personally or some communication by e-mail, from chairman ginsler. that obviously there was more than a little concern at your office regarding mf global. is that right? >> well, i think that -- >> you didn't think everything was okay at mf global after you read the e-mails of chairman ginsler, did you? >> i think -- in the beginning the reason why he sent staff to the offices of mf global is so that we could receive the supporting documentation to make sure to do the tie-back of the segregated accounts -- >> because there was certain at your agency about mf global. >> right. >> where the money was coming from and what money they had and so forth. >> right. >> is that correct? >> that's true. and the documentation and the data that they provided to us showed us that they were in

complian compliance. so over the weekend -- >> but that was not true, was it? >> it was not true. >> did you have suspicion at that time. >> i do not believe that staff had suspicion they were not in compliance. over the weekend the staff was in the process of filing all of the documents that we would need to file in order to make a transfer possible. so customers from mf global, if there was a financial institution that would purchase the fcm, that those customer accounts could be transferred with our approval. so we were drafting those documents in order to make that transfer of customer positions possible. we were not informed -- the commission was not informed until monday morning of october 31st that there was a shortfall in customer segregation. >> but were you ever concerned that there might be some things wrong at mf global?

obviously, something had to come up on your radar. >> absolutely. we were concerned, but never -- i don't believe i ever thought that one of the concerns should be that there would be a shortfall in customer segregation. >> mr. duffy, you have any comments on that? >> i will echo commissioner somers for the most part. my recollection of what happened is we also had people on the ground tying out, validating the reports against bank records and everything else, and we got through friday. into saturday we still had people on the ground. then we were told there was an accounting error as we referenced in my earlier testimony of last year of $900 million. so everybody was trying to put the company -- >> an accounting error of $900 -- >> i found that pretty staggering myself, $900 million, yeah. some people felt it was too big, it had to be an accounting error. others thought it was too big and it could not be an accounting are error.

i was in the latter camp. >> did that send a lot of anxiety through your organization? >> it sent a lot of anxiety, but i think people felt fairly confident that there was no way that it wasn't an accounting error, and the company was going to be whole -- >> were the people wrong that felt that? >> dead wrong, sir. >> dead wrong? >> dead wrong. >> mr. giddens, you're the mf global trustee, right? >> yes, sir. >> and what is your -- as trustee, just for the record, what is your portfolio? what are you supposed to do as a trustee for mf global, inc.? >> well, i am appointed the equivalent of a chapter 7 trustee, i have the equivalent

powers, also as the broker/dealer. my job is to marshall the assets of the broker/dealer estate and to pay them out as required by law. there are sacrosanct property which is really not part of the estate, which belongs to customers. the commodities customer funds and also the securities customers' funds. and there are very detailed positions about the cftc right act and the cipa act that governs how you calculate those claims and pay them out. the big distinction and the big difference and the reason that, as mr. cook of the s.e.c. has pointed out, some of the securities customers have been paid in full, is the existence of the resources of the cipa fund which provides up to an additional $500,000 to cover

losses in an account. >> is that $500,000 per account? >> yes, sir. yes, sir. $250,000 -- >> what is the average account? >> the average securities account -- >> at mf global. >> at mf global -- probably -- just doing the calculation in my head was probably $1 million or more. >> okay. >> the commodities accounts i think as indicated, 75% were less than $100,000. and probably 93% of the commodities accounts were less than $1 million. now, in both cases, there were significant numbers of commodities customers and securities customers who in the last weeks transferred their accounts from mf global to other solvent firms. >> why did they do this? was there concern in the marketplace about mf global at that time? >> absolutely. credit had been downgraded -- >> do you know of your own

knowledge that that concern in the marketplace extended to chicago, to the commodity futures trading or to the s.e.c. or to the cme? >> certainly it was in the major newspapers, that the firm was spernsing trouble. whether anyone suspected there was a shortfall in segregation, i don't know that. but i do know that because of downgrading and rating and losses, many of the large -- >> people were leaving the ship? >> absolutely. >> okay. your written testimony, mr. giddens, provides an overview of large cash movements at mf global during october 2011. were there any large transfers -- you talked about some others, alluded to them -- from mf global's customer

segregated accounts to the firm's own accounts while multiple regulators were on-site at mf global starting on october the 27th? >> the answer is yes, there were billions of transfers in and out of the firm and from the various accounts. >> and the regulators were on-site there? >> yes, sir. >> okay. were there any subsequent large transfers out of mf global's own accounts to pay counter parties? >> certainly during the period of october 27 through october 31st, yes. >> okay. mr. giddens, you recently announced that you would pursue litigation in the united kingdom to recover approximately $700 million of customer funds. what's your best guess or your

