street, and you touched on it previously in answering mr. sherman's question, there's a lot to be done for those individuals who are underwater in mortgages and that whole area. and i believe we did the right thing when we did talk, but there's a lot of questions out in with reference to -- here's what main street says. you helped out others. what happens to in the? why can't i get a hand up, a lift up?

recently i saw in the new york times there was somewhere out of the box type proposals, one of which were governments have used the legal doctrine of imminent domain and people looked at it generally in real estate on property, but using imminent domain to purchase underwater mortgages at a fair market value, thenork with private investors to reissue new mortgages with smaller balances to homeowners and home owners would no longer be underwater and would be able to repair their credit lating so not likely to default, and new investors would be repaid, and the taxpayers won't be involved, won't be anything added to the budget. so my first question is, to me that's somewhat out of the box thinking. have you or the administration or treasury thought about that kind of proposal, and if you're not think about this particular one, what kind of out of box thoughts do you have to help

home owners? >> we are carefully looking at exactly that proposal. it raises a lot of complicated legal and policy questions, but we have to look at those carefully. i think it's important to recognize that there is a broad range of other tools available for states, probably because we have helped provide them money -- available to the gses themselves, fannie and freddie. we didn't -- existing authority to provide principle reduction to homeowners deeply underwater but can afford to make payments if their mortgage is modified. we have been very supportive of the programs and the programs we administer, and we have encouraged the other agencies to take advantage of those things. we'll carolfully look at those proposals and all their implications. >> clearly, you mentioned -- a

good program but too many people have not been able to take advantage of and it too many are still suffering, and part of the same piece, wall street/main street, is banks lending money, and there was another article that was in the wall street journal, i think it was by allen blender, where he was talking about an effort to get banks to lend money again and talked about the central banks in europe are cutting their interest they pay on excess reserves to zero; that the danish cut it to a negative zero. many banks have to pay the central bank to keep reserves with them and this was a powerful incentive to either lend or have the banks either lend money or put money into the markets. you work closely with the federal reserve. do you think a policy or something like that would be beneficial if it was implemented here and would it help our economy? >> i want to be very careful not

to comment on the authorities the fed has or how to use them in respect of the independence of the fed. here's my general view on this. economy is not growing fast enough. unemployment is very high. huge amount of damage left in the housing market. americans are still living with the cars of this crisis. the institutions with authorities should be doing everything they can to try to make economic growth stronger. that is an obligation we all share. congress, under the constitution, has the authority for the most powerful tools we have available to help economic growth. we'd like congress to use those tools now in this context. we will keep supporting anything practical, sensible, that would make credit more available, get people back to work, more credit, not just to buy a home or refinance a mortgage, but to make sure businesses can expand to meet growing demand for their

products. we have made a lot of progress doing that, lending to small businesses is growing, lending to the economy is growing, it's shrinking in europe but growing in the united states because of what we did, but we have a lot of work to do, and given the damage remaining from the crisis, the obligation we all share still would be to do as much as we can to make sure we're getting growth stronger. >> gentleman's time as spirit. -- expired. >> following up the line of questioning about the libor issue, it was about three months later that -- after you -- the libor issue came to note and you shared this information, you agreed to the aig credit line that was tied to libor. i just want to note that for the record. the taxpayers are on the hook for that $85 billion. so, mr. secretary, the

unresolved debt crisis, obviously a severe consequence for the global economy. do you agree? >> absolutely. >> that has an impact on the american economy, does it not? >> already has had a significant impact, and slowing growth growth here and around the world. >> a significant impact. >> yes. >> so you say concerning the spanish fiscal performance, concerns have persist, fueling down through the prudence of adhering to strict budget targets amid deepening recession. and as a result your area, finances ministers agreed re los angelesation of spain's fiscal targets and assistant to recappallize its troubled banking sector. marketed reacted adversely to this. seems to me that spain's proof positive that relaxings fiscal targets and spending more money

doesn't work. so, would spain be better off had they maintained and adhered to more austere fiscal targets? >> my own view is that the actions the spanish government is taking taking and the stratee europeans are supporting is moving in the right direction. let me explain. why you're right to remind is if you have unsustainable deficits it's going to hurt you economically. we agree with that. but when you're in recession as europe is, or if a period where growth is slow, wow want to be very careful that when you are putting in place reforms to address those long-term questions of sustainable, they aren't making the growth challenges worse. the balance is going to differ across countries. what is appropriate for spain now would be different than what is appropriate for italy and no comparison to what is appropriate for us. >> so, do you believe that the issues and the eurozone are

going to get worse before they get better? >> depends on their choices going forward. they're doing a set of important, necessary, tough things on the reform side to make the economies work better and more competitive, and to make sure the institutions of europe over time create better fiscal disciplines and better management or their financial systems which got very big and very risky and very levered. in the mere term they have to do more to make sure there's confidence in the markets and banking systems can, and the countries doing this right thing are base volume low rates. >> of note, though, there might be parallel, but u.s. public debt is a percentage of the gdp is greater than it was in spain when their ten-year spanish sovereign jacked up to 7% when this action took place. so, do you think that the market is already discounting sort of

the adverse consequences of the eurozone crisis on the world economy? >> no way to know that just can't tell. you know markets -- >> only can tell in looking back. >> then you can't really tell -- all you can tell is the market every day is making a new assessment about whether the european leaders are going to do enough to hold it together. they've mitted to do that. they said that's their intentions and plans. they. >> my question to you is what is their administration's plan that you're putting forward for eurozone debt crisis, and i know there have been numerous summits, you're frequently there you're spending a significant amount of time on a significant problem. are you not? >> i am. >> so, do you have any plans, like a large action by the world to take on this issue? what is the obama administration's plan? you said it's a significant

impact on the economy. what is the significant plan you're putting forward to take on and to actually show some leadership on this? >> as you know and as the european leaders said in public we have played an active role in encouraging them to move more aggressively and contain the damage of the crisis, and we have been careful to where we had the ability to help that context mitigate the pressure on that. we have done that. the fed swap lines are an example. we have been supportive of the imf coming in, on tough conditions for reform, provide something assistance and we'll do that. but fundmentally, this is the solution of this problem are going to have to come from the europeans. they have to finance it, have to agree on it. it's going to sit with their politics and economics. we can't want this more than them. what we can do is what we are doing, is try to put pressures -- pressure is the wrong word -- to put -- well, i'll use it -- to put as much

pressure as we can on them to move more quickly to address it because of the implications for us. >> gentleman's time hasser anded. chair wreck nices mr. capuano. >> mr. secretary, heard a lot of people now who obviously think some people think you didn't do enough in 2008. that's great. but it kind of strikes me that these are the very same people that thought you were doing too much probably most of the time. they don't like any regulation. they're currently undercutting and defunding the sec and the cftc ands who do regulation. they argue against every regulation on everything no matter what it is, particularly in the financial services industry. there was nothing from '08. do you think that's the best way to move forward? what would you say to the people that say, we're not happy perspective i with what you didn't do before and we don't like what you're doing now. >> i don't know what to say to them except to say, as you did, that we have had compelling, overwhelmingly compelling

evidence in the financial crisis of the damage you can do to the average american when you allow a system to outgrow any sensible set oprotective safeguards for consumers, and that's what happened to our country, and the responsibility of this body and of the executive branch is to make sure we put reforms in place to prevent that from happening and that's what we are working so very hard to do, and we're facing enormous opposition to doing that, and we are going to work against that because we're going to make sure these reforms are tough. it again you need not to just have good designed, tougher rules and more protections -- >> do you think the word hypocritical white be appropriate here? >> i would leave that toitois say, but as i said in my opening statement, we need the support of the committee congress to put these rules and police and make sure the agencies have the resources they need to enforce them. >> mr. secretary do you agree

with moodies reside comments they made in june of the year when they downgrated 15 financial institutions of page 14 -- a direct quote from the pagewe believe the fdic remains committed to achieving the goal set out in title 2 of dud frank, including ending bailouts of too big to fail institutions. do you agree. >> i try never to comment on those reports for obvious ropes. but what they point us, as your colleagues have done today, is to remind people that under these reforms, congress has limited very significantly the ability of the government of the united states to in the future come in and protect an institution from failure, and for that rope, if you look at the financial markets today, there is a -- there is much less confidence in markets, and this is a good thing fundamentally -- that congress and the administration in the future would come in and protect them from the mistakes and that's a

good thing and you're right to highlight it. >> some of the people who voted to repeal the act, are complaining some banks are getting bigger. i happen to agree with and it voted against the repeal and wish they voted against the repeal as well but they didn't. obviously the libor matter cannot be ignored today but i'm not interested in rehashing history because that will come out what was done. this isn't the place for it. nonetheless, since we passed dodd frank in just the last year or so we rev had the mf global issue, we have had capital one being -- having a significant fine, and how to barclay's agreed to a $450 million fun. all those numbers are big but $450 million to barclays is 1% of their annual revenue. so it's an interesting number but not going to change anything, and yet on page 9 of the executive summary of the report, you, i think, quite

properly point out, the vulnerability of the financial system can be grouped into three broad classes. one and two and the children class states, behavioral vulnerability, the incentive to take too much risk, and i understand you're working on that and we'll continue to do that obviously those are not in place yet, otherwise these instances wouldn't have happened. too took much risk, a different type of risk, the risk of manipulating a market but i ask a simple question, and i know this is not your place. i know that as the secretary of the tressy, but -- treasury. but do to you county it would be important for f -- due think the markets would be well served if individuals were held liability for criminal activity if there is criminal activity sneer certainly barclays has indicated there might be criminal activity in this libor situation.

