there. thanks very much. >> thank you. federal reserve chair janet yellen talks about monetary policy. that's next. and paul bremer and jay carney. later, a senate hearing looks at stock practices and insider training. house republicans will meet tomorrow to elect a replacement

for eric cantor. congressman kevin mccarthy of california and labrador of idaho will chair. next, the head of the federal reserve is asked about the status of the federal reserve program. janet yellen spoke to reporters.

good afternoon. the committee concluded its june meeting earlier today. as was indicated in our policy statement, we will make -- maintained its forward guidance regarding the rate target, and -- remains appropriate. today's policy actions reflect the committee's assessment that the country is continuing to make progress toward maximum employment and price stability. the unemployment rate is four-tenths lower than at the time of our march 6th meeting.

and -- those working part-time but preferring full-time work has fallen by a similar amount. unemployment remains elevated, and underutilization in the labor market continues. and this appears to have resulted mainly from transitory factors. spending by domestic households and businesses continued to expand in the first quarter. and the limited set -- in the second quarter have picked up. the committee thus believes that economic activity is rebounding and will continue to expand at a

moderate pace thereafter. overall, the committee continues to see sufficient underlying strength in the economy. and the committee remains mindful that inflation could pose risks to performance. and expectations continue to be well-anchored. the committee continues to expect inflation to move gradually back. and the committee wants to ensure that the policy continues to reflect the longer-term objectives of employment and

inflation rates of 1.2%. as always, each participant's projections are modeled on their own perspectives. -- now stands at 6.0% to 6.1%. and we generally see the unemployment rate declining to the normal level by the end of the 2016. and -- 2.1% to 2.3% for 2014. down notably from the march projections. largely because of the

unexpected contraction in the first quarter. finally, fomc participants continue to see inflation moving only gradually back to 2.3% over time as the economy expands. the central tendency of the projections is 1.5% to 1.7%, ri rising in 2016. and the committee decided to make another measured reduction in asset purchases. and we will go down $10 billion

from today's rate. and after, we will continue to expand our holdings of longer-term securities. and reinvest principal holdings of agency debt and agency mortgage-back securities. these sizable and still increasing holdings will continue to put downward pressure and make financial conditions more accommodative. h today's announcements show that progress to the objectives will continue. -- on going improvement in labor

markets and inflation moving back over time toward etc. longer run objective, the committee will likely continue to reduce objectives in measured steps in future meetings. but it is not a preset course and decisions remain contingent on the outlook for jobs and inflation as well as the assessment of the likely success of these policies. and in determining how long to maintain the target rate for the federal funds rate, the committee will assess progress toward its objectives.

this broad assessment will not hinge on any one or two indicators, but will take into account a large range of indications. based on its current assessment of these factors, the committee anticipates that it will be appropriate to maintain the rate until the program ends, especially in continued inflation continues to run below the goal and longer-term expectations remain well-anchored. and it's the committee's current

assessment that -- economic conditions may for some time warrant keeping the target federal funds rate below levels the committee regards as normal in the longer run. this is consistent with the policy as reported in the participant's projections. which show the federal funds rate remaining below normal values in 2015. and although there are a number of explanations of the federal funds rate target remaining below its normal level, there are some reasons -- diminished

expectations in future outcomes -- may be lower for some time. let me reiterate that the committee's expectations are contingent on the economic outlook. if it continues to be stronger than the anticipation of the committee, then increases in the federal funds rate target are likely to occur sooner and be more rapid than currently envisaged. -- resulting in larger and significant increases, then the changes will takegradual.