judgment for how long it will take for mf global customers to recover, if they do, the $700 million that is trapped in the uk, and will it take weeks, months or years and so forth? just your judgment. >> the petition to commence the case is due to be filed shortly how quickly and how the court determines how the litigation is held, what discovery is required and the like, is unknown at this time. we will try to expeditiously get a decision from the court. we had a similar situation in the lehman case in which our position was that funds that were with the lehman uk broker/dealer were segregated

customer funds. these happened to be securities funds. and that was opposed by the english regulators. and that process, because of appeals to three courts, took almost in excess of two years until there was a final decision. i hope that will not be the case here. >> what's your best judgment on how long it will take to recover the remaining $900 million in customer funds? >> we have recovered, from closeout, some portion of that already. >> how much have you recovered of the $900 million? roughly. you can correct the record but just give your judgment. >> i believe about -- in excess of $500 million, but i'm not sure. >> you will furnish -- >> we'll have supplemental information on that. >> commissioner somers, i'd like to come back to you. in an attempt to justify his mf global recusal, mr. ginsler

stated he did not want his rip with mf global ceo jon corzine "to be a distraction." did mr. ginsler, chairman ginsler, ever express any concern that his relationship with mr. corzine would be a distraction from any previous matter involving mf global, including matters related to cftc rule 125 dealing with investment of customer-segregated funds? >> not that i'm aware of. >> you don't recall? >> no. >> have you researched your records and your e-mails and everything else? >> we have. >> okay. mr. ginsler also stated that, and i'll quote him, he will not participate in any enforcement-related matters involving mf global and any matter directly related thereto. those are his words. this language appears, from

reading it, to prohibit him from participating in any of the cftc's efforts to develop recommendations based on lessons learned from the collapse of the mf global. do you agree or disagree? >> senator, we -- my staff -- >> in other words, he can't have it both ways. he's either in the game or out of the game, he's saying here he's out of the game as chairman. is that correct? is that the way you read the language? >> we have sought direction from the general counsel at the agency on my delegation, and we're told that my delegation does not go towards the policy recommendations that the chairman would be handling them. >> i know my time's moving on but i've got another question i need to did mr. giddens as trustee. on april the 4th you provided an updid it on your investigation of jp morgan chase which is mf global's largest creditor.

regarding the mf global funds in its possession. you stated that you and jpmorgan, these are your words, are "presently engaged in substantive discussions regarding the resolution of claims." is it your expectation that some of these funds will be returned from jpmorgan chase to mf ghoebl customers, and when can mf global customers expect a resolution of claims against jpmorgan, if they can? >> i believe that we have a solid basis for seeking recovery of some of the funds that were transferred to jpmorgan. as to how that decision ultimately will be made, if we do not reach a consensual conclusion, it will probably

have to be resolved by bankruptcy judge john glenn, and how long that will take is difficult to predict. difficult to predict. but we would not be exchanging information and engaging in really confidential discussions about legal arguments unless we thought we had a good prospect of recovering something from them. >> mr. chairman, can i ask mr. freeh one quick question, if i could. mr. freeh, you're the trustee of mf global holdings, is that correct? >> yes, sir. >> so is it your responsibility to protect the corpus or assets of what's left of mf global only? >> yes, mf global and the other debtors that are in chapter 11

of which i'm the trustee, exactly. to get the assets and get them back to the creditors if possible. >> okay. thank you, mr. chairman. >> i would like to thank our witnesses for their testimony today. it is important that congress continues to evaluate lessons learned from the collapse of mf global and discuss the important issues raised at today's hearing. i look forward to working with my colleagues to help ensure that we can better protect customer accounts and improve future regulatory coordination. this hearing is adjourned.

c-span's congressional directory as complete guide to the 112th congress. inside you'll find each member of the house and senate with contact information, district maps and committee assignments. to get a copy for $12.99 plus shipping and handling, order online at c-span.org/shop. rosie o'donnell was the president's first choice to be here this evening. and she withdrew, citing a nasty and brutal confirmation process. i wasn't even the second choice, dennis miller was the second choice. but he got hung out by an illegal nanni technicality. but isn't that what the confirmation process is all about here in washington? weeding out the truly qualified to get to the truly available.

