as i look at the department's budget, almost one-third of the justice department money is going in to federal prisons. that amount is now at $6 billion, and it is rapidly approaching almost what the fbi budget is which is $8 billion. now, my question is, what's going on with federal prisons? if people are incourse rated -- first of all, we want the bad guys and gals off the street. so we want you to prosecute and incarcerate particularly where there are people who constitute a danger to our country or to our communities. we -- i don't know if we can sustain this growth. and then i'm concerned about once we put them in, it's a resolving door and we keep expanding their prisons with the same people. they keep coming back.

could you elaborate on your department's needs, but is there any recommendations you'd have to begin to contain the prison population? are we federalizing too many crimes? is recidivism the problem? again, safe streets, but this is really an ever-increasing part of our appropriations. >> i think there are a whole variety of reasons why we see the prison population expanding. we now have about 215,000 or so people in the federal system. that number goes up every year. it is for that reason that we consistently come back to this committee asking for additional funds for b.o.p. i think there are a variety of reasons you see people coming into the system. we're good partners with our state and local counterparts and try to help them to the extent we can. and so some cases that violet both federal law and state law, and if they have very serious

criminals, we bring into federal system if there are evidentiary rules or more harsh sentences that we can give to them. the point you hit on is something we need to focus on. how can we rehabilitate people so we cut down on recidivism rates? one of the things we talked about is the second chance act, coming up with ways in which we make available to people reentry possibilities so that they have the chance of not being recidivists, coming up with educational, vocational, drug treatment programs while we have them in prison. we've actually seen i think pretty good success being done by some state systems that has been shared with me by the pew research foundation. i think we can learn a lot from them in that regard. >> mr. attorney general, we would really look forward to specific recommendations where again we want our local and federal law enforcement to prosecute and get bad people off the street, whether they're

terrorists or whether they're terrorizing a neighborhood like some of the drug dealers in some of my own communities in maryland. at the same time we don't want our federal prisons to be an incubator for more crime, where the lessons they learn when they go to prison is not to commit crimes again, but how to be better crooks. we want our prisons to teach them how to be better citizens and then to come back to a community support system where they don't fall back into the behavior that got them. so i'm concerned our federal prisons are such that we need to really take a look and evaluate and learn some of these lessons. we want to work with you. i know we feel that way. you're very experienced in street crime which takes me to the other. ultimately while you've done this fantastic job of fighting

terrorism, keeping america safe, it's been stunning what our national security services have accomplished, both military and civilian. but you know, again, i'll come back to streets and neighborhoods. we have communities that faced crime every single day and when you talk to our local law enforcement, local prosecutor's offices and so on, they feel they're under the gun. they need burn grants, cops on the beat and so on. do you feel that this is sufficient funding? because in the last couple of years -- in 2010, we had $3.7 billion that went into state and local grantsz due to acts of congress and so on. now we're down to $2 billion. yet everywhere i go in maryland from our local police commissioners to local district attorneys or state's attorneys

as they're called in my state, people say we need those justice department grants. they either give us better technology, they give us tools to deal with violence against women. they express gratitude for the legal index. they need you. they love having you as a pa partn partner. do we have enough money in the right places to do the job to protect our communities? >> we have, in the budget request, $2.04 billion for state and local assistance programs, $1.4 billion for office of justice programs, about $290 million for cops and about $412 million for the office on violence against women. we think that -- this is a level equal to the level we requested last year. it is lower than the numbers you had said. but i think that given the budget realities that we face, the amount that we have requested is strong on law enforcement. it's strong for science, strong

for victims. would i like to have more money? yes. but the budget realities that we confront and the needs to stay within a budget in the executive branch i think have gotten us to this point. i think through the provision of this money, through the technical assistance that we can also provide to our state and local partners, we can i think do the job. i met with the association of attorneys general just this week. i think the partnership we have is an unprecedented one. and i think the combination of that partnership, the sensitivity i think we have to their needs and the $2 billion we're seeking here will allow us to be good partners. >> we have many questions. i'm going to turn to senator hutchison. what i would find very helpful is two things. one, if you look at your burn grants, cops on the beat and so on, what was the amount of money requested by state and local people to apply for those grants and what could you fund?