these represent prudent planning, and the intention to communicate plans to the public. the committee is confident it has the tools it needs to raise short-term interest rates and to control the level of the interest rates thereafter. the committee's recent discussions have centered on the appropriate mix of tools to

employ during the normalization process and the degree of control over short-term interest rates, the funding of the federal funds market, and the extent to which the federal reserve interacts outside of the banking center. we will continue its discussions in upcoming meetings, with details coming later this year. thank you. i'd be happy to take your questions. >> is there every reason to expect that the pce inflation rate, followed by the fed, looks

to exceed your forecast later this week. does this mean that the federal reserve is ahead of inflation? if it's above the 2% target, how is that not blowing through the target in the same way you blew through the 6% target? thanks. >> thanks for the question. so, i think recent readings on, for example, the cpi index have been a bit on the high side. but i think it's, the data we're seeing in noisy. it's important to remember that inflation is evolving in line with the committee's expectations. the committee has expected a

gradual return, and the evidence we've seen suggests that we're moving toward our 2% objective, and i see things roughly in line with what we expected it to be. and looking at the projections we submitted this time, we see have little change with the projections of the committee. >> what about the tolerance for higher inflation? >> well, the committee has emphasized that we have the 2% objective as a longer-term -- for pce inflation.

and we will not willingly see a period where inflation is above or below our objectives. and we continue to see the data coming in, abstracting from the noise, in line with what we expected. and continue to see a gradual movement toward our expectations in the next two years. >> can you please talk about -- is that something more permanent about the economy? is this it, or is there potential to go lower yet?

>> well, you do see a slightly higher decline in the committee's longer-term normal rate of interest projections. i would caution you, however. we've had turnover in the committee. two new participants that are new and two who departed. and that can create changes in the projections. small changes that are difficult to interpret. and i think the most likely reason for that is, there's some slight decline of projections pertaining to longer-term growth. and particularly estimates of --

would move in line with growth projections. >> my question is the flip side of steve's. it's about your outlook for unemployment. your predecessor said that -- today, you lowered your outlook again. how do you see the unemployment rate evolving? what might an unexpected drop mean for the first rate hike? >> it's true that unemployment has declined slower than the committee has expected. and you do see a slight lowering

of expectations in terms of the unemployment rate. but i think we've seen continued job growth at a pace that is certainly better over the time. over the last three months, for example, employment, payroll employment has been rising. around 230,000 jobs per month, and close to 200,000 over the last year. that said, many of my colleagues and i would see a portion of the decline in the unemployment rate is perhaps not representing a diminution of rate in the labor

department. and i think most of us would agree that there has been and will continue to be decline for d demographic reasons. i think it probably reflects a kind of shadow unemployment or discouragement. a cyclical part of labor force participation. if that's correct, we may see further recovery in the labor market. those, let call them, discouraged workers will return either to unemployment or employment. and as labor force participation begins to stabilize, the rate will come down less quickly.

and i think for a number of people, that's a component of the forecast. you asked about implications for the path of policy. well, the forward guidance states that the timing of liftoff will depend on actual progress we see, and the progress we expect going forward to achieve our goals. maximum employment and 2% inflati inflation. so, we're not going to look at any single indicator like the employment rate to assess how we're doing. we'll look at a broad range of indicators. but there is uncertainty about monetary policy. the timing and pace of interest

rate increases. ought to, and i believe will, respond to independeicatorndica. but the opposite also holds true. if we don't see the improvement that's projected in the baseline outlook, the opposite will be true in the case of the timing and interest rate increases will be later and more gradual. >> and some officials and commentators have noted to market conditions look like they did last spring before a period of volatility.

risk premiums are low. and in particular, market expectations for short-term interest rates look below the fed's projections. i want to ask two questions about that. one, what is your read on market activity. and are you at all concerned about a sense of complacency in markets? and two, what is your view on market expectations that the fed has laid out in its dot plot? is the market where the fed is on that? >> well, i'd start by saying that volatility, both actual and expected in markets is at low levels. the fomc has no target for what the right level of volatility should be.

but to the extent that low levels of volatility may induce risk-taking behavior that entails buildup in leverage or extension of maturity, things that can pose risks to financial stability later on, that is a concern for the committee. i don't know if overconfidence or complacency is one of those reasons, but i guess i would say it is important, as i emphasized in my opening statement, for

market par tticipants that ther is uncertainty. and the adjustments to the policies will be adjusted over time, and that gives rise to a certain level of uncertainty about what the path of rates will be. and that's important for market participants to factor into their decision making. you asked me about the dot plot, forecasts or projections for the fed funds rate. you do see a range of disagreement among the participants there. by 2016, there is a considerable range of disagreement. participants do see different

rates of trajectories of inflation and recovery. and they adjust this to their own view of how the economy will evolve over time. and around each of these dots, every participant has a considerable band of uncertainty around their own individual forecasts. >> you've spoken about the sense that the recession has done permanent damage of the economic output. i'm curious to know what you think stronger policy could reverse the trends.

