a company was in a situation where they could not meet their obligations, the commission could seek legal action to have a receiver appointed in an emergency situation. >> i'll direct the same question to both of you. in the area of protection of customer segregated accounts, commissioner sommers and mr. duffy, both of your organizations, as i understand it, had staff on-site at mf global chicago offices the weekend before the firm's bankruptcy filing. what steps did your agency, i'll start with you, commissioner sommers, take to protect customer assets prior to learning that customer assets were missing? and what date and time did staff in your agencies first learn that there was a possible or probable shortfall in the customer segregated accounts? and after you learned of the

missing customer assets, what specific steps did each of your agencies take to ensure that customer funds were not improperly transferred over the weekend? that seems when there was more than a little mischief done. commissioner sommers, you first. >> so the first question with regard to what our staff was doing, although the commission and the dsro receives daily segregation reports, those reports only list the amount of money that the fcm owes to customers. what their obligation would be there. our staff was in the process of trying to get supporting documentation from mf global to be able to make sure they actually had that money in the bank. >> you had that conversation you testified to earlier, either 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 concern 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 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 sommers for the most part. my recollection of what happened was 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 -- >> yeah, 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 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? >> the people were 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 liquidating 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 provisions of both the cftc right act and also the sipa act, which 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 sipa 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 -- probably -- i'm just doing the calculation in my head was probably $1 million or more. >> okay. >> the commodities accounts, i think we 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? >> yes, absolutely. credit had been downgraded -- >> do you know of your own account, 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 experiencing trouble. >> everywhere. >> 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? weren't they? >> 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 sommers, i'd like to come back to you. in an attempt to justify his mf global recusal, mr. ginsler stated that 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 searched 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 ask mr. giddens, as trustee. on april the 4th, mr. giddens, you provided an update on your investigation of jpmorgan 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 global 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.

with congress on break this week, we're featuring weekend programs in prime time. tonight a look at the role and influence of america's first ladies starting at 8:00 p.m. eastern with three photographers whose images chronicle the lives and work of barbara bush. at 10:00 p.m. we'll hear from women who served as the right hands for the first ladies. american history tv in prime time all week here on c-span 3. on c-span 2, book tv's programs in prime time. get a glimpse into the lives of senators starting at 8:30 p.m. eastern with senator arlen spector and his life among the canabl canables.

then john shau. and at 10:00, a book party with allen simpson. book tv in prime time, all week on c-span 2. four years ago, i was a washington outsider. four years later, i'm at this dinner. four years ago, i looked like this. today i look like this. and four years from now, i will look like this. that's not even funny. >> mr. president, you remember when the country rallied around you in hopes of a better

tomorrow? that was hilarious. that was your best one yet. but honestly, it's a thrill for me to be here with the president. a man who has done his best to guide us through difficult times and paid a heavy price for it. there's a turn for guys like president obama. probably not two terms. >> miss any part of the dinner? you can watch online at the c-span video library. behind the scenes, the red carpet, and all the entertainme entertainment. john brennan, the assistant to the president for homeland security and counterterrorism confirmed the use of drones and terrorist strikes at an event in washington, d.c. here's a clip from the event. >> in the course of the war in afghanistan and the fight

against al qaeda, i think the american people expect us to use advanced technologies. for example, to prevent attacks on u.s. forces and to remove terrorists from the attacks on u.s. forces and remove terrorists from the battle fooefooebattlefield. we do temperature it has saved the lives of men and women in uniform. what has caught the attention of many is beyond the battlefields of afghanistan, often using aircraft remotely operated by pilots who can be hundreds, if not thousands of miles away. and this is what i want to focus on today. jack goldsmith, former assistant attorney general in the administration of george w. bush, professor at harvard law school captured the situation well. he wrote "the government need as way to credibly convey to the public that its decisions about

who is being targeted, especially when the tark set a u.s. citizen, are sound. first, the government can and should tell us more about the process by which it reaches its high value targeting decisions. the more the government tells us about the eyeballs on the issue and the robustness of the process, the more credible will be its claims about the accuracy of its factual determinations and the soundness of its legal ones. all this information can be disclosed in some form without endangering critical intelligence." well, president obama agrees. and that is why i'm here today. i stand here as someone who has been involved with our nation's security for more than 30 years. i have a profound appreciation for the truly remarkable capabilities of our counterterrorism professionals and our relationships with other nations. and we must never compromise them. i will not discuss the sensitive details of any specific