many of us think so. if people are doing something wrong, at some point, some individual has to be held responsible. at least that's my opinion, and i guess i'd like to hear your opinion on the matter. >> i want to be careful not to respond directly to the question you raised about these enforcement actions. i will say the following. it is very important to this country that we have in place a very tough enforcement regime so that people who violate the law are held accountable for their actions so that they are not just held accountable, but we're deterring others from engaging in that behavior, and we have a huge interest of restoring an enforcement regulation and part of that is rules against manipulation and abuse and a big part to make sure there's adequate resource available to enforcement agencies. if we starve them of esources that i cannot do an adequate job

of protecting investors and consumers so we're going to keep working hard to meet that test. >> thank you, mr. secretary. >> gentleman's time has expired. which i recognizes mr. pierce for five minutes, gentleman from. >> thank you, mr. secretary for being here. as you respond to mr. maloney on the questions of separation of the investment banks from the community bankers would like to be included in that written response. i have to say that you have -- i'm impressed with your resume. dartmouth, john hopkins, department of the -- treasury. chairman of new york fed, not withstanding other gentlemen trying too make you a choir boy and these terrible bush appointees trying to overwhelm you. you have a strong resume and you

have accomplished a lot. you recognize there are critics that said you didn't have enough experience when you went with the new york fed. critics who -- y'all said that -- i think the estimation was he marked with the bush administration to minimum nice the effects in 2008 and there are people who strongly questioned whether or not the actions actually did that or they didn't, and so we can accept the fact that there are discussions -- i don't know fancy policy. i'm just a congressman from. we don't have big banking institutions. i'm not going to sit here and ask you some question that's going reorient your thinking about the country but i have an obligation to those people who elected me to represent them. now, we have got the whole idea of the administration came in with, was a definite change for the country, and it was pitched that this is the hope for the

future. we have sustained 8% unemployment. we have financial difficulties that are erupting everywhere. you have pensions systems that are going to follow trillions of dollars short that's going to make the debt in europe look small. and looks like you're not going to stay. if you don't believe the the pathway you have laid out, -- i'm just going by what or friends on the other side of the aisle said -- probably the last time -- i don't know. i don't have a report so i'm not on the inside of the room. if you go, 0 are even if you stay -- who that shoo the people of new mexico -- i doubt we have any 1%ers in -- why should they believe and trust you or the policies you set in place? >> well, let me just say a few things. i believe very strongly that this country, this economy, is in a much stronger place than it was when the president took

office. i think by every measure we are in a dramatically stronger place and much better position to deal with the many challenges still ahead of us, and we face many challenges still, not just on our fiscal deficits and remaining problems people face getting a job or keeping a home. i also believe the policies we've laid out and put before the congress are the best way to make the condition true stronger. not -- make sure we're protecting the safety net for americans and making the economy more pom tettive. so i'm strongly committed to those things. you're right, i'm in -- like you i'm in public office. i have the privilege in that context of making lots of decisions. those decisions are going to be controversial decisions. i've taken a lot of criticism for judgments made by both sides. but all i can do and what is my responsibility is to do what i think is in the public interest, and to help the president deal

with the problems facing the country. those judgments are going to be viewed by everybody and looked at appropriately, and i fully respect the process of oversight you guys take. you should do that process. but all i can do is make sure i'm doing things i think are in the public interest. >> i appreciate that. on page 4 you talk about the fsk report caulks be the budgetary trends are unsustainable. you talk about the fact that governments are being cut and government spending is being cut is causing a weakness in the economy. so when the report talks about the budget trend are unsustainable, is that talking about the debt and the deficit or talking about the cutting and spending occurring in your opinion? >> well, it is true that the government spending is falling across the american economy, and that is making growth weaker it's also true that long-term

deficit are unsustainable and it would be good --eye why are they unsustainable? that's the problem with those? >> the deficits are too high and if left unaddressed then our debt will grow to be too large -- >> let me finish up here. just got a second. i notice that you spent a lot of time and raid strong words talking about the debt discussion, that the debt ceiling discussion but no time talking about debt and that's a huge indication of where you are, if you can give that to news writing, that would be great gentlemen's tire expires. >> chair represents mr. lynch for five minutes. >> mr. secretary, i want to thank you as well for helping the committee with its work. there's been a document that has been revved to a number of times. let me first ask you, this is regarding your response back in 2008 when, i believe it was in april of 2008, there were a

series of articles that came up in the british press, also times, about the possible manipulation of libor by some of the british banks, and then you had an opportunity -- you responded, if i understand your earlier testimony, you informed the president's working group on financial reform, and just to be clear on that, back then it was secretary paulsen, it was benazir ben bernanke, chris cox at the sec, and who was it -- the fourth mesh done cftc. >> other agencies, took but the heads of all the agencies. >> okay in addition -- so after you informed them, you also -- i have a document that has been mentioned a few times, a memo, it's dated 6-1-2008, 5:00 p.m., and the conch page says it was delivered the previous tuesday.

it's addressed to mervyn king. was he the governor of the bank of england at that time? >> yes. >> and then it's from you. so, can i have somebody -- i just want to dish want to put a fine point on this because you have talk about your response but in subsequent questions it seems to be ignored. i want to make sure this goes into the record and that we have a clear understanding of what you actually did when you were at the federal reserve bank. it has here a -- it says, recommendations for enhancing the credibility of libor. frbny statistics group. do you recall what the recommendations that you made -- this is unfair. i have the document and you don't -- >> that would help. >> thank you.

>> i think to save time, maybe you can look at the document and say exactly what it is rather than me asking you these questions one at a time. >> this is a recommendation reads as follows: strengthen governance and establish a credible robert procedure. increase the size and broad 'the composition of the u.s. dollar panel. add a second u.s. dollar libor fixing for the u.s. markets. specify transaction size. only report the libor securities for which there's a net benefit. eliminate incentives to misreport, and each subheading we gave a series of suggestions how to do that and again, what that goes to explain is, in pretty significant detail, the range of potential vulnerabilities in the way this thing was being run. >> exactly. mr. chairman, i've asked

unanimous consent that this memo from secretary -- actually back then, the head of the federal reserve bank of new york, 0 to the governor of the bank of england, be accepted into the record. >> without 0, so ordered. i. >> thank you. secretary, there's also an article that came out yesterday in the press -- and i can't lay my hands on it but it talked about the fact that a lot of the requests for manipulating libor came from traders who were asking to lower libor as opposed to coming from lenders asking to raise libor to enhance their loan portfolios, and in this particular article, i talked about the fact that for barclay's and other banks,

two-thirds of their depository assets were invested and used in their trading portfolio and only one-third of the depository assets were used to making loans. so there was a bigger upside if they could lorelei bore -- lower libor and enhance they're trading as opposed to raising the interest rate to enhance their loan performance. and this goes back to really what the volcker rule is trying to get at. i just want to know, do you think that fact, that banks -- this goes to mr. weills -- talked about the fact that maybe we got to go back and look at what banks are doing, and if we're going to have the

taxpayers supporting their conduct and the performance of their basic businesses -- >> gentleman's time has expired. >> is it better to separate the risk-taking versus the tradition allenning. >> good question. again in response to that general set of questions how to think about the volcker rule in this consequence, happy to respond more to the numbers questions. >> thank you, mr. secretary. i yield back. >> gentleman's time expired. chair recognizes the gentleman from pennsylvania, mr. fitzpatrick, for five minutes. >> thank you, mr. secretary, for your testimony and time today and for the report. i wanted to follow up on the questions mr. pearce was asking recording the growing national debt. in the report, page 8, entitled "potential emerging threats to united states financial stability" you write that

threats to financial stability, like threats to national security, are always present, even if they're not always easy to discern in advance. a couple of years ago, admiral michael mullen, at the time chairman of the joint chiefs of staff, said the greatest threat to our national security is our national debt. shocked a lot of people. do you agree that the growing national debt is a significant threat to our economic and financial security going forward? >> if left unaddressed. our long-term fiscal deficits would damage the american economy. >> i agree if left unaddressed that would be true. >> henry morganthal has been quote. he said -- the late 1930s -- we're spending more money than we have ever spent before and it

does not work. i want to see this country prosperous. i want to see people get a job. we have never made good on our promises. i say after eight years of this administration, we have just as much unemployment as when we started. and an enormous debt to boot. what is different between the late 1930s and and what is happening right now in light of secretary's comment? >> good question and good context and it's worth looking back. chairman greenspan and others said the crisis was caused by a storm much larger than what caused the great depression, but because of the things we did, we were able to get the economy growing again much more quickly. the economy is really much stronger than it was at that period in history you referred to, much stronger than it was when we came into office. and the fiscal challenges we face, you were right to say that

