i think there are some things we could do. i think there are some tweaks that should be made. there should be some reform. i think the delta air line representative brought us some things that should be considered but my concern is, the xm bank has been well received by everybody over the years and now all of a sudden we have this partisanism over the bank and i'm just wondering, what is it about this moment in our history that we don't think we can look at a problem and some of that's not a big problem, and make changes so that our businesses can compete for business abroad? i mean i'm frustrated over the fact that it would seem to me that there are issues that need to be addressed. they can be fixed.

has there been anything discussed to the day that can't be dealt with if we sat down and worked? >> congressman, i'm a business map. i came to this after 20 years in the private sector. so we're constantly and our team is looking for better ways to operate the bank, address reforms and issues brought up by congress so we can do a better job in managing risk and also serving exporters. lastly, i would just add, as under president reagan, a number of reforms went into place and president reagan signed a six year extension of the xm bank. >> the time of the gentleman has expired. the chairman recognize the gentleman from north carolina, the chairman of the investigations subcommittee, i want to ask you about the world street journal story from june 33rd for employees being under investigation for accepting kick

backs. is there an internal investigation conducked by the xm bank separate than the office of the inspector general? >> let me just begin by saying, frankly -- >> i just want to know. i'm outraged by -- >> i appreciate that. you've answered this question before that you're outraged but is there an investigation by the xm bank separate from the office of inspect ojoor general. >> most of those investigations are transferred over to the investigator general. so they are under the jur is of the inspector general at this point. >> at this level of seriousseri, they are tush turned over. >> well, it's not closed. it is an open issue.

>> but if you referred it to them because of the seriousness, then you are done with the investigation, kregt. >> we are awaiting to hear what the inspecton general says. that may recommend what other actions we take. >> i understand. so as a result of this, have you consulted with the general counsels office about these reported incidents of fraud, waste, and abuse? >> well, let me just make one statement. all of these infractions, all of these individuals you're referring to were all referred to the inspector general by our employees. our employees said there's something suspicious here. i need the inspector generals to look at this. these were all internally generated and sent so the inspector general by our own employees. >> i'm asking about you. >> i'm not sure i understand the question. >> okay. fantastic. so have you consulted the ethics office about these matters?

>> well, the matter has been handled by our general counsel and inspector general as is proper. >> and the general counsel referred to over to the office of inspector general? >> on some of them they may have been turned over by another employee. they don't have to go through a particular channel. any employee can refer and manage -- >> let me ask you a separate question. is there an office of ethics at the xm bank? office of ethics, i mean yes -- in the general counsel's office there's an office of compliance. i know there are two to four attorneys in the administrative law area. >> and they report to the -- >> they report to the general counsel. >> yes. okay. other ethics offices actually directly to the head of the operation in other parts of government. would you support that? >> well, we have a chief risk officer that this committee

asked that the inspector general recommend and i committed to. the chief risk officer has reporting to him, it's more broader than just credit risk. it looks at everything. >> i understand. i just asked a simple question, the chief officer reports to me and he -- >> i understand. i asked about the ethics office not about the risks office. >> well, ethics is part of that. >> i understand but i am talk being a direct report. i move on because i understand you don't want to answer those questions i have been asking so i will ask the question, raw wear of any criminal investigation about the actions that were brought to light in the wall street journal report? >> these matters, i think are better answered by the inspector general since they are an ongoing investigation. i don't want to invade people's privacy. >> are you aware of a criminal investigation about these matters. >> i am aware that they are conducting a investigation. >> are you aware if there's a criminal investigation about this matter? >> i'm aware of the

investigation. i still feel the question would be better answered so i don't invade anyone's privacy by the inspector general who's at the table. i don't want to make a misstateme misstatement. >> i understand in terms of meetings with the office of inspector general, it's much easier to do. i'm just trying to ask you a few questions. so mr. chairman, i'm just trying to get to the bottom of this. if i can ask you a question about the florida construction company. the center of the wall street journal story, have you had any contact or dealing with them personally. >>? oh, no. absolutely no. >> all right thank you. mr. chairman, i yield back. confounded, i yield back. >> gentleman yields back of the the chairman now recognizes the gentleman from florida for five minutes. >> thank you mr. chairman. chairman hochberg good to see you. thank you for your stead past promotion of american jobs and