>> i must say, mr. president, i thought that, you know, when you got into office, that you would put a swift end to your basketball pickup plan, pickup basketball plan, you know. i mean, come on. first black president playing basketball? that's one step forward, two steps back. and really, are you any good? i bet you think your game is really nice right now, don't you. yeah. you really think you got good moves, huh? nobody's going to give the president a hard foul with the secret service standing there. >> jon stewart and canada stiwa at the annual white house correspondents dinner. and this weekend c-span will again offer live coverage of the event saturday night. see what other comedians have said at these dinners online. the c-span video library, archived and searchable, at

c-span.org/videolibrary. now the house foreign affairs committee looks at u.s. policy toward north korea. in light of the change in leadership there and the country's recent failed rocket launch. this is an hour and a half. >> the committee will come to order. welcome to my fellow members of the committee and to our distinguished panel of witnesses who are joining us today. after recognizing myself and the ranking member, my good friend from california, mr. berman, for seven minutes each for our opening statements, i will recognize the chairman and the ranking member of the

subcommittee on asia and the pacific for three minutes, followed by one-minute statements from each committee members who wish to speak. we will then hear from our witnesses and i would ask that you summarize your prepared statements to five minutes each before we move to the question and answers with members under the five-minute rule. without objection, the prepared statements of all of our witnesses will be made a part of the record, and members may have five legislative days in which to insert statements and questions for the record subject to the length limitations in the rules. the chair now recognizes herself for seven minutes. today we will examine the up tumultuous events that have again consumed the korean peninsula. in a sense, negotiating with north korea is similar to the endless repetition presented in the film "groundhog day." withdrawal from negotiations is followed by provocative action. next there is a wooing by the

united states and its allies with concessions offered. then a so-called break-think deal. finally, another betrayal, often in the form of a missile launch or the disclosure of a secret nuclear operation. it was so with the clinton administration, with the george w. bush administration, and thus it has come to pass as well with the obama administration. president clinton's agreed framework ended with the disclosure of pyongyang's highly enriched uranium program. president bush's attempt at reproachment, including the removal of north korea from the list of state sponsors of terrorism, which i adamantly opposed, was met with the construction of a secret nuclear reactor in syria which israel thankfully destroyed. and then yet another betrayal. the obama administration is confronted with the abject failure of its leap day deal on february 29th with north korea. and has refused to send

witnesses who were privy to the beijing negotiations to testify today at our hearing. old kim, kim jong-il, had of course responded to president obama's inaugural overture of an outstretched hand by kidnapping two u.s. journalists, firing a missile, setting off a nuclear weapon, sinking a south korean naval vessel, and shelling a south korean island. his son, kim jong-un, seems intent on fulfilling the adage the apple doesn't fall far from the tree. he has already tried a failed missile launch and may be plotting yet a third nuclear test. the u.n. security council issued a presidential statement condemning the april 13th missile launch as a serious violation of security council resolutions 1718 and 1874. no real consequences for north korea's flagrant violation and

action that threaten global peace and security. while the missiles blew up -- while the missle blew up soon after leaving the launch pad it is said in international relations, measuring intent is just as important as measuring capability. north korea's rhetoric should have told our negotiators all they needed to know. the military first policy of starving the people to feed the army and supply the munition industry remains. the south korean defense ministry estimated this month that the north koreans spent $850 million on the failed missile launch. enough to buy corn to feed the entire population for an entire year. politics in north korea remains all about the kim dynasty and its needs, not about either the concerns of the united states or the welfare of the korean people. a particularly unfortunate result of the leap day agreement was the combining of discussions

of nuclear disarmament and food assistance at the same negotiating table. this was a departure from the approach of both the clinton administration and the bush administration which held to the regan doctrine that a hungry child knows no politics. it also led to a highly embarrassing reversal on the food aid decision following the missile launch, even as administration officials insisted that there was no direct linkage between food assistance and the failed negotiations. our distinguished panel of experts can shed light today on whether succession from the old kim to the young kim has really changed anything in north korea, or is it merely an old kim in a new uniform? further, there is the pressing issue of how we should respond to the possible -- to future provocation, including another nuclear test. we also wish to examine how we should go forward in addressing

the simmering north korean crisis, a rogue state in possession of nuclear weapons working on delivery capability, engaged in murky proliferation activities with opponents of the united states, in the middle east, and south asia. the young general at sunday's military parade gave every indication that trouble lies just ahead in north korea. dressed in a dark mao suit he viewed tanks, missiles and goose-stepping troops as they paraded through north korea's capital in a celebration of the 100th anniversary of his grandfather's birth. in his first public remarks since assuming power, the young kim bombastically warned that "the days of enemies threatening and blackmailing us with nuclear weapons are forever over." the new kim looks and acts suspiciously very much like the old kim. here is a brief video clip that will just take us a few seconds to line up of the cold war

military parade held on sunday in pyongyang that clearly illustrates the nature and the priorities of the north korean regime. if we could show the clip. >> we fight for victory and honor and the flag will always encourage and lead us to the new victory. >> the untested young leader, thought to be in his late 20s, prompted international outrage after going ahead with the rocket launch. but despite its failure, this first address is being seen not just as a message to north koreans but the rest of the world as well. >> thank you very much. now i'm pleased to turn to my good friend, the ranking member of our committee, mr. berman of california, for his opening statement.