those deficits are unsustainable but these are very manageable challenges for our country at this time in history. much more manageable than were faced by any other country around the world, and the challenge is not just to recognize they're unsustainable and to work to bring them down to earth, but we have to decide how to do that because we have to balance the obvious concern, we need to have growth stronger and also we have to protect our national security interests and make sure we protect the basic safety net for retirees, and for low income americans. so we're going to have to make tough choices what do we do for education, for infrastructure forks are incentives for investment, and making growth stronger over the long run as we make sure we make those commitments to retirees and to low income americans more sustainable over time and that's the challenge. that's what separates us. it's not a recognition that

these are unstablable. what separates us is a debate about the best composition of spending, savings, and tax reforms to restore sustainability. >> normally what follows debate is a budget resolution, and would you agree in order to bring this back down to manageable levels, wouldn't passing a budget resolution in both houses of the congress put us on a path toward getting deficits are in control. >> i know where you're coming from the on question but i make the obvious point, congress has to act. it's not enough to propose thing. congress has to come together and negotiate a framework that brings things -- brings these reforms -- >> you're aware it's been over three years since the senate democrats pushed a budget resolution. passed one last year. hasn't stopped the federal government from spending ten trillion dollars since the senate passed a budget resolution, sect 1.12b2 of dodd

frank requires forms must be submitted what the steps are taken and neither the report or member has recommended that the senate democrats pass a budget resolution, any comment. >> that's true. but it would be strange for you do ask the sec and the cftc to tell congress how to restore fiscal sustainability. there's nothing standing in the way of congress taking more action. it's taken some action. take can more action to reduce deficit except you need both sides to come together and reach some agreement. >> yield back. >> chair recognizes the chairman from north carolina, mr. miller, for five minutes. >> thank you-mr. chairman. secretary geithner, you have said today and previously, that you and others at new york fed became aware in 2008 that there were concerns about libor, that libor was vulnerable to manipulation and it's

essentially an honor system. there will incentives in this report and there were rumors, reports in the public domain that was in fact happening, that the new york fed conducted an investigation, decided there was a basis for those concerns, and passed along the concerns to the fsa and boe, bank of england, and the members of the president's working group on financial reform. but among the documents released by the new york fed, it's a transcript from a telephone conversation on april 11, 2008, between an employee of the new york fed, fabiola and an unnamed bash clays trader in which the trader said they were reporting about 20 basis points lower than what it would really cost them to do it. when they posted an honest correct libor rate, there was an article that they were coming in higher than the other banks. there is implication the other

banks were also misreporting but said, yes, that when that happened there was an article in the financial timeshat raid questions about barclays, so the other banks knew something about barclays that was not known generally. barclay's stock win down so they decide not to report an accurate libor anymore. in fact he said, so we know that we're not posting an honest libor, and the reason they did it was not to have questions about barclay's financial conditions -- and this was a month after bear stearns and jp morgan chase bought bear stearns in a fire sale that the new york fed was involved in did you know of this conversation? >> i did not believe i was aware of that specific conversation -- made aware of that conversation but i didn't need to be made aware of that. >> why not? >> because the concerns about the structure of the rate and

the broad concernsacross the market were a suspicious basis to do -- >> mr. secretary, this conversation is not just about the vulnerability of libor to manipulation but in fact an admission that it was in fact being manipulated, that there were false reports being filed by someone who was involved in it. is there any -- i ask chairman bernanke last week, there is any element of criminal flaw that isn't admitted to in this transcript? >> there's a set of lawyers that will answer that question, and you can be confident they're going to do that. again, on the basic point, we had a sufficient basis on -- based on what the market was saying was happening and the way this thing is designed on which to take the action we took. >> i understand that. but did the employees of the new

york fed who are involved in surveillance, tell now yao this conversation, or perhaps others like it, that not just -- not just theoretically possible but participants in libor admit that they were in fact misreporting -- were you told it was not just a theoretical vulnerability but in fact it was happening? >> i believe that -- this is why we did what we did -- that this was not -- we were not concerned this was a just thereat rhett cal vulnerability. we were concerned about the range of different reports out there. we thought were credible that banks were actually misreporting, underreporting. so not on the basis of theoretical concern we did what we did. on the basis the reports were plausible and credibility and that's white we took the steps we did. >> the chairman, mr. bachus, asked you if you reported to justice. you said, no, justice was not part of the president's

oversight or working group. you did not report this conversation of anies other like it to the justice department? you did not? >> i want to be careful about this. but my colleagues at the new york fed are going back over the full records. i do not know what the new york fed staff did in terms of who else they informed this. i don't -- >> but you did not. >> did not. >> mr. secretary, you also said earlier that litigation was certainly possible, being contemplated. various lenders who had -- now have either filed suit or contemplating litigation against the libor banks for having gotten paid too little in interest. probably no bigger lender during that time than the united states government. are we considering filing litigation, pursuing claims to get back some of the interest that we did not get because libor was artificially low during that period? >> i do not know whether we were

disadvantaged by this practice. obviously we'll take a careful look at that. we also don't know what the net effect was of this behavior on those prices at this point. as many of your colleagues said, some people believe that people who borrowed money generally benefit. people who lent money generally did not benefit. it's not clear that's the case. but again, that's going to be the process, the subject of a very careful extensive review by a lot of people in this context and going to take some time for them to figure that out. >> host: gentleman's time expired in an effort to try to honor our commitment to make sure the secretary gets out on a hard stop, the chair is going to recognize the gentleman from michigan for three minutes. >> thank you. i appreciate that, mr. chairman. and mr. geithner as well for being here. i'd like you do expand a little bit and revisit, i was watching squawk box this morning when sandywhile made his comments, then saul the crawl -- view the

crawler about -- okay, did he say that? i don't know if you had a chance to see it or read it. certainly would like to then get your reaction both here but then more in depth as i'm sure you will be looking at. so, if you have any reaction or comment. >> i haven't seen those reports and i don't know exactly what he said, don't know what he meant. on the broader question about laying out to this committee the extent of the actions congress has authorized and taken to limit this risk, i'd be happy to walk you through that -- >> struck me that maybe he was getting at the too big to fail element in the question of whether some of the organizations are too big. do you -- >> that is a widespread and common subject of concern, and it's something that people are going to be looking at for other long period of time. i think it's important to recognize that we did force these banks to hold much, much

more capital against the risk they take. we forced a dramatic restructuring of the system. congress put in place limits on how large they can get and deprives the government of the ability to come in and rescue them for their mistakeness significant ways, and if you look at the net impact of those actions on how the market perceive the risk of too big to fail, that market's perception is dim minimum issued significantly. that's not the end over the story. >> i want to touch on the reserves here in the remaining time. talk about $400 billion increase in reserves and the fact the cost of credit has fallen. it strikes me, whether it's denmark, switzerland, countries out of the eurozone, the -- or the euro market -- the united states -- in a way it's sort of gull very among the lilly put ans. it's not that we're doing so

great but maybe they're doing so great. it's just maybe everybody else is such a mess and the flight to credit is coming here. but i had very prominent economist out of chicago, who actually put out an e-mail today to his clients -- i happen to be on the list -- regarding those reserves and he was saying that reduced access of reserves by the fed was 100 billion, and that means there's 100 billion less, and i've e-mailed him back looking to hear his answer, but does seem that his argument is basically that it runs counter to the goals, some of the reserve requirements that were requiring additional reserves, yet were lowering interest rates for quantities tatetive easing to try to stimulate more liquidity. is it true lay liquidity problem or other issues. >> i'd be happy to look at his

concerns. and be happy to try to respond. i think you're combining two different things. $400 billion more capital in the system than before the crisis which is a very important thing. >> is that because of the reserves? >> that's a different thing. some people use those words interchangeable. you're referring to a question about excess reserves in the banking system, holding them and what that does. i'd be happy to look at his concerns. >> i appreciate that maybe we'll put that down in writing and love to get that response. thank you. >> gentleman's tire has expired. secretary geithner, there's been a request from some colleagues to see if we can have an equal number of members on either side ask questions so we'd like you stay for an additional three minutes. >> okay. >> chair recognizes the

gentleman from texas,mer green. >> secretary geithner, i well be as concise as possible. you indicated that the economy is in much better shape now than when the president took office and i'm bringing this to your attention, because if we are not very careful, the fat toss well be perceived as facts and i think it's important for you to reiterate the condition that this economy was in when we took office, when the president took office, and juxtapose that to where we are now so we can move forward with a much better opportunity to improve the economy. so, i would like to yield time to you to please, sir, do not allow the factious to become fact. >> we have a long way to go. we have to be honest and open with that. but just for comparison.