is there something we can do about it? and if not, why? >> well, i think part of the reason we're seeing slower growth may reflect the fact that capital investment has been slow in the recovery we're experiencing. so it does make a negative contribution to growth. as the economy picks up, i certainly would hope to see that contribution restored. so, i think that's one of the factors that's been operative. of course, we've had unusually long duration, unemployment, a very large fraction of those

unemployed for more than six months. there is the fear that those individuals find it harder to gain employment, that their attachment to the labor force may diminish over time. and the contacts that are helpful to gain employment could erode over time, and -- because they haven't had jobs for a long time, they find themselves permanently outside the labor force. my hope and expectation is that as the economy recovers, we will see some repair of that. that many of the individuals where were long term employed would take jobs if the economy is stronger and would be drawn back in again.

but it is conceivable that there is some permanent damage to them, their family's well-being and the economy's potential. >> thank you, madam chair. i believe you mentioned in our opening remarks, tighter credit. and i'm wondering if you think the possibility of the federal reserve is partially responsible for them. and the litigation, i read something that where the three largest banks have paid millions of dollars in fines so far. if you look at federal reserve bank of new york research, and people below a fica of 500 are

havie inine ining worse credit . banks just don't want to take the risk. so, what can you do to fix that? >> i would first start by saying i really think it's essential to strengthen financial regulation and make it more robust and reduce risk. so, i think the regulations we've put in place, most of which follow from dodd-frank, are highly appropriate to create a more robust financial system

which will be a safer one going forward. and i think we're making progress is doing that. putting regulations in place, we've tried to phase them in that gives long enough lead times to make sure that, in strengthening the system, we don't produce a credit crunch. and my assessment is that credit is broadly available. but i do agree with what you said in terms of mortgage credit. banks are not as likely to lend to lower fica scores. and i think it is difficult for any homeowner who doesn't have

pristine credit these days to get a mortgage. i think that's one of the factors causing the home market recovery to be slow. and of course, there are a lot of practices in connection with mortgage lending that need to be changed. but we can clarify the rules to create an environment of greater certainty for lenders to be willing to extend mortgage credit. >> the fed has slashed expectations in lending for this year.

and you said there is uncertainty in the path of recove recovery, but the expectations remain quite strong. are you quite certain that the united states will sustain a period of growth? >> well, there is uncertainty. but i think there are many good reasons why we should see a period of sustained growth in excess of the economy's potential. we have a highly accommodative fiscal policy. easing credit conditions. we have households who are becoming more comfortable with their debt levels and more able to service debt, an improving

job market. rising home and equity prices. an improving global economy. i think all of those things ought to be working together, and that's reflected in the forecasts. but of course, there is uncertainty reflected in the projections. and over a number of years in which admittedly, growth has come slower than we'd like. but i think that we will broadly continue to improve. >> and -- i assume that involved some review, the third

anniversary of the june 2011 exit principles. is the committee reaching a consensus about the reinvestment and rollover policiepolicies. i'd be interested in your personal view on that. >> that was included in our principles. we've not yet reached -- we've made quite a lot of progress in our discussion, but haven't reached a conclusion. there are a couple of things chairman bernanke indicated in contrast to our 2011 principles. we would be very unlikely to be

able to sell mortgage-backed securities. and some of the principles that were incorporated in that package, expecting our balance sheet to shrink back toward normal levels that would be consistent with officially conducting monetary policy. that's still an expectation, and that eventually, our portfolio will consist largely of -- but there are a number of tools that we can continue to use. our rrp facility, term purchase

agreements, and exactly how to deploy that set of tools to meet our objective of raising the general level of short-term rates when the time becomes appropriate. and how best to communicate to the public and to markets how we're conducting policy and what our objectives are. we're hopeful to come back with a full description, or a revised set of principles later this year. >> madam chair, one of the outstanding reform issues on the plate of the fed is to handle the risk associated with short-term funding.