american manufacturing in our country. as a small business owner, i understand that one of the most important things those small businesses need is access to capitol and financing. last year alone ex-port and impart bank financing supported over 200,000 jobs 90% supported small unilaterally disarms the export financing world and allows xm to lapse, what kind of economic impact could it have on american manufacturing, on our job creators, our exporters, selling goods that are stamped proudly made in america all around the world? so many of which have relied on this export, import bank? >> well on the first panel there was specific testimony about how the threat of it not being here in september has already impacted the awarding of a 57

h million contract that would support a lot of jobs. the smaller transaction of $48 million supported 165 jobs. it would obviously be more. it's an even larger transaction. we heard small businesses at the time of the shut down were losing sales because of potential we would not be there. small businesses rely on us very deeply. it's 90% of our customers, 90% of clients. frequently they do not have other option. they frequently have few very options. i ran a small business. it's hard to get credit in general and it's even harder for a sha a small business. lastly, many of the small businesses are part of the supply chain. they are part of the boeing supply chain, they are part of space x where congresswoman waters is in her district. there's a wide supply chain. manufacturing like boeing or ge don't make 100% what they do.

their supply chain are full of small businesses that would be impacts immediately. >> as fiscal conservative myself i view all government spending with a skeptical eye, one of the things say frequently is isn't this body's role to create jobs rather that's our role to create an environment conducive to job growth. you developed that environment through stability and certainty not through sequesters. can you talk about some of that uncertainty and what was last year 200,000 jobs what it could potentially be in the future. >> it's hard to be precise. i'm thinking positively that we will reauthorize the bank and do it on time. but let's be very clear. 205,000 in the past year well over a million jobs over the last five years just under 1.2 million were supported by our exports because we filled a gap

the private sector could not fill or did it to meet the competition. so those are all at risk. when someone gets a loan from us they have to state why they load the loan from us or the guarantee or why they can't get it in the private sector. we are there when the private sector can't or won't. >> to that point i feel like i'm in an alternate universe here. this doesn't maek any sense. can you talk about on the international scene how this is affected what some of our competitors are doing. what some of other countries are doing and maybe, you could address if you think they are going to step in to help us. main their export banks will step in to help american manufacturers. >> well, the xm banks of china, russia, and france -- there are 60 countries that have an export bank. they all would gleely take sales

from the united states and support more jobs in their community. they are delighted to do that and looking forward to doing that. as i mentioned, china does more than four times the amount of financing for its exports than we do. >> if anything some could argue we should be expanding the export and import bank. >> if you really care about jobs and you want to make sure we meet the competition and one way to get the competition in line is to meet them toe to toe, head to head over and over again and indicate we're not going to back down unless they play by the rules . it would be one thing if not a single other country in the world had the equivalent of the export, impart baort bank. they do and they are bigger. we live in this reality and we mine as well compete and give them the best opportunity we have. >> the chairman recognizes the gentleman from california. mr. royce. the chairman of the foreign

affairs committee. >> thank you very much. a stated goal of xm bank is to provide xm credit assistance to serve customers who are unable to obtain financing through the commercial markets. what policies and procedures does the bank have in place to ensure that it is limiting its assistance to these customers and not crowding out opportunities for private capital markets. does xm make any formal analysis of what kind of private capital would enter markets in its absence. >> each application must state why they are looking for our support and why they can't find it in the private sector. that's a requirement whether it's lack of financing, meeting the competition. sometimes banks have limits on what they will do in certain industries in certain countries. that's where we step in.