the u.s. economy was shrink agent annual rates of 9% in the last quarter o 2008. we were on the verge of a what most people thought was a plausible chance the american system would collapse. you have seen trillions and dribbles of lost wealth in the savings of americans, and 6 months later, because of the, as we took, congress authorized the fed to fix the broken financial system, the economy was growing. remarkable turn around and the economy has been growing now for three years since. novelty fast enough, and the reason it's not faster is because of this combination of concerns you're all aware of, which europe is hurting us, spending is declining, not increase, by the government, and people have been bringing down their debt and trying to fix the problems that got news this mess. so we have along way to go but we're in a much stronger position. >> to be more specific, because we have incredible people saying incredible things, i'm sure you're very much aware -- of

these statements, we were about to lose the american auto industry. i think you agree. and do you agree that the auto industry is in a position now such that it is coming back? >> i do. >> at this time, the president came into office, the financial system was almost in collapse. do you agree that it has been stabilized and that it is now in much better shape than it was when the president took office? >> absolutely. >> at the time the president took office, do you agree that economic uncertainty, while people say there's much of it now -- and i conquer, there is some -- but economic uncertainty was to the extent that banks would not lend to each other. >> that is true. >> would no lend to each other. which is why you could not structure a deal with banks to save the auto industry, because the banks wouldn't lend to each other. they weren't about to go out and try too salvage an auto industry

when they were trying to salvage themselves, true? >> there's no private market solution to a financial crisis like we faced. >> for those who want to lay all of this at your feet, i've heard a new term called a black swan event. is that some semblance of that with this? >> absolutely, yes. >> thank you very much. >> gentleman's tyler expired. mr. secretary, want to thank you for your time and testimony. some members may have additional questions for you which they may wish to submit in writing. without objection, this hearing will remain open for an additional 30 days for members to submit questions to secretary guider in and for you to place responses into the record. this hearing now stands adjourned.

[inaudible conversations] >> a look at congress quickly. the debate over the 2001 and 2003 bush era tax cuts shifts from the senate of the house next week. ...

>> with all the major fiscal issues in the coming months, why did majority leader reid set aside time for my values and the bull debate time to take it security bill? >> i read a fair amount about that a wrote a magazine piece. he by all accounts has legitimately quite worried about the national security. if you type to any intelligence community outside of that, they'll tell you, this is the top worry they have. this is all significant motivation. so he's been working at this behind-the-scenes for a year and a half for us though, bringing together all these committee chairs and get the jurisdictional issues worked out and getting some kind of go in the draft and they're kind of that the end of the opportunity for them to do something this year and the senate, so this is when were doing it.

>> in your cq article company wrote about several rival factions. you are a day, and whether their interests? >> well, the main group that sponsors the bill on the floor are senator joe lieberman, senator rockefeller from west virginia, senator collins from maine and senator feinstein from california all our reader committee chairs on the case of senator collins, the top republican on the homeland security. they are the ones who have kind of got the white house endorsed the end, they have an interest in some kind of standards that on the most important element with the attack in the banking system, things that are attached to this computer networks. the second group is a number of top senate gop members. john mccain is the leader of that group.

those groups substantially agree on security of its own network. the third group is senator cryo, senator whitehouse who bridge a gap and want to come up with a voluntary standard to show up defenses in the computer networks. >> they would affect his misses. what is a view of the business community? >> it's unclear how many businesses that would affect right now. >> a sponsor of the rockefeller bill aussie would affect a small percentage of the people who own the most crucial of all of these networks. the business groups however, some of them are quite worried that he would be nothing in the

bill is saying what's in the system. so if there are worried about business to start off like it. there's other businesses do like a. this is a de facto regulatory scheme, even if the bill is voluntarily voluntary. those who do like if they would need to have something in place because some businesses attack the way the internet might grow and i'll put together would affect a lot of other people as well. >> lastly with the august recess, what is the timetable for having examined the senate? in the next seven days or so, we'll see how far they get. at this point, there is no final agreement on a version of the bill that created maybe have 60

votes. and from there they have to figure out what to do with the house. there is really the information sharing and that could be anything or difficult thing because the house chair is concerned about the regulatory schemes if anything. >> 10 starts with congressional record early. you can read his studio at cq.com. >> coming up on c-span 2 will take you to the international aids conference in washington d.c. for remarks from former president, bill clinton scheduled to speak at or 25:00 eastern.

>> so i may just begin to open up a discussion by asking this. what exactly is the major clash between? is this a clash of a policy? is this a problem of personalities? >> from lectures in history, trim and a macarthur jump up and professor elliott: to relieve a general at the height of the korean war saturday night at 8:00 eastern on sunday for more of the contenders come a series of key political figures from president and the change of political history. this week, illinois editor adlai

stevenson and his grandfather space president of grover cleveland. his great-grandfather, abraham lincoln as president and ran twice against eisenhower. the contenders at 7:30 eastern. american history tv this weekend on c-span 3. >> you know, it's the traditional common-law judges not to reply to suppressed criticism. we get clobbered all the time. i can't tell you how many wonderful letters i've written to the washington post, just for my own satisfaction. >> that's the tradition of the common-law judge. you don't respond to criticism. >> supreme court justice antonin scalia reflects on 25 years in the bench interpreting legal documents in his latest, reading law, sunday 8:00 on c-span's

q&a. >> like remarks this afternoon from former president bill clinton speaking at the international aids conference here in washington. until then, we'll hear from one of the world's leading aids researchers. he spoke earlier this week, where he outline steps for ending the global aids pandemic. we'll hear from phil wilson at the black aids institute. >> please welcome, professor francoise barre-sinousse, director of regulation of retroviral unit says the concerns institute and nobel laureate for her presence. [cheers and applause] >> thank you. ladies and gentlemen, dear colleagues and delicate, it is our privilege and honor to introduce the aids 2012

conference and what we can see after 25 years. [applause] only one person would give the very first top. the person with the real vision of science and was signed can do. it's the reason why i am really delighted to introduce this person. tony fauci. [applause] director of institute at the nida. in 1984.

he has overseen an extensive reserve to prevent teen, denoting and treating the immune disease. dr. fauci is the chief of the niv regulations, where he has played numerous recovery related to the hava in response of the most scientists in the fields. he is the author, co-author of more than 1200 certifications, including several textbooks. it includes a generous award for scientific accoutrements including the national medal of science. over for public service in

presidential medal of freedom. ladies and gentlemen, i am pleased to call tony. [applause] >> thank you very much françoise for that kind introduction. madam chairperson, i want to thank the organizers for the opportunity to kick out the scientific component of this international symposium and to take a stand that was developed last night with great enthusiasm and to discuss with you over my time allotment why we now have the scientific basis to be able to even consider the feasibility and the reality of an hiv/aids free generation.

i want to start first by a little background i love matt. i looked at deep blue of the ocean, refreshing green of the plane and the awesome mountains. but when we now look at maps, many of us in the room past couple decades have taken on a different complexion. the dreaded differential shaming indicating prevalence in different regions of the world was now 34 million people living with hiv/aids. if you look in the upper left-hand corner of the slide, you see the united states 1.1 billion living with hiv and focusing a little bit and you see washington d.c. i see a couple issues about washington. we'll welcome you here, but it was 25 years ago that the international aids conference was in washington.

i've had the privilege and the opportunity to participate in every one of the 19 conferences at the international aids society's. but i want to play a moment with you in washington when we talk about what we share globally. like i said, this is a google map of washington d.c. this is where you are sitting. again, the dreaded shading because in washington d.c., we have a prevalence than in many respects because some of the paths our nations. as michele said last night, it is the best of times and the worst of times. the worst of times is a prevalence. the hope for the best of times is as you heard from the maher last night, washington d.c. has been lamented an aggressive and innovative program to have a

major impact which can serve as an example and not get back to that in a moment. but let's get to the gist of what i want to develop with you over the next several minutes. we want to get to the end of 80s. that will only occur with some fundamental foundations and these foundations are the basic and clinical research that will give us the tools, which will ultimately lead to interventions and ultimately it is for me to be implemented, together with studies about how best to implement them. so let me briefly go through each of these with you. the basic and clinical research. we have had a stunning amount of advances in the arena of basic and medical science, which are delineated on the slide. i don't have time to go through each and every one of them with you, but there are some that stand out, some as breakthroughs

such as the initial identification of the virus and the colleagues in the past, the demonstrations with the ideological agent, and the intensive, incremental if that was a breakthrough, the incremental financing come each year learning more and more about the hiv virus is south, as well as the pathogenic mansions. ipo one site about 30 years of research. but we know now, a lot about this virus from the primary infection, establishment of lymphoid tissue, the networking, partial but never complete control, accelerated virus replication and in the absence of therapy destruction of the immune system. very important in that process of incremental science knowledges understand and the

early events in hiv, particularly at the surface where there's vulnerability that hosting vulnerability is the virus and understand and extraordinarily important insight into those transmissions and development. probably the most important of accumulation of scientific advantage is understanding the hiv replication cycle from the binding fusion, but the reverse translation integration by providing because each of that, year after year has given us targets of vulnerability on the part of the virus. it is that kind of basic science, which brings us to the next step. that is a step of intervention, predominantly in the arena of treatment and prevention. let's start with treatment.