can you please explain to us why it's taken so long to get this proposal out and where we may be in that process? thank you. >> i'm afraid i can't give you a detailed timetable. we've been supportive of taking some action to diminish the incentives for heavy reliance on short-term funding. we still see that as one of the risks to the financial system. -- or in thely -- related to

reliance on wholesale funding. i've been supportive, but i'm afraid, at this point, and this remains very much on the table. to address this, it remains on the table as an unfinished agenda item. i'm just not certain. i just don't have the detailed timetable for you, i'm sorry. >> madam chair, this is partially a follow-up to the question, how would the administration move if the rates are above target? there has been some suggestion -- that may achieve a faster improvement to

employment. >> so, with respect to the question of overshooting, let me start by saying that inflation continues to run well below our objective. and we're still some ways away from maximum employment. for the moment, i don't see any tradeoff whatsoever in achieving our two objectives. they both call for the same policy, a highly accommodative monetary policy. so, overshooting inflation or the thought that we will reach it before attaining maximum employment, i see it as a risk

we could face down the road. and it's a risk we could reach our maximum employment objective before we reach our inflation objective, so there are ways in which there could conceivably reach -- a statement on our longer run goals and policy. what it said was, first of all, whenever inflation or unemployment are away from their desired levels, it will always be the policy to get back to the normal levels over the medium

term. but in that statement, the committee will follow a so-called balanced approach with its policies. that means when we see some conflict between achieving the two objectives, we would consider deciding on a policy just how far we are from achieving each of the objectives. and if the distance is particularly large, it would be consistent with the balanced approach that we would tolerate some movement in the opposite direction in the other objective. the balanced strategy is one we would follow. >> i'd like to ask you about your signaling mechanism going

forward. you told people, don't pay attention to the dot plot. if something should surprise in the economy, with only four press conferences a year, how do you signal to the markets -- some sort of credibility problem where people feel you're falling behind the economy? >> well, again, we are very attentive to unfolding economic developments and understand that there can be surprises and twists and turns in the road. so, the forecasts we've made become no longer appropriate, and we need to respond to

further developments. we have four press conferences, but i would feel it appropriate for me to either have additional communications, meetings with the press, to give speeches or in a variety of opportunities, i need to make clear what the thinking of the committee, i would feel entirely appropriate to communicate changes in our views. >> thank you very much. since we're currently having the world cup, i think it would be valid to ask a question about the world. and looking at the darkening

outlook over the world, in the ukraine, in iraq, problems with global impact. do you that the u.s. can be a leader globally? and do you think that financial stability is making the fed be more accommodative than it would usually be? >> well, let me start -- with respect to financial stability, we monitor threats very carefully. and we have spoken about some, i've spoken in recent con

aggressionle -- diminished risk spreads in lower-grade corporate bonds. high-yield bonds have certainly caught our attention. this is some evidence of reach for yield behavior. that's one of the reasons i mentioned this environment of low volatility is very much on my radar screen and would -- that could unwind in a sharp

way, and provoke a sharp raise in interest rates. that could impact the global economy, and it's something to avoid. but broadly speaking, if the question is, to what extent is policy being driven by financial stability concerns, i would say i would never take off the table that policy should respond, but i don't see it shaping policy in an important way right now. i don't see a broad-based increase in leverage, rapid increase in credit growth, maturity transformation -- has risen above a moderate level.