sub-saharan africa is a good example of that. we did a lot of loans in the philippines. we have a list here. in cameroon, i think i mentioned over half the exports we went there, we financed. why? it's very hard to get any bank to step forward. in place like western europe we do very little business because the banks are able to do. japan, we hardly do any business. there's a very defined banking system. >> let me ask the goa, is xm doing enough to ensuring that companies are going out in the private market and not finding capital before coming to the banks? >> i think that gets into sort of underwriting and what they are doing in terms of looking at eligibility and the anal isysis that's done there. we have work under way that's looking at that but that work is not yet complete. i would point out that we had made some recommendations back in '07 and this is just to clarify a point although xm has

been very captive and hkapt coo agreed not all yet have been impleme implemented. there are some from '07 that it is still working on. okay. well let me ask you also in terms the numbers both sides of the debate are claiming numbers that support their case based on different counting methodologies. the bank claims estimates that it made $1.6 billion in revenues. the cbo reported on may 22nd, that if xm used the fair valuing it would be budgeted as a 2 million cost to the taxpayer each year. can you explain the large gap in numbers even those assessments or in your response can you touch on what kind risk assumptions you use in terms of

losses and when you apply this fair value methodology? do you look at historical experience and commercial bank experience and do you factor in loss reserves in capitol. maybe a quick explanation of how you do this. >> yes, congressman. when the government makes a loan or makes a loan guarantee either through xm bank or some other credit program, the ultimate budgetary effects of that are not known. most loans are repayed some are prepaid in part. sometimes moneys are recovered. last year, xm turned over some amount of money to the federal treasury. that's true. when we give the congress cost estimates, we're trying to give you a sense of what will happen going forward under a certain program from a certain financial -- bit of financial assistance. those estimates are operating in

a great world of uncertainty. what the fair value methodology does is to capture in the estimates not only the expected level of default and recoveries but the variation around that expectation and to recognize how the possibility outcomes -- >> let me put it another way. what i'd be interested in is the risk analysis framework that's employed in accounting the private sector creditors. if you did that -- >> so private sector creditors take account of this market risk and put a price on it because the risk is costly. >> in your opinion if you did that, would it be a $200 million cost to the taxpayers. >> so when we applied that methodology to the xm bank's projections of the size of the credit programs, they will run of the default rates and recovery rates, taking the same set of underlying cash supplies that appears in the credit supplement to the president's

budget and that we use in our standard accounting, we apply those cost for market risks than the xm bank's programs are costly to the tune of $200 million ayear as you said. >> the time of the has expired. the chair now recognizes the gentleman from jorgeorgia, mr. scott. >> thank you mr. chairman. in this morning's hearing, the chairman of delta airlines and the palace associations made some very salient points. i think this. we've got to move the xm bank forward. it helps small businesses. it creates jobs. i believe we can do this as well as address those concerns.

so, i know that you know exactly what they are but from what the testimony said this morning, chairman of delta airlines mr. anderson and the head of the pil pilot's association both made these points that unless there is a level playing field and the exercise of one particular aspect of what you do, which is the financing of these wide body aircraft that puts our airline industry in the united states at a competitive disadvantage with foreign airlines who are able to get these wide bodied aircraft, flying these international routes that are very, very profitable. so if -- you can see the concerns that delta airlines has and the pilot and airline industry has because quite

honestly unless we do something to address this, and if xm bank is being used in an unfair way to subsidize for example, the airlines in india, the other airlines that have been brought up, when they get subsidized by their government and turn around and get subsidized by you. they are able to get the planes cheaper and they can reduce their ticket prices and that makes it very uncompetitive. so what i want to do is -- as i mentioned was find a way that perhaps we can come up with some language as we move forward with this within the 90 days that we have that can address that concern. that doesn't seem that this is mutually exclusive. can you help us with that and give me a little guidance on how we'll be able to move this forward at the same time addressing the concerns of delta