operation today. i will not nor will i ever publicly divulge sensitive intelligence sources and methods for when that happens, our national security is endangered and lives can be lost. at the same time, we reject the notion that any discussion of these matter is a step on to a slippery slope that inevitably endangers our national security. too often that fear can become an excuse for saying nothing the at all, which create as void that is then filled with myths and falsehoods. that can erode our credibility with the american people and foreign partners and undermine the public understanding and support for our efforts. in contrast, president obama believes that done carefully, deliberately and responsibly, we can be more transparent and still ensure our nation's security. so let me say it as simply as i can. yes, in full accordance with the

law and in order to prevent terrorist attacks on the united states and to save american lives, the united states government conducts targeted strikes against specific al qaeda terrorists, sometimes using remotely piloted aircraft, often referred to publicly as drones. and i'm here today because president obama has instructed us to be more open with the american people about these efforts. broadly speaking, the debate over strikes targeted at individual members of al qaeda has centered on their legality, their ethics, the wisdom of using them and the standard by which they are proved. with the remainder of my time today, i would like to address each of these in turn. first, these targeted strikes are legal. attorney general holder, harold coe and jay johnson have all addressed this question at length. to briefly recap, as a matter of

domestic law, the constitution empowers the president to protect the nation from any imminent threat of attack. the authorization for the use of military force, the aumf, passed by congress after the september 11th attacks authorized the president to use all necessary and appropriate forces against those nations, organizations and individuals responsible for 9/11. there is nothing in the aumf that restricts the use of military force against al qaeda to afghanistan. as a matter of international law, the united states is in an armed conflict with collide yash the taliban and associated forces in response to the 9/11 attacks and we may also use force consistent with our inherent right of national self-defense. there is nothing in international law that bans the use of remotely piloted aircraft for this purpose or that prohibits us from using lethal

force against our enemies outside of an act of battlefi d battlefield. second, targeted strikes are ethical. without question the ability to target a specific individual from hundreds or thousands of miles away raises profound questions. here i think it is useful to consider such strikes against the basic principles of the law of war that govern the use of force. targeted streaks conform to the principle of necessity, the requirement that the target have definite military value. in this armed conflict, individuals who are part of al qaeda or its associated forces are legitimate military targets. we have the authority to target them with lethal force just as we target enemy leaders in past conflicts, such as german and

japanese commanders during world war ii. targeted strikes conform to the principle of distinction, the idea that only military objective maying intentionally targeted and civilians are protected from being intentionally targeted. with the unprecedented ability of remotely targeted air kra to precisely target a military objective while minimizing collateral damage, one could argue that never before has there been a weapon that allows us to distinguish more effectively between an al qaeda terrorist and innocent civilians. targeted strikes conform to the principle of proportionality. the notion that the anticipated collateral damage of an action cannot be excessive in relation to the anticipated military advantage. by targeting an individual terrorist or small number of terrorists with order nantz that can be adapted to harm others in

the immediate vicinity, it hard to imagine a tool that can better minimize the risk to civilians that remotely targeted aircraft. for the same reason, targeted strikes conform to the principal of humanity, which requires us to use weapons that will not inflict unnecessary suffering. for all these reasons, i suggest to you that these targeted strikes against al qaeda terrorists are indeed ethical and just. of course even if a tool is legal and ethical, that doesn't necessarily make it appropriate or advisable in a given circumstance. this brings me to my next point. targeted strikes are wise. remotely piloted aircraft, in particular, can be a wise choice because of geography, with their ability to fly hundreds of miles over the most treacherous terrain, strike their targets with astonishing precision and then return to base. they can be a wise choice because of time when windows of opportunity can close quickly

and there just may be only minutes to act. they cab wise choice because they dramatically reduce the danger to u.s. personnel. even eliminating the danger altogether. yet they are also a wise choice because they dramatically reduce the danger to innocent civilians, especially considered against massive ordinances that can cause injury and death far beyond their intended target. in addition, compared against other options, a pilot operating the aircraft remotely with the benefit of technology and with the safety of distance might actually have a clearer picture of the target and its surroundings, including the presence of innocent civilians. it's this surgical precision, the ability with laser-like focus to eliminate the cancerous tumor called an al qaeda terrorist while limiting damage to the tissue around it. that makes it counterterrorism tool so essential.

there's another reason that targeted strikes can be a wise choice. the strategic consequences that inevitably come with the use of force. as we have seen, deploying large armies abroad won't always be our best offense. countries typically don't want foreign soldiers in their cities and towns. in fact, large, intrusive military deployments risk playing into al qaeda's strategy of trying to draw us into long costly wars that drain us financially, enflame anti-american resentment and inspire the next generation of terrorists. in comparison, there is the precision of targeted strikes. we'll show you all of mr. brennan's remarks from this event today on our companion network c-span beginning at 10:30 p.m. eastern and you can wash at any too many on our web site, c-span.org. this is c-span3 with