we're using tools and regulations to make the system more robust and to pay attention to areas where we've spotted concerns, like leveraged -- let's see, the first part of your question, about global risks. and we always pay attention to global risks and the likely evolution of the global economy. you expressed pessimism, but i believe we'll more likely see growth there. of course, there are geopolitical risks. in iraq, not only a humanitarian concern, but also with energy

supplies and prices. so, i would certainly list that in the category of risks to the outlook. >> peter barnes, fox business. what about equity markets? right now, the s&p 500 is on track to close at another record high. you have said you haven't seen any evidence of bubbles, and trading within historic norms. have you seen anything like that today? >> well, we do certainly monitor a number of different metrics that give us a feel for where

valuations are relative to things like earnings and dividends. and look at where the metrics stand in comparison with history, to get a sense of whether or not we're moving outside of historical norms. i still don't see that for equity prices broadly. >> thank you, chair yellen. i'm growth this year and next year and if inflation outpaces wage growth, does that scenario make you more hesitant to raise the federal funds rate next year or if conversely wages rise just enough to keep up with inflation, moving in lockstep, let's say. is that enough to satisfy what you're looking for in the job market? >> well, thanks, that's a great

question. you know, i see compensation growth broadly speaking and as having been very well contained. by most measures, compensation growth is running around 2%. so that's real wage growth, real compensation growth is essentially flat rather than rising and real wage growth has not been rising in line with productivity. my own expectation is that as the labor market begins to tighten, we will see wage growth pick up some to the point where real wage growth, where compensation and nominal wages are rising more rapidly than inflation so households are getting a real increase in their

take-home pay. and even limits that might be size of the tighter labor market, within limits it's not a threat to inflation because consistent with the level of inflation we have for our 2% inflation objective, we could see wages growing at a more rapid rate and -- a somewhat more rapid rate and, indeed, that would be part of my forecast of what we would see as the labor market picks up. if we were fail to see that, frankly i would worry about downside risk to consumer spending. so i think part of my confidence that, in fact, we'll see a pickup in growth relates to the fact that i think consumer spending will continue to grow at a healthy rate and in part that's premised on some pickup in the rate of wage growth so that it's rising more than

inflatio inflation. >> today's statement repeated a phrase that's been used -- that the committee has been using, that there's likely to be a considerable period between the end of the bond purchases and the first hike in the federal funds rate. in march, you gave us some guidance trying to help us understand that by saying that that's hard to define but it could mean six months. is that a time frame that you feel comfortable with? and if you feel like it needs to be modified do you -- could you give us a an assessment of the -- the markets seem to expect the first rate hike in the second half of next year. is that a good assessment? >> so what i want to say, the guidance that i want to give you that there is no mechanical formula whatsoever for what a

considerable time means. the answer as to what it means is it depends. it depends on how the economy progresses. the committee said very clearly in their statement that what they would be looking at and deciding on the timing of interest rate increases would be the progress we're making in achieving our objectives, how far we are from achieving our labor market objective and our inflation objective and that we will be assessing that progress and that's the key determinant of when interest rate increases are likely to come. there is no mechanical formula.

>> thank you, greg robb from market watch. there was a report this week in a salmon colored newspaper i won't mention that the fed is thinking about -- or regulators in washington are thinking about an exit fee for bond mutual funds. this has sparked a lot of comments. would you care to comment on this? >> i am not aware of any discussion of that topic inside the federal reserve and my understanding is that that is a matter that is under the purview of the s.e.c. >> the epa proposed new rules recently to-to-reduce new greenhouse gas emissions from power plants. an epa official will take questions about the proposal

before a house subcommittee hearing on energy and power. live coverage at 9:30 a.m. eastern here on c-span 3. and later in the day, republican senators ted cruz, mike lee and marco rubio deliver remarks at the faith and freedom coalition conference. the organization was founded by ralph reed and our live coverage begins at 12:30 eastern, also on c-span 3. >> up next, former iraq administrator paul bremer talks about the current situation in iraq. he joined us on "washington journal." >> we are back with paul bremer. as many of you know, served as the administrator for the iraq coalition, provisional authority from 2003 to 2004, headed up the reconstruction of iraq and the setting up of its government back then. mr. bremer, let me begin w the

hear and now in the situation in iraq. you've got the front page of the "wall street journal" saying that the president believes -- has ruled out air strikes for now but then you've got the "new york times" saying that he is eyeing limited strikes, drone strikes like we have done in yemen. what is your take? >> well, i think there are two problems that need to be addressed that affect the american interests here. there's the immediate problem of these terrorists moving into iraq and there's a broader problem that we will eventually have to get to which is the collapse of the whole geopolitical structure that's been in place for a hundred years. on the first problem, the president identified a week ago in his statement on friday a week ago the interest the united states has in not allowing the isis terrorist group to gain foothold in iraq. i think that is a correct assessment of our immediate interest. my own view is that that will require military action by the united states.