my time is up. i'd like that for the record. the second thing is the gao report raises issues related to duplication of services. i would like to have your reaction to the gao report on how we can streamline, get more efficiencies. i think you're already on that road. let me turn to senator hutchison. >> thank you, madam chairman. mr. attorney general, we will have questions for the record, but i wanted to pursue this public integrity unit's misconduct against senator stephens. the court appointed council after you moved to dismiss the case, the court appointed council to investigate the botched prosecution of senator stephens and found the prosecutors engaged in

systematic concealment of evidence, but they were not guilty of criminal contempt. according to the summary that was put out in the public, the full report coming later, it said that the court said despite findings of widespread and at times intentional misconduct, the special council, mr. shul key recommended against contempt charges because prosecutors did not disobey a clear and equivocal order by the judge as required under law. judge sullivan said, upon review of the documedocket and proceede stephens case, mr. shul key concludes no such order existed in this case. whether the court accepted the repeated representations of the subject prosecutors that they were familiar with their discovery obligations were complying with those obligations and were proceeding in good faith. my question to you is, does it

concern you that the only reason these prosecutors escaped criminal charges is that the judge in the stephens case did on the file an order specifically telling the prosecutors they should follow the law? >> i t w account a variety of things. when i was made aware of the issues that led to the inquiry that judge sullivan ordered, i made sure -- i ordered that the case be dismissed. i also ordered an office of professional responsibility report before done as an internal justice department which has now been completed, it is now in its final stages of being worked through. >> will it be made public, mr. attorney general? >> i'm hoping we can. there are privacy interests that we have to deal with. but my hope is to get that report -- as much of the report made public as we possibly can. it is an exhaustive study, hundreds of pages long. i think the people at opr have done a good job and there are recommendations with regard to

sanctions that ought to be made. i'm hoping we will make that available. >> i'm going to request that you do. >> okay. the report -- i'm not really at liberty to discuss the report that mr. shul key did. we have gotten a limited number of those reports in the justice department, 10 or 15. and we're under orders by the judge not to discuss those. i've had a clans to review certainly the summary and in portions of it and some of the findings that are made there are disturbing. they were disturbing when i made the decision to dismiss the case. we have done a lot i think since that time to come up with ways in which we try to prevent those kinds of mistakes from happening again. we have an extensive training program. we have hired somebody who is responsible as a coordinator to make sure that discovery in criminal cases and civil cases, that the justice department is involved in, so we don't fall back into those same kinds of

errors. we have talked to -- i have spoken to members of the judiciary, all to make sure that what happened in the case involving senator stephens is not replicated. but i would urge everybody to understand that this justice department, this attorney general, when we made that determination that mistakes had occurred, took the extraordinary step of dismissing the case. >> which i gave you full credit for. now, let me ask you, four of the six prosecutors according to reports who were investigated opposed releasing the report and their names have been redacted. i want to ask you if any of those prosecutors are still in the justice department system? >> i have to check that just to make sure, but i believe all the prosecutors who were involved in that case are still in the department. i believe that's true. i'm not totally sure on that. >> does that trouble you that there would be findings of

misconduct in such a sensitive area that they would still be -- that you would not let them go outside of our justice system? >> it depends on the nature of the misconduct, what it is that they did, the mistakes that were made. i think one has to look at the shul key report that is about to be released combined with the opr report and the recommendations for sanctions that are contained in that opr report to look at what exactly should happen to these people. was the incident an isolated one. how serious was it? what is the nature -- >> are you going to do that, mr. attorney general? are you going to make a decision regarding people who have clearly exhibited that they do not have the integrity to prosecute in this sensitive area? will you tell the committee what your actions are when you have made that determination? >> the actions that we take -- i don't think there's any privacy

act interest that prevents us from sharing with the public with this committee, what actions we have ultimately decided to take against those people who are found to have been culpable. >> i ask that you report that to the committee. thank you, madam chairman. >> senator brown? >> thank you, madam chair. thank you general for your service. you established a new residential mortgage backed securities working group. thank you for that. i want to talk in a moment about that. but last week phil angelides from senator feinstein's state, former chair of the financial crisis inquiry commission observed that what -- the number of lawyers, some 55 lawyers, investigators and other staff of the working group i just mentioned, that this is far fewer than the hundred law enforcement professionals dedicated to the dallas bank fraud task force during the savings and loan era. he also suggested -- mr.

angelides also suggested congress should extend the statute of limitations for financial institutions fraud from five years to ten years as congress did in 1989 when it passed the federal institutions reform recovery and enforcement act after the savings and loan crisis. you, of course, are aware of the public sentiment of anxiety, frustration, outrage, pick your noun, towards the fact that so few people have been prosecuted. talk to me about the working group, the dollars you're dedicating of the $55 million increase you're asking for, is it going to go i understand the rnbs working group. comment if you would on mr. angelides' recommendation that the statute of limitations, similarly 20 years ago if not in a similar scandal, sure li a scandal when it was lengthened to ten years by congress then, if that's something we should do? >> i would say first off, this whole mortgage fraud problem