airlines. >> i'll do my best. one, let me just -- i have to say, we don't subsidize, people pay us a fee and as a result, they essentially are paying for our guarantee so they can borrow money through a bank. we are totally self funding and so self sustaining so there's not a subsidy going from us to anybody else. i just need to state that. two, in 2011, without congress asking us, we raised the fees multilaterally across the world. made it more expensive to borrow money from us to buy aircraft in particular. today, foreign carriers all pay more than a comparable u.s. carrier would pay for the same airplane so they are already paying a premium. what delta airlines is unhappy about is they are paying a premium. they pay more. they would like him to pay a lot more. we need to understand the facts. >> but delta airlines does not

take any money from the xm bank but these foreign countries do. >> we look at -- that is correct because the need is -- the united states has the best financial markets, the most liquid creative financial markets so u.s. carriers are borrow at far lower rates than any foreign carrier buying the same airplane. so there isn't an advantage going to the foreign carriers . but here -- granted. it's sort of like we're at a stale mate here. what we have to do is try to lean into one another and try to find out where we can give here because there's absolutely no way that we can move forward with the progression of the xm bank if you've got this salient

cry from an unlevel playing field for one of our most significant, most industries world wide. i mean isn't there something we can do even if it's a trigger or a mound. even if it means curtailing certain routes that the competition can't take. >> for three years we've been asking delta precisely what they would like and they have not given us a precise recommendation. >> i understand and hopefully we'll get that recommendation in an amendment that we can address this to as we move forward. >> time of the gentleman has expired. the chair recognizes the gentleman from tennessee. >> thank you mr. chairman. and the rest of the witnesses. appreciate you being here. a lot has been talked about today with delta airlines. i was looking over something where delta had used the credit export agencies of brazil and canada to purchase hundreds of aircraft made in those countries. is that true? >> yes. to the best of my knowledge.

>> so why would they be -- and to be -- to their accredit, they are for reforms but extending the re-authorization of the bank but what would be to the advantage of delta to borrow the money from those countries and not use ours? the product? >> yes, the united states is not really in the business of making what are called regional jets, those small somewhat uncomfortable narrow jets. old 50 to 75 people that a lot of us fly on. we don't make those. they are largely manufactured in brazil and canada. >> if if you're against it, you'd be against all of it, correct. they avail themselves of estimates of three to $4 billion

of exports to canada. >> i will say this. the commerce department says the first quarter contraction was even more severe than the 1% annual decline it estimate a month ago. another major factor was a bigger trade deficit than initially estimated. i did not make re-authorization last time because we did not make the reforms necessary. i have a whole book of reforms that we've been working on. something that we tend to in congress and now we're in premier election seasons so things are happening. we saw elections lat night and elections will be next week. elections have consequences when we forget who we work for. if i forget my district back at home in tennessee, than when i go back there the elections will have consequences. my district number of job supported and i know the gentleman from south carolina had problems with numbers a few

minutes ago but a thousand jobs plus in my district, 5,000 plus in my state. now, that's who i work for. the 8th congressional district of 10 h tennessee. this is not about big or small business. we want the country to flourish and hopefully have environment in the private sector where they don't need the government and washington but at the same time i'm looking at the debt clock -- it's unbelievable. this is a program under the current guidelines that's not costing. it's actually returning money back. we need to reform it. i heard the chairman -- the former chairman bakrus a few minutes ago talking about sending a letter to you guys and not getting a response in a timely matter. i don't think that's acceptable. i think you have to do a better job of being accountable to your

customers but just to -- because it's -- it doesn't look right or i don't get everything i want, my wife and little girl were going to be here today but she's out doing something else and i was thinking i've been married 23 years which is a long time. i don't get everything i want at home. i'm sure not going to get everything i want up here. it's just not going to happen but my job. >> i hope you better at home. >> my job is not -- i'm a farmer and i came to washington 3 1/2 years ago and i promised my constituents that the folks of my district because i had received farm subsidies before i was selected. and i promised them that we needed a better way. we needed to reform the farm bill. this is just an example. we reformed the farm bill more reforms that had been done