wlp t whether the president will come down on that or not is an open question because, as you point out, the papers are somewhat contradictory but i think it will require limited american military involvement which could have two military objectives -- one is to first stop the southward movement of the isis toward baghdad and the holy cities of karbala and najaf, which are south of baghdad. the second is then to help iraqi forces recover the territory that's been lost, particularly the cities of fallujah, tikrit, mosul and tal afar. if you think about it from a military point of view, air strike cans matter. air strikes by the french basically changed the battlefield balance of forces in libya. it can work. not, obviously, without effective ground forces but it can work. i'm not talking about putting american combat forces in, by the way. i'm talking about a need for intelligence on the ground, help to plan and execute these operations which is exactly how it worked during the surge.

>> president barack obama has sent a little over 200 troops to the area to help secure the situation. is that adequate? >> well, as i understand, what the white house has said about that first group, they are basically there to protect the american embassy. they are not there immediately anyway to coordinate with the iraqis on the broader problem. so i think we'll have to wait and see what the next announce system from the white house on this subject. i'm obviously fully supportive of protecting the embassy since i worked in embassies myself for 25 or 30 years. but that doesn't solve -- doesn't address the question of what we're going do about keeping isis from establishing a base, which was the president's statement. >> how do you militarily hold back the isis from continuing their momentum while at the same time not alienating the sunni population in iraq? >> well, i think it's important to -- you know, people sort of divide this very quickly into a

shi'a/sunni thing. it's a little more complicated than that. the sunnis, many, many, sunnis in iraq do not like al qaeda and these terrorists, as we saw during the program of the awakening, as it was called, when we were able to mobilize the tribes, particularly in the western al anbar province in 2007 and 2008 to fight against and defeat, in the end, al qaeda. these -- the isis people are trying to establish a caliphate, they have already shown their colors by executing prisoners, by establishing sharia law in mosul. this is not going to be popular with the vast majority of sunnis so i don't think that is the problem. the problem is how do we do it in a way that doesn't make it look like we're siding only with al maliki and his rather narrowly based shi'a government? that's the problem. >> and how do you do that? >> it's going to be very hard. i think the president, again, is

right to say that the level of our involvement should in some degree be conditioned by al maliki trying to broaden his government a bit. as soon as we withdrew he basically started an anti-sunni campaign, anti-kurdish campaign. he urged the army of the officers we had trained right down to the battalion level which is one reason the army has been collapsing so quickly. so he's -- the president is right, we've got to get al-maliki. my view, my experience and the experience of every one of the american ambassadors who succeeded me in iraq is only the americans can actually be there and broker a political reconciliation. it can't -- they can't do it themselves for a whole lot of reasons. no other country can do it. i think that secretary kerry ought to be in baghdad. he ought to go there and he ought to go there and show that we really mean it. that al-maliki is going to have to broaden and in effect the americans have got to get act i

have -- active on the ground. that's how you do it, it's called diplomacy. >> should nouri al maliki go? >> i don't take a position. this is a democratically elected prime minister. he actually won the election just a couple of months ago. i don't think -- i don't think public comments he made yesterday critical of al maliki strengthen our hand in trying to persuade them to do the right thin thing. >> i would like to see an official trying to talk with al maliki, the sunnis and kurds to pull together a government. >> during your tenure, did you know nouri al maliki? >> no, he was not very prominent but i had no impression of im.