scandal that we are dealing with is something we've taken extremely seriously. we brought charges against about 2100 people last year, all over the course of the last few years in connection with the mortgage problem. the number of people, i guess you mentioned 55 federal personnel to go to this, the rnbs task force, that's the federal component. one of the things i think is unique about that is we're working with our state and local departmentments, in particular, state attorneys general. the number of people ultimately devoted will be substantially greater than that. we'll also be adding people from various u.s. attorneys offices across the country. so i think that number will ultimately go up. we'll have adequate resources in terms of the numbers of people to do the job we need to do with regard to the residential mortgage backed securities working group. with regard to the extension of the statute of limitations, i

think that is something that i'd be more than glad to discuss with members of this committee after i've had a chance to speak with the prosecutors on the ground to zoo if, in fact, that is something that we need. we want to use all the tools that we have and also consider any possibilities that we might want to acquire so that we can hold accountable the people and institutions who really had a devastating impact on our nation's economy and continue to have a lingering effect on our nation's economy and in particular the housing market which drags down the recovery. >> thank you for that. we will be following up with your office on the wisdom, hearing from your prosecutors that might be in the middle of initiating these cases or in the middle of these cases, the importance of that extra five years in the statute of limitations. let me talk for a moment about gas prices. you know, oil prices are well over $100 per barrel.

doe and cftc have told us inventories are sufficient, domestic production is up, the number of rigs has grown, the consumption is down, all reasons that gas prices should not be going up, understanding the turmoil in the middle east and the discussion of iran. it's my understanding that over -- some analysts have added speculation may be adding 50 cents per gallon to a gallon of gas. it's my understanding doj organized the oil and gas price fraud working group to determine the potential price manipulation are having on the price of gasoline. what have you found? what are your next steps? what can we expect? >> that working group continues in effect. in fact, they're having a call today to discuss the situation in which we find ourselves with regard to these rising gas prices and the committee -- that working group itself will be meeting before the end of this week.

the work of that committee or that group has been on going and looking to see if there are inappropriate eight manipulations of the market. the ftc is also working in this area. i don't want to speak for them. i understand they're working on a report of some sort we should be seeing i believe relatively soon. ha is, again, the ftc working independently of us. within the department, that oil and gas working group has been active and, as i said, has a call today and a meeting that will happy think by tomorrow. >> i would like to request that after that meeting today or tomorrow, after the phone call and after meeting today or tomorrow that task force brief me and other members of the subcommittee that have expressed an interest. >> to the extent we k we would like to see that. >> mr. attorney general, we really would like to see that. this is very, very, very important. we'll now turn to senator murkowski. >> thank you, madam chairman.

mr. attorney general, welcome this morning. i want to follow on to senator hutchison's questions regarding the prosecution of senator ted stephens. i think so many of us were absolutely shocked. i was horrified as a friend and as an alaskan to read judge sullivan's comments that this ill-gotten verdict not only resulted in the loss of senator stephens losing his seat, but in his word tipped the balance of power in the united states senate. pretty powerful in terms of what the department of justice did to a great man. i appreciate and i recognize and i thank you for your actions in dismissing that case and in your decision to not attempt to retry, and i join senator hutchison with that. there are questions that still remain. you know that. i have a long series of them.

what i would like to do is submit them to you today and ask that you respond to them prior to the release of the report which is due to come out so i would appreciate your attention to that. i have a question regarding what is happening now with the release of this report. the "usa today" reported that the department of justice has spent $1.8 million in defending prosecutors from allegations that they broke the law in the stephens prosecution, and senator grassley was one who mentioned that it seems like this is an unseemingly high amount of money being spent by the taxpayers to defend what appears to be egregious misconduct and, again, senator hutchison noted the words judge sullivan used in his order saying that the report demonstrated significant widespread and at times

intentional misconduct by the prosecutors. now, i understand that the $1.8 million went for attorneys fees to defend the actions of the justice department prosecutors who were under investigation for contempt by the counsel appointed by judge sullivan. the report of that counsel again is due to be released on the 15th. in addition to spending taxpayer money to defend your attorneys, did the taxpayers also pay for the honors to argue that the contents of this report should not be publicly released? you have stated that this is a matter that has risen to a level of public attention. so if you can answer that question for me, and, also, whether the justice department supports the merits of the appeal that has been raised by mr. edward sullivan, who is one of the prosecutors who has asked the u.s. court of appeals for an emergency stay to appreciate the release of this report next

week. so the question is whether you support the merits ever that appeal, and, again, whether or not the taxpayers are on the hook to pay for his attorneys to argue that this report should be kept from the public? >> yeah. i don't think we take any position regard to the -- with regard to what he has said about his desire to keep the report sealed, but we, the justice department, has indicated that we do not object to the release of the report. i think the given -- given the issues that we found there, the magnitude of the case and frankly the magnitude of the errors that led me to decide to dismiss the case, that there is a legitimate public interest in knowing as much as we can about what happened, why it happened, what steps the justice department has taken in connection with the, these findings of misconduct. >> so is the justice department paying for his attorneys fees in this matter to keep this from