a slide out of my archives a picture of me in fellows from the very early 1980s, when we were frustrated clinically, but beginning to make headway scientifically. i refer to these as the dark years of my medical career. the work had to us, myself and my colleagues not only here, but throughout the country even though was realizing that people were going through as eloquently stated in the castro in san francisco or by cream or a place in omaha are heart, distracting what is going on in greenwich village. but things began to happen to science class the intervention. if you look at the evolution of treatment strategy, the first strike in 1987, eight glimmer of

hope, could stand very little, doesn't stay down, resistance occurred. years go by, the virus goes down further, for a little bit longer, but not enough. then the transforming meet in vancouver in 1996 with free drug therapy brings down the virus below the levels and stays there potentially indefinite land we have a new dawn of therapeutic with hiv/aids that have transformed the lives of individuals. we have now up to 30 hhv anti-hiv approved drugs by ds pa, multiple classes used in combination that are completely transform. but we can't stop there because they're still does not responding to the drugs that we still need long that doing drugs, particularly with regards to adherence.

the results have been spectacular. i'll pick out a couple of examples. this is a study from holland. i told you back in the dark years of my experience, the survival of my patience is six to eight months. 60% to six to eight months. now if a person wants it to her clinic at the nih or any other place that has availability of treatment, you put them on combination therapy and you cannot them in the eye and tell them it is likely the idea to a regimen that they will live an additional 50 years. this is not only confined -- [applause] this is not just the developed world because we know now what countries, for example, cohort analysis at the same similar results with no life expect to see. that is the good manners. but then there's challenges.

this is a very scary slide because if you look in the united states at the 1.1 early in people infected, 20% to another infected. 62% are linked to care. 41% are retained. only 30% x% are antiviral. we must do better than that. we have the tools and a socket to a moment, we need to implement that. we can take examples from the developing world, but what we need to do is we need and are doing it, having a care continuum that is seeking out testing, linking to care, treating them eligible in making sure they appear and in fact getting back to the district of columbia, a study on going now with six cities, two of which are implement cities to south florence in washington d.c., where were starting to see that this can actually occur if you

put the effort in and i'm sure he'll hear more about that later from our colleagues. it doesn't only have been developed world and that's what people keep saying. is this going to be able to be done? take a look at what's going on in rwanda when you have a community-based program with two-year retention with 92% -- with 98% tested at two years has suppressed by rowboats. similar results and not on a period extending the intervention. what about prevention? combination hiv prevention. the method to this is prevention is not unique dimensional and we all know that. there is a combination of comprehensive. on the lower level of the building blocks are interventions that are not necessarily biologically driven. we are an lamented before we knew there was a virus what the virus was.

but as the years have back, science let us. some examples briefly prevented the mother to child transmission. a breakthrough study of those seven dates indicating by treating the mother you can actually decrease dramatically. now we treat mothers for their disease and secondarily together with the mother's health, the baby is born on the fact getting to be. in the united states, this has transformed what we see now on these bad virus, the estimated number. but in fact, remember when neher creosote last night. in the city, with high prevalence there has not been a child born with hiv infections since 2009 in a city with high prevalence. [applause] that's thegood news, 600,000 infections were averted by

prophylaxis. but we still have a challenge to at least 330,000 new infections in 2011 alone. what about male circumcision? this is a stunningly successful intervention. the trial in south africa, kenya and uganda shows advocacy than in the compliance of the trial, it were. the real question is, was at work in the field? and matter-of-fact, uniquely this is one of the few prevention interventions that actually gets better with time because the initial result was 60% if you go to the district and uganda five years out, the effectiveness in the community is 73%. good news and challenge him is of mixed results, the capricious study proved the concept, you can have a one man mandated intervention when you adhere to

it. this study and the press study has been soberly told us something. biological interventions work, but they don't work if you don't adhere, which tells us why we have to marry biological with behavioral. there's no doubt about that. [applause] we know that from the boys study which wishes to do fertility hopefully we'll get the answer from the fact study. getting back to the long act team worlds, the same thing has to do it the approach of no monthly use in two studies, were starting to see the aspire study in the ring study, which will hopefully bring us a greater degree of adherence to show that advocacy can equal effect that mess. pre-explosion prophylaxis again mixed results. the breakthrough study with the

recent approval by the fda, both for hard risk of men who have with men and heterosexual puts at risk. the sun city showa does the word. it doesn't work with some biological effects with concentration of drugs, but importantly, hammering home to last the concept that biological efficacy will not be effective without adherence. probably the most game changing advance over the last couple of years has been treatment is prevention but that now very famous child, which reduced by 96% the likelihood that someone will transmit to their uninfected partner a few treat early a great argument for getting people in treatment. now before i go on to the implementation, i just want to mention i'm telling you good

news about science in wasilla challenges. we're challenges in the arena of vaccination. we're challenges and the reason it your. what about the development of a vaccine clinics if we wait to plug-in a vaccine block, we would surely have a very robust combination prevention package, even if it wasn't a perfect vaccine, even if it wasn't 90% or 80%, we could do it. let's take a look where we've been with that. you are familiar with the rb 144 trial. it's a humbling trial because it showed a modest degree of efficacy. but when you mind down and try to figure out the potential part of it, we find out that it's not neutralizing, nonrelated response against a very region of the envelope, some pain that do. i would not predict it.

at the neutralizing antibody approach is also very important and in fact, naturally induced antibodies. as new as they are, as ineffective as the art and as late as they are about giving a scientific clues to identify neutralizing epitopes on the envelope will do two things. you can see parallel research going on. you are going to see structure based image in design for a vaccine at the same time the tradition passably virtualizing antibodies, either by transfer or by gene-based factor. we need to show an virtualizing antibodies actually do protect, otherwise the vaccine could be moot. what about a cure? françoise and her colleagues a couple days ago sponsored a symposium about perches to an hiv cure. two general types either ratification or purging what should very difficult or perhaps what they call a functional

cure, namely either enhancing hiv specific community or modifying the wholesales to be resistant. i want to make sure because they know people in this room understand, but others don't. this is not an implementable intervention. this is way upstream on the fundamental basic discovery bubbles so that you could put an end to the hiv pandemic, which is the epidemiological phenomenon without carrying anybody. you can cure a few people without putting an end to the hiv pandemic. this is a sign of a challenge. let's go on to implementation. we have been able to implement while he discussed over the last day or so, and the extraordinary effects of the programs of global funds, philanthropy such as the gates foundation, the clinton foundation, but importantly, recently the

assumption by host countries of their own responsibility in this has really been very important. so let's take a look at this. just a couple minutes of this. what happens when you take an efficacious clinical trial scientific observation and try to scale it up regionally or locally to see if it becomes a fact based. there were many examples. i'm just going to give you a few. what about the positive impact in botswana? take a look at the red dots, which is a percentage of mothers who are actually being treated? take a look at the diminishing blue bars as a percentage of children who are born with hiv. it works. what about the fact that if you treat people do you really save their lives? we now have 8 million people receiving antiretrovirals in the one middle-income families, which in fact 840,000

aids-related deaths have been averted in 2011 alone. asked the question. what about the positive impact of therapy on the hiv incident? you go to a place where you have 30% coverage and another section where there's 10% coverage. there's a 30% lower reverse of requiring hiv in those high coverage areas. treatment and prevention works in the field if you implement it. we know that scientifically. [applause] what about the impact of voluntary male circumcision. again, if you look at non-muslim populations who generally don't get circumcised and you increase circumcision up to 35% by 2011, you have a 42% decrease in acquisition of infection. what about comorbidities, a very

nefarious marriage between those two diseases. but look what art is doing for tv. it reduces incidents the best way to prevent tedious by treating the hiv. it decreases by 67%. that has a recurring rate it reduces mortality by 90 plus%. now you're going to hear a lot of models over the next few days, import models. models can be complex and using depending on what the assumptions are. you could models scale by pm cc, even stick a vaccine in there. rather than both through complexities of the model, i want to talk to you just for a minute about it. uncomplicated aspirational model. we know now that the incidence is going down from 2.7 to 2.5. so the slope is going down.

i don't have a date there because we can't talk about aids. but for sure, the decline is not deep enough. so if you talk about scaling up to things that kerry cruise being others have been talking about, this is what we hoped for, that we will see a major deflection of that curve. ..