>> you have no impression of him? >> no personal impression. i think he has not been a very good prime minister in terms of the last couple years narrowing of the political base but i don't have an opinion on him. >> how can there be a cooperative government for the iraqis? how do you bring sunnis and the shi'a population into the government? >> well, it has to be done through active diplomacy. i think only the americans can do it. >> nuts and bolts, how does it work? >> it works like any diplomacy. you sit down and drink a lot of tea and talking to a lot of people. the problem we faced and continue to face is this -- by overthrowing saddam hussein sad effectively we ended a thousand-year domination of this area, the land of mesopotamia, by the sunnis. they've been in charge for a thousand years and one of the

statements i had to make over and over and obviously it seems to have been fading in the last decade, one of the arguments i had to make to the shi'a was yes, representative government is a good thick but one of the key elements of representative government is respect for minority rights. that's a hard message for the shi'a to understand after a thousand years. and the loss of power is a very hard message for the sunnis to understand. so there is a very long historical problem, effectively, of political revolution. you have to find a way to appeal to their interests and try to find a way you can put their interests together so they're willing to work together. it's obviously much more difficult because of events of the last six months even than it was in 2003 but we have to try. the most important something that's the political part of the

strategy. we've got to have a military strategy. unless we stop isis, all these other things are details. we've got to stop isis. >> why should the u.s. go back in with special forces like you've been talking about when it doesn't seem -- when this could just happen again once the united states leaves? i mean it's been ten years. >> it's a fair question and all the polls are clear -- the american people don't want to go back in. i understand that. the only reason is because we have an interest that the president correctly identified which is that the world's worst terrorist group should not gain control of a big chunk of property -- very rich property, by the way. this is not afghanistan with no money and back behind the hills. this is the possibility of an al qaeda type group getting its hands on a very rich part of the world and, by the way, they have americans among them. we saw an american suicide bomber last week in syria.

they have europeans. in other words, it's a much more difficult group to contain than it was with the taliban. so the president is right. that's not in our interest. that's the only reason. you don't go into this kind of a thing out of some fantasy, you go because you're clear -- your clear identification of american interests compels it. not a happy thing to have to say. >> before we get to phone calls, there have been critics, obviously, of the bush administration of you who point back to your leadership when you were there in 2003 for those 14 months when turn head of the interim government, the role that you played in forcing members of the ba'ath party of saddam hussein's party out and dismantling the iraqi military. that that is what led to the insurgencies that we've seen over the years and the current situation now. >> well, if you have a minute, why don't i answer both those? >> yes, please. >> because it's important to deal with some of these myths. take the ba'ath party first,

first of all, the ba'ath party was identified by every seconder of the iraqi community that the state department talked to, they did a year long study called the future of iraq. everybody agreed there should be no place for the ba'ath party in a post-saddam era. this was a decision -- a recommendation made at the end 2002 before we went in. the u.s. military under general tommy franks outlawed the ba'ath party before i got to iraq and so the question was what are you going do about the members? what we did was a very narrow decision to say to the top 20,000, about the top 1% of the ba'ath party, that they could no longer be in the government. most of those people had already left by the time that was issued and contrary to the myth, it didn't collapse the government. the government kept going. it was the single-most popular thing that we did when we were there. it always polled above 95% popularity. in other words even sunnis

agreed with it. now, i did make a mistake. i turned the implementation of this very narrowly defined decree over to iraqi politicians who then ran with it and made it much worse. that was a big mistake. on the army, just four quick points. number one, there was no army. the problem was to choose the word disband. what we really were -- because the army went home. what we really were doing was saying we didn't want to recall the army. why? saddam's army was a conscript army. most -- about 300,000 shi'a enlisted men who had been drafted under an even larger officer corps that was dominated by sunnis. and which brutalized the shi'a. 10 what happens when the warm started to go against them, they all went home, there was no army. woe would have to go back into the villages and farms and force shi'a conscripts under guns back urn. that's point one. instead we decided to build a new army, we gave pensions to

every single officer of the old army and we said to them up to the level of colonel, you're welcome to come into the new army. >> even sign zblees. >> even sunnis. and by the time i left 14 months later 75% of the officers and ncos in the new army were from the old army. we had vetted them and they were in the army. third point. that army with our help defeated al qaeda. people forget this. by 2008, end of 2008, al qaeda had been defeated by the iraqi army. it was a well-trained army so so you say why is it screwed up now? because as i mentioned earlier, al-maliki after we withdrew our troops basically started to purge down through the ranks even down to the battalion level putting in his partisans who were not certainly most of them tra trained and anybody who knows anything about the military knows that the unit leader is the key. if you don't trust the captain or major who's telling you to fight these isis guys, if you think this guy doesn't know what