being made public? >> i don't know about him specifically but i do know as a result of the charges that were brought against him, i think the determination was made that there would be a conflict of interests for the justice department to defend them which would be typically how we would do it and they were, therefore, aloud to get outside counsel and under the regulations the justice department then pays for those legal representations which has happened in a variety of cases, a variety of circumstances from attorneys general as lawyers would have been reimbursed by the government. hoping i won't have to do that, but other attorneys generals have done that. >> so even now that the independent counsel that judge sullivan had appointed, even though that counsel has found that members of the stephens prosecution had engaged in significant widespread and at times intentional, again, intentional misconduct, does the

government have any recourse to recover the funds that have been paid for theirtarians, for their attorneys fees? when they have engaged in intentional misconduct? you mentioned in your comments to senator hutchison that after the office of public responsibility report, that there may be sanctions that we will see, but is there recourse? are you pursuing any recourse? it seems to me in an instance like this, where it has been made clear that the intentional -- that the conduct was intentional, that it was substantial, and it was widespread, that we should not be defending and paying for the attorneys fees to -- to, again, allow these individuals to -- to conduct such acts and then to learn that they're still within

the department of justice doesn't give me much confidence. >> well, i mean, certainly one of the things that i think happens is that because the justice department can't represent these people and they have their own views of what happened. they want to be able to explain with counsel, defend themselves. that is why the expenditure of money actually occurred. that is why they were allowed to get outside counsel, and as i said, that has happened not frequently but it certainly happened in the past, and we acted with regard to them as we have done in the past with regard to the retention of outside counsel. >> i would think that $1.8 million to go to defend these attorneys who had engaged in intentional misconduct is -- is just stunning to me. i'd like to think there could be some recourse. madam chairman, i'm well over my time and thank you for your indulgence. >> it was important you had the opportunity to completely pursue your line of questioning. the situation that has been

presented by you and senator hutchison reminding the committee is deeply troubling. we must have public integrity. we also must have and independent judiciary. we have to have, regardless of which party is in the white house, a justice department that we believe in, and that the american people believe in. so i know the attorney general will be lee responsiblive and we'll take it from there. >> i just want to thank you for those comments, and agree wholeheartedly, and i do think the attorney general took a major first step when he dismissed the case. that was huge. but now we must follow-up so that there is no question that the people who did this and the report will show whatever it shows, in a they're not able to prosecutor ever again. ever. >> thank you. >> thank you. >> senator pryor? >> thank you, madam chair, and attorney general, welcome to the committee. thank you for being over here.

i just want to add my voice to something said earlier about prison overcrowding. and i could go through the facts and figures on that but you know those better than any of us do. it's just a real concern, and we have one of the prisons that's on the short list is actually in arkansas. back in 20 -- in fq 2010 it was scheduled to the funded in 2014. pushed back now it's 2018. just an example of us not being able to get to some of the real needs that we have. so i know i'm not alone in that. so i just want to voice my concern there. let me ask about sequestration. i don't believe anyone's had a chance to ask about sequestration, and i'm curious about what in the justice did he want you all perceive will happen to the doj funding if sequestration does, in fact, take place? and what plan, what steps you're taking to, you know, address

that? >> well, i certainly hope that's something we don't have to face. i mean, as i look at it, we'd be looking at didn't across the bort board cut. $2.1 billion. no justice component would be exempt from those cuts and from an operational perspective, but i think we would have to cut funding and non-personnel funding. we're xiestimating furlough agents, fbi agents, dea agents, attorneys who try cases investigate cases for an average of about 25 days. lose permanently a substantial number of jobs, and this would have, this across the board cut would have a devastating impact on the justice department's ability to protect the american people, to do investigations. it would be something that wo d would -- would just simply be devastating, and my hope would be that congress will find a way to avoid this sequestration,

which just from my own parochial interests which are actually the nation's as well, to really avoid the very negative consequences that could have a permanent impact on our well-being. >> and so you mentioned these furloughs but i assume also y d you'd have to suspend the funding of many of the programs that help local and state law enforcement agencies? >> that's an excellent point. the collateral consequences -- the consequences are not restricted to simply what happens to the just it department here in washington and in field offices. our ability to be good state and local partners would certainly be impacted by the reduced amounts of money we'd be able to share with our state local partners in terms of grants, cops on the beat. it would be a devastating thing for this to happen. >> and let me ask about personnel here for a second. a little different context. the john r. justice program. 'r