>> early in november of 2011, a lot of people, a lot of countries, a lot of regions have a lot to do from country ownership, capacity building, health system strengthening, increased commitment by currents involving new partners, coordination, get rid of what does not work, concentrate on what does work, and remove the legal, political, and stigma barriers. only then -- [applause] only then will this occur. [applause] let's get back to the dreaded math. i mentioned in the beginning of the talk i have had the opportunity to present in every one of the 19 meetings. this is a map i led off this meeting for. what i hope for over the coming meetings of the international

aid society is to be able to start to show a map that goes like this and this and this until finally we can say that we are the generation that opened the door through scientific endeavors and implementation to an aids free generation. thank you. [applause] >> introducing our second speaker, please welcome ebony

johnson, ceo of prevention and member of the athena network. [applause] >> good morning. first, as a woman from the united states, i am so pleased to welcome you back and to thank and congratulate the exceptional bold leadership of president obama for of lifting the travel ban. [applause] but as a black woman residing in washington, d.c., we face the highest rates of hiv, and we're black women which are the center of as a -- as a rule necialt. it is a pleasure to welcome you back and for this to be a call of action. [applause] it's my pleasure to introduce

from the u.s. phil wilson. phil wilson is the president and ceo of the black aids institute. the black aids institute is the only national hiv/aids think tank in the united states focused exclusively on ending the aids pandemic in black communities by engauging, mobilizing black institutions and individuals to confront hiv, by interpreting public and private sector policy, conducting training, providing technical assistance, and december -- desimilar nateing information from a black perspective. wilson was the aids coordinator for the city of los angeles, as directer of policy and planning for project los angeles, as co-chair of the los angeles health commission, and as an appointee for the advisory

committee. wilson has been involved in a myriad of agencies from their inception across the united states. nigh include the national black leadership forum, national task force on aids, the aids health care foundation, the national minority aids council, the los angeles county gay men of color consortium, and mr. wilson also worked extensively across eastern and western europe, in africa, india, and mexico. in 2001, wilson was named as the leadership for change in the world recipient. in 2004, he received the medical honor. he's also been named as a 2000 black history makers in the making by black entertainment

television. he's a writer who published articles and newspaper writings. please welcome him to the stage. thank you. [cheers and applause] >> i am both honored and humbled to have been asked by the conference organizers to share my thoughts with you this morning. i'm also a little intimidated to have to follow dr. tony falsi, one of the greatest heros in the movement, and i'm more than a little nervous to stand between you and one of the highlights of the conference, secretary of state, hillary clinton. i'm thinking of something about a rock and a hard place right now. [laughter] on behalf of the 1 million americans living with hiv and the tens of thousands of

doctors, nurses, researchers, advocates, counselors, advocates, and volunteers who serve them and those who work every day to end the aids epidemic in this country, welcome back to our house. [applause] twenty-two years is a long time, and we missed you. welcome to the first international aids conference where we know we can end aids. 3 # 1 years after this disease was discovered right here in this country, we finally have the right combination of tools and knowledge to stop the epidemic. no, we don't have a cure or a vaccine yet, but david only had a slingshot, and he failed goliath. our tools are not perfect, but they are good enough to get the job done if, and this is a big if, if we use them first timely, --

efficiently, effectively, expeditiously, and come pass natalie. that's what i want to talk to you about this morning. i'm an openly gay man who has lived with hiv for 32 # years. [applause] theme may be prevention, but i've proved that treatment is treatment. [applause] when half of the people living with hiv in this country are black and over 60% are men who have sex with men, i understand why the organizers of this meeting invite someone like me to give this talk. you see, i'm a three-fer. i'm black. i'm gay, i'm hiv positive. according to aarp, i can check off the senior box as well.

[applause] it is not lost on me all the things that i am not. i am not a woman, a straight man, or a transgendered person. i'm not la tee know -- latino, white, or an imgrent. i don't speak spanish. i'm not an injected drug user, sex worker, homeless, or the victim of domestic violence. i don't live in the world south, and i've never been to anchorage or bismarck. i know this. i know we will not end of the aids epidemic in this country unless all of those voices with included. [applause] all of what i am and am not must be a part of the conversation. the united states spans nine

time zones. it has a population of over 3 # 00 million people speaking 311 languages, and 14 # million american households, english is not the primary language. you might think that the united states has it easy, and in some ways, we do. we have great universities that generate superb science. we have an entrepreneurial and can-do spirit, and we're wealthy, but even so, many of our residents live in debilitating poverty. we have unacceptable levels of homelessness, addiction, and mental health illness. we have large numbers of people with hiv who suffer from other diseases such as hepatitusb and c and are stigmatized. we not only have the largest epidemic in the world, but one of the most complicated

epidemics in the entire world. we face challenges that demand we rely op lessons learned in many other countries, lessons learned by you in this room, and challenges that offer opportunities for learning lessons that can be applied all over the globe. approximately 50,000 people get infected each year in the united states. that's a dramatic decrease from where we were in the mid-80s, but our convention efforts have been stalled for at least the last 15 years. demographically, it's 25% male and 25% female. it ranges from 14% to 69%. our pep deemic is 43% black, 34% white, 14% latino, 1% asian pacific islander, and less than 1% of hawaiian.

new hiv infections are rapidly rising in rural communities, especially the south. the u.s. epidemic is primarily a concentrated epidemic, but in certain populations, we have generalized epidemics. for example, with a background hiv prevalence of 3% and 835 new infections in 2010, the aids epidemic in washington, d.c. right here is a generalized one, and it is one that is worse than the aids epidemic in port prince, haiti. according to a new report released by the national black gay men's advocacy coalition, blacks are at an elevated risk for hiv upfection regardless of aids.

the odds that a block msm will be infected increases from 1 in 4 at age 25 to 59.3% chance by the time he reaches 40 years old. now, think about that for a minute. by the time a black gay man reached 40 years old, nearly 60% of him, six out of ten, will be hiv positive. the aids epidemic in america is a tale of two cities. that seems to be a theme this week. it is definitely the best of times and the worst of times. we have a system that can work very well for some of us, but for many of us, the system is terribly, terribly broken. the other day, i was talking to my friend, the president and ceo of the aids foundation of chicago, about his friend,

louise, a mexican immigrant who lived the last six years of his life in the united states. he worked as a dish washer in two restaurants, paid taxes, and obeyedhe law. he was privately jovial and loved to dress in drag. don't we all? [laughter] his health declined rapidly, and tragically in 1995 at the age of 25, he died from aids-related complications. his friends pulled together resources to bury him, but what follows next shocked everyone who knew him. his name was not luiz. that was an ailius name he obtained. he lived the most secretive life of all. his sister who traveled from mexico to collect his remains

learned only after his death that he was gay and had aids. that deception helped him obtain health care he otherwise couldn't afford, but it denied him a chance to live and die with dignity. lawrence stallworth is in the audience today. he was 17 years old when he found out he was hiv positive. it only took one mistake for the virus to become a personal reality for him. lawrence's father, once he found out that his son had hiv, reacted by going into the bathroom and closing the door. lawrence eventually got a job working in hiv. unfortunately, his job didn't offer health insurance and did not pay enough for lawrence to pay for his own treatment, so he was forced to choose between working or staying on medication. what kind of choice is that?

they are not isolated examples. this next model, first described by a doctor at the university of colorado, estimates how many people with hiv in the u.s. are engaged in the various steps and continuing care from diagnosis to viral depression. there's three things in the slide that strike me most. first, 80% of hiv positive people in the united states know their status. now, we can do better, but that's not too bad. second, once we get people on virals, around 71% get the so suppressant. gren, we can do better. the real problem is in the middle section here. we do a terrible job of moving people from testing to being on virals. between testing virals and going

on anti-retro virals, we lose 80% of people with hiv. remember, these are people for whom we have some kind of contact. bottom line, in the richest nation on the planet, barely a quarter of the people with hiv are on fully effective treatment. more than 70% are either not on treatment at all, or on other treatment. that's bad for them and it's bad for everyone else because when they are not on treatment, they are much, much more likely to spread the virus. we, you, and i, the people in this room, the people in the global village, people doing work back at home every day who couldn't afford to come to the conference have to change that. luckily, there's people in programs that are showing us how. right here in this city, the community education group, a small non-for-profit organization that serves

predominantly black neighborhoods officers hiv tests and a whole lot more. of the people who turn out to be positive, 95% -- 95% are linked, relinked, or confirmed to be receiving hiv care, treatment, or services. [applause] rather than giving individuals a paper referral, they provide clients an immediate personal escort, and if needed, financial up sentives to go to medical providers. there's new technology to conduct risk assessment and enroll community members in dc's free insurance program and/or medicaid. they also provide patient follow-ups such as text message reminders and indications of where they have medical appointments. something else happens here in washington, d.c.. there's a huge help for people

with hiv. it's called affordable care act. better known as obamacare. [applause] because of this law, no insurance company can deny you coverage because you have a pre-existing condition. jack up your rate or drop you because you get sick or because your care costs too much. for people with hiv and aids, these provisions are absolutely life life saving. leadership matters. two years ago, president obama released the first ever comprehensive hiv/aids strategy in the united states. according to the vision of the strategy, the united states will become a place where new hiv inspections are rare, and when they do occur, every person, regardless of age, gender, race,

ethnicity, sexual orientation, gender identity, or other circumstance, will have better access to high quality, life extending care, free from stigma and discrimination. [applause] together we can manifest that vision if we do the following things. first, we must fully implement the affordability care agent. [applause] this will deliver health coverage to more than 30 million people who are currently uninsured. single chillless adults who -- childless adults, typically not qualifying for medicaid, but under the affordable care act, everyone will have a means to pay for life saving treatment.

this most important piece of legislation over the last 40 years generated a lot of opposition and misinformation. aids advocates must be at the forefront of opposing any efforts to roll back reform on the affordability care act. [applause] we need to ensure that the mandatory benefits package under the legislation include an annual physical for everyone, an hiv test at every physical, including at least two annual hiv tests for high risk individuals, twice the year viral test for people living with hiv, and comprehensive coverage of arv, both for treatment and prevention. second, everyone living with hiv

must come out. we all must come out. living openly and proudly with hiv, not only confronts hiv stigma, but it also helps build demand for a central service. openly hiv positive people serve as living, compelling reminders of their importance of knowing one's hiv status, and that is that communicating that it's possible to live a full, healthy life with hiv and that's important. [applause] when you come out about your hiv status, you not only save your life, but you save other lives as well. my family is here in the room this morning. my brother, my dad, and my mom.

when i was 24, i gave my mother a book called "loving someone gay." she said to me, why did you give me this book? i don't love anyone gay. yes, you do, i said. you love me. i was right. i'm alive today because i have the love and support of family and friends.. [applause] but they could not support me if i denied them a chance to truly know me, not just some one dimensional avatar of me, but all of me. despite the quilt being optimal this week, which is really about our depth, the story of our lives, largely untold and unnoticed, we want our families to love us and to support us,

but they cannot love us if they don't know us, and they can't know us if we continue to hide from them. now, i'm not naive. i know it's too dangerous for us to come out right now, but if some of us can and we do, others can join us later. third, put as much emphasis on treatment as we do on insuring access. our health care system has long been a source of shame. the united states is the only industrialized country that does not guarantee health coverage for its citizens, but through medicaid and the ryan white care act, there's a row best system of care for -- robust system of care for those of us living with hiv, but one in four in the country are receiving the care they need and deserve. if we demand it, they will have

to build it. health services are not meaningful unless they are actually used. too many people are intimidated by the medical system, too many still believe that a positive hiv test is a death sentence, and too many people believe hiv treatment requires a fist full of pills every day with horrible side effects. we need a massive investment in community and education, hiv science treatment literacy, we need an army of navigators that link us to the care we need. fourth, link the behavior in the treatment efforts. some people in the aids field continue to resist the so-called medicalization of aids while others promote new biomedical tools as a panacea. neither is correct. the new viral medical strategies, the stream as prevention, preps, and the

others to be developed, are more powerful than anything we've ever had in our tool kit before. [applause] to work these, these tools have to connect with actual people. those who deliver them and those who use them. our biomedical innovations are not workable if people are frustrated by the complexity of the system, and they simply give up. if they don't understand the importance of the hearing of the prescribed reg min or if their providers are judgmental or display they don't understand what our lives are like, over the course of this epidemic, we've learned a lot about how to influence human behavior. we need to apply these lessons as we put our tools into practice. the crucial point here is that it is not an either/or, but a

both/and. it only works when education, counseling, behavioral change, adherence, and support are all there. the whole history of the epidemic has shown us that while education and social and behavior intervention are necessary, they are absolutely not sufficient. if they were, the epidemic would be over already. it's the addition of biomedical intervention that lead to the promise of ending aids. we must turn this tide together. finally, the fifth thing to do is that aids organizations need to retool themselves to rapidly resolve the landscape. community is central to the ability to end aids, but most of our community-based organizations have focused their expertise on behavioral

interventions only. few have meaningful scientific expertise and fewer, still, deliver health care services. with medical tools rapidly becoming a critical part of the aids response, and with the affordable care act poised to dramatically alter the terrain for health and social services, many aids organizations risk becoming wholly irrelevant. fortunately, some visionary organizations have already begun to retool. harlem united, for example, has actively worked to adopt to a dynamic environment readying itself for state medicaid reform and shift with the nation's health care system. it began as a small organization, but today, it is a federally qualified health center with 3,000 patients. harlem united connects the dots between medical care and social

services. a health educator is here this morning from vienna star, a unique peer based social service organization serving latinos in los angeles. they serve them by building an infrastructure that connects prevention and treatment and science with advocacy. harlem united are examples of what service aids organizations have to look like if we're going to end the aids epidemic. i have a recurring dream in which a boy asked a wise woman what did you do when millions of people were dying from aids? i always wake up before the wise old woman has a chance to answer. i'm afraid i wake up because i'm afraid of the answer. i'm afraid the answer will be not enough. i work for a tiny organization,

and for all i know, we may close the doors next week, but this week, this week with our suri black treatment advocates and black scientists, no, this week with our journalists, we are going to sweep every drop of information out of this meeting we can. [cheers and applause] my worst nightmare is that we will distort opportunity as this is what i know. the day will come when the epidemic will be over, and when it does, it's important for them to know that we were not all monsters, that we were not all cowards, that some of us, some of us dared to care in the face of it, some of us, some of us dared to fight because of it, and some of us, some of us dared to love in spite of it, because it is in the caring and in the fighting and the loving that we live forever. this is our time.

this is our deciding moment. together, we are greater than aids. [cheers and applause] >> the international aids conference held here in washington, d.c. this week. being held in the u.s. for the first time in 22 years, but as bloomberg news reports, president obama is not attending. he's campaigning and fundraising out of town. also, in the president's 20 # 13 budget, some funding would be cut for the emergency plan for aids relief, but we will be hearing shortly from former president, bill clinton, during his keynote address.

we'll join speeches now in progress, lorenda garcia speaking, and he's the founder of the be change group. >> peacefully and with mutual respect. [applause] so, as we plan what comes next, when we leave the doors of this conference, i hope the words of a man who was the epitome of someone who constantly stepped out of his conference zone will resinate in your mind. i paraphrase harvey milk by saying the only thing we have to look forward to is hope. we have to give people hope. hope for a better world, hope for a better tomorrow. my hope? is that the hiv that is running through my vains and in the vains of 33 million people around the world will soon be cured.

my hope is that that cure will be wrapped in compassion putting an end to the stigma and discrimination we see and get rid of it once and for all. thank you. [cheers and applause] >> please welcome the executive director of the international aids society. >> dear, friends -- [applause] before i get to introduce our next speaker, i would like to commend a group of people that have made the conference possible, and you've seen them running in the corridors and standing in front of session rooms and helping you with all of your needs. please help me in thanking all of the volunteers at this conference. [cheers and applause]

great job, thank you. so, our next speaker doesn't need an introduction, but as i heard from one saying earlier this week, he deserves one, and here it is. [laughter] right. so william clinton -- [cheers and applause] this will be a hard one if you go on like that. [laughter] the former president of the usa,

elected twice, first in 1992 and again in 1996. after leaving the white house, president clinton established the william j. clinton foundation with the mission to improve global health, promote health care, and protect the environment by fostering partnerships among government, businesses, non-governmental organizations, and private entities turning good intentions to measurable results. since 2005, the clinton global initiative brought together global leaders to device and implement resolutions to the most pressing issues. president clinton was named united nations special envoy in 2009 to assist the government and the people building back better after a series of hurricanes battered the country in 2008. today, the clinton found cation has staff and volunteers around

the world looking to improve lives through several initiatives, including the clinton health initiative which is helping people with hiv/aids access life saving drugs. as many of you know, president clinton is no newcomer to the conference. in fact, it's his fourth conference in a row, a relationship that began in 2006, and president clinton's commitment which to this conference is something we all admire and look up to so please, ladies and gentlemen, join me in welcoming president clip -- clinton. [cheers and applause] >> thank you very much, thank you. [cheers and applause] thank you. [applause]

thank you very much. i thank you for the introduction i'd like to thank the chair of aids 2013 and thank you for your leadership as president of the international aids society and the chair here, i wish you and your successor well. i thought you gave a heck of a speech, by the way. [cheers and applause] i want to talk a little bit about where we go from here. how do we implement the goals set for 2015? if we believe there's an aids-free generation, even if you define it in the narrowest terms, how can we achieve it?

when the aids conference first took place in america 22 years ago, a passionate group of activists, community leaders, and researchers shouting "silence equals death" made the world listen. we didn't have the first arv, a failed anniversary drug called azt, and it was treating a grand total of 5,000 people all in europe and in the united states. it was at prohibitively high costs. that's a long way from where we are today with 8 million people on treatment around the world and the ability to treat all the rest who need it. [cheers and applause] back then, aids was the death sentence, and those of us old enough to have been fully grown

then still have lots of painful memories of our friends who did not survive. we couldn't imagine an end to the epidemic, and now all of you created the possibility that we could have an aids free generation. as bill gates said, we still have a good ways to go, but we have come a long way. everything i say today comes from the per perspective of thek my fun dation has done in the last ten -- foundation has done in the last ten years. before it was funded, our job was to go around and raise money country-by-country, figure out how to cut costs, and to provide a working delivery system to save lives.

now things have been made here, and by people throughout the world, to achieve universal access, to eliminate mother-to-child transmission, and to cut new infections in half by 2015. we can do that, but it won't be easy. just last week on my annual trip to africa to see the programs, i visited moe sam beg and rwanda. i saw amazing progress and offering treatment to those in need, and i saw a willingness to completely eliminate mother-to-child transmission, and then i met with program managers who don't know where the money will come from and are not sure we have the systems to do that. to achieve universal access by 20 15, we have to increase the

number of people on treatment by 30% a year. for example, in 2005, there's only 10,000 people on treatment and low income countries. thanks to many of you in this room, and a special thanks to other units in the gap, the global effort to accelerate peed pediatric treatment means there's 25,000 kids on treatment today. [applause] to reach the goal, we need 1.5 million more. to eliminate mother-to-child transmission, we need to test and treat women earlier and keep them on the treatment longer throughout the entire period of breast-feeding. when many of them live miles and miles and miles from the place where they get their med sip -- medicine today, to cut new

investments in half, we have to heed the years of pleas to implement treatment as prevention and implement prevention programs. [applause] now we can save lives if this is done, but we have to do it together to do what works, spend the money we have with maximum impact, and raise what we'll still need. it's worth remembering, and i don't think enough has been made of this, that of the $16 million invested annually in this effort, first time in my memory, anyway, that more than half of it comes from the affected countries themselves. [applause] they deserve an enormous amount of credit for that. [applause]

one reasons this is achievable because we can do it for less money than previously thought. my foundation released results of a study done with five african governments across 160 treatment facilities. in ethiopia, rwanda, zambia, and south africa, i thank the leaders of the country and the personnel for taking the epidemic seriously and for the progress made in scaling out the program. the study was the largest of its kind and shows with the exception of south africa where labor and lab tests are higher, treatment costs just $200 per patient, per year including the costs of drugs, tests, personnel, and outpatient costs. there is no excuse for failing to provide treatment to the remaining 10 # million people in

need. [applause] even in south africa, there's real opportunities with the commitments the government already made. our foundation recently redid the drug ten dore for them, and this year and last year in just two years, they saved $700 million on what they were spending for drugs and immediately added 340,000 people to the treatment rolls. [applause] more savings are on the way. prices dropped 70% since 2008, 30% since last year and it's $125 now, and it's a good drug. the savings of that drug alone by 2015 will be $500 million.

we can use that money in this fight. [applause] now, i have to be fully candid because beating the goal of treatment by 2015 will require some activity, especially community programs. you need community outreach workers if you want mother-to-child transmission down to zero. you have to do it. we just can't do it without it. [applause] clearly, just what i've already said to convince you that we can meet the treatment goal. we should. we also know that smart investments trade money. united states center for disease control presented an economic model this week suggesting that implementing a test treatment strategy for pregnant women and people with tb and accelerating

the scale up for others not only save lives and avert new infections, but it lowers cost. just five years. where will we find the money? we all know that last december the global fund had to postpone the funding round because it was short on cash. the fund is now back in business because the gate's foundation in saudi arabia stepped up on the heels of president obama fulfilling america's three year commitment. secretary clinton recently announced here for money for the u.s. to meet the 20 # 15 goal, and i'm hopeful -- [applause] that other donors will do the same, especially big countries that are growing fast like china and brazil. don't forget as elton john's

presence here and bill gate's presence here, there's an enormous amount of private money raised, and there will be more from gates, elton john, the dutch lottery, mac aids, san, many others, and government, even in this difficult time, i believe will do more if we prove we maximize the amount of money they have given. united kingdom has followed strict austerity programs without cutting its development assistance. that's an astoppishing -- astonishing fact. our foundation works with them, with the irish, the nor wee januaries, the swedes, the government of australia, all of whom are giving and giving even in this difficult time. finally, we need to make

something good out of what is otherwise not particularly wholesome development, the growing inequality of income in wealthy countries. thank god a lot of wealthy peoplement to give more and would give it to this cause if they knew what an enormous impact their dollars can have. do not min mize the possibilities that we will have more private giving as we make more progress and demonstrate it. i also think that we can learn a great deal from creating a new revenue stream that saved huges of thousands of lives in my experience, from what it's done in putting chirp's arvs and second line arvs out there at more affordable prices. leveraging short term investments for long term gains. we need more innovative financing.

the am mewizations could offer a model for us. it raises money by issuing bonds in the capital markets, which are backed by long term commitments from donors so the donors can buy now and pay later. increasing aid flows over a five to seven year period and then paying them back over a 20-year period. as we know now, at low interest. applying this model to raise funds to implement accelerated treatment and combination prevention means that infections and costs will be lower when the time comes to pay the money back. if we all keep producing results, i believe the money will be there. [cheers and applause] i am committed to do whatever i can to see that. we do have to prove, over and over again, that we're making

the most of the money. we have managed to lower treatment costs at the facility levels from what was said in 2003 was about $11,000 -- $1,000 a person. beyond that, further cost reductions are coming. looking ahead, there's other things that i think we should do. first, we can target the money we're spending more effectively, especially in prevention. u.n. aids recently reported in two african countries where 30% of new infections were drip by high-risk population, less than 1% of the prevention dollars were spend to reach those people most in need of services. we can do better than that. [applause] last year, the investment frame

work provided guidance on how to prioritize national strategies to focus on the interventions with greatest impact. it's an excellent tool that i'd like to see more countries adopt. secondly, and this may be somewhat controversial, but i feel strongly about it. we need a new level of openness about how every last dollar is spent by countries, by donors, by ngos. [applause] you can't expect program managers all over the world to make the smartest decisions with they are trapped in a financial black box. all donors, all nations, all ngos. i believe should make our spending records open and available, not so somebody can

be embarrassed, but so we can see who is doing better and the rest of us can copy. we have to work together. if we do this, you know as well as i do, everybody's working, we can have a much bigger impact with the dollars we have. thirdly, i think we need investments based on evidence, not politics and invested interests that often drive spending decisions. [applause] we're all -- to meet these goals, we're going to have to have courage to shut down programs that are not working and to channel more money towards the populations that are driving the epidemic and the evidence-based interventions that are working. finally, we got to make sure that we're paying for services that directly help the people involved. when businesses start operations

in new countries, they often send in their people, ex-patriots to help get the work off the ground, but then management responsibility is transferred to others. i think we've reached a point in the hiv response where we have to do more of that, transfer speedometer -- responsibility to local governments and ngos. [applause] i don't want to imply that i think spending on international organizations can go to zero. that's just not true. many countries still need support to grow and sustain their progress and to build an infrastructure necessary to run their own health programs effectively, but international technical assistance can be very expensive. some organizations take it up to $600 a day. for the cost of a day of

consulting, we could put three people on treatment for a year. [cheers and applause] that is, that means every time we make the former rather than the latter choice, we've got to know what we're doing and be prepared to defend it in the light of day. [applause] otherwise, we should go for the life saving. let me say that i think channeling more money to capable governments is catching on because it saves money and because it builds capacity and produces sustainable results in the countries that need them. pep four recently announced its intention to transition greater ownership over its funds to national governments. i am very grateful for that, and just last week, when i was in rwanda, the national government and the health minister, i believe is here today, announced a new effort to dramatically

reduce overhead and the entire health care work force of the country, and i applaud the efforts, and i think more of this can, should, and must be done around the world. now, having said that, we know money's not the only impediment to meeting our goals. two years ago in vienna, we heard about the promise of combination prevention. we heard about the evidence of treatment is prevention. we agreed about the impact of male circumcision and accelerated action in that area. we heard about promising ways to improve the effectiveness of treatment including increasing point of care technologies, something our foundation has been involved in. we didn't really know how to implement these programs at scale, but at least i, and i think most of you, left vienna

willing to act, eager to act, and newly energy jizzed. two years of progress, though none of these proposals have been taken to scale. many hard questions remain, and we could spend a lot of time talking about the hard questions. how do you find people earlier before they feel sick? how do people get the information they need to make their own decisions? how do we improve the care? what treatment has preventions are best, and if we do it, and if we do even more circumcisions, will it really leave people to give up less costly and proven treatments of prevention? all the questions are important. should any of them be a bar to

doing what we know we have to do? i argue no. i remember well back in 2003 when jim kim launched the three by five initiative. there were lots of serious questions about whether we could meet the goals of increased treatment. there were people who even said if we can't treat everybody who needs it, decide who gets and who doesn't, and wouldn't we be better off because it's so much cheaper just doing universal prevention? guess what? we responded to the challenge, and now there's 8 million people on treatment. that's the way we have to respond to these challenges. [applause] sometimes you have to make a commitment before you know how you're going to get there. china, rwanda announced intents to implement treatment as prevention at scale. we are working with a government

of swaziland and the prevalence is 26%. i've been really impressed with the leadership and foresight there. they know this is the only way they're going to achieve their goals, and they are focused, therefore, on how to do it, not whether to do it. mulawi has severe resource constraints where i have the honor of doing economic work. they made the decision to put all pregnant women on treatment immediately for life. they didn't wait to figure out how to do it or how they were going to pay for it. they made a commitment, and i believe the president banda showed wisdom and strength in doing it, and we should all be grateful to her because -- [applause] because now every one of you can say if they are not waiting, how can the rest of us wait?

[applause] you may think this is naive, but it's happened over and over. this is one of those, if you build it, they will come. if you scale it up, and it works, the money will be there to fund it. [applause] we alaska talked then a lot about improving treatments that works, identifying the patients earlier, reaching them where they live, treating diseases that really kill people like tb, minigitus, and today, we know about the treatments that help and empowering community members, and we know from pilots

in africa that if we provide foretesting at the point of care, we can cut pre-art loss in half. we know that if nurses play a larger role in caring for parties including initiating treatments -- [cheers and applause] we will reach more people in an environment where they feel better understood and cared for. so when we scale up, we will stop just paying lip service to community engagement and we'll have to start engaging and relying on communities. these are things that i believe -- i think the money will be there if we prove that we're responsible with the money we've got, and if we prove that these approaches work. you have nowhere near theup verse whe