he's doing because he used to be selling rugs in' wan nia, you're not going to fight for him. and we saw a very quick collapse along those lines, particularly in mosuls. >> let's get to calls. paul is up first in tennessee. republican caller. good morning, paul. >> >> caller: good morning. i want to tell you something, i'd take my 30 days before i call in and i've got just a quick couple of comments that i'd like to make and i've got a question for mr. bremer. >> all right, go ahead. >> mr. bremer, it's an honor for me to get to speak to you right now, but i want to take us back through history right here just a little bit. during the collation the tower -- they tried to vote them up and then we had all of our bases in africa that were blown up while president clinton just sat on his hands and absolutely done nothing and then of course he fired a few missiles at

afghanistan and virtually nothing. now here comes obama in here and he's telling the enemy, "hey, we're going to leave on thursday and you guys can do whatever in the heck you want to." we keep funding these guys to fight these other guys and then they're taking our stuff and just rubbing it right in our nose. but during -- after we went to war in iraq, we supposedly was going there to find nuclear weapons. they didn't find nuclear leer weapons but the men had used chemical weapons on his own people and gassed them. just an evil man. and not long after we was in there libya turns over nuclear weapons and they had no way to make nuclear weapons. >> paul, we've got a lot of folks who want to get in. so what's your question for mr. bremer. >> mr. bremer, can you tell me, do you think you've -- do you -- what's the chances that those

nuclear weapons that could not be turned over, what's the chances that those come right out of iraq and all these democrats that won't call in are going to say that there was no al qaeda there, abu musab al zarqawi was killed right there -- >> okay, paul, i think we got your point. mr. bremer? >> well, i think qaddafi's nuclear program was his own program. it wasn't anything do with the iraqis. the intelligence just turns out to have been wrong and it wasn't just our intelligence about saddam, it was the french, israelis, british, germans, russians, people who even opposed our invasion there. i don't think the qaddafi thing had any relation to iraq. >> and the caller also brought up clinton and al qaeda. >> well, look, i chaired the bipartisan national commission on terrorism under president clinton and we reported in 2000 to president clinton that we saw a new terrorist threat arising, ladgely because of events in the

1990s. and we even predicted a mass casualty attack on the american homeland and by complete chance had a picture of the world trade center on the cover of our report. so i guess i agree with the caller's thrust that it was important during the '90s to understand that we faced a new threat and unfortunately neither the clinton nor the bush administration really took account of our report until 9/11. >> on twitter richard has a question for you "ambassador bremer, did iran ben it from the overthrow of hussein?" >> well, it may have. we'll see how this whole thing plays out. we're in the middle of a major potential restructuring of the whole political -- geopolitical structure, as i mentioned. and it would be unfortunate if that were the case because iran is the world's leading state sponsor of terrorism, has been identified as such by six presidents of both parties,

including this president. >> we'll go on the james in newark, new jersey, democratic caller. hi, james. >> how are you doing, mr. bremer. i agree with everything you said so far as what should be done. you're right on the mark. i'm a moderate and i have had discussions with president george w bush way back in 2002 about the whole situation. i want to say we should invade with him and two of his advisors. now we kept in touch with each other for several years afterwards like what happened -- i do not you at the time because i was talking about this with the president, bush, at the time. and what you concluded is right

on. >> so james you agree there could be air strikes? >> no, i agree maliki should intergrate his cab bit in the shiites and the kurds. >>. many bremer. >> we agree and i'm glad to hear you support the idea of a political -- let me be clear. both of these things have to happen. there needs to be a military strategy which is enveloped in a broader political strategy which in turn eventually will be broadened in a strategy to address geopolitical unrest in the region. all three of those things have to happen but unless you do the military part the other two are just talk. >> just to be clear, drone strikes? do you think that's a good idea? >> yes. here's the problem. the military strategy would have two objectives. stop the southward flow. to do that, you can attack the lines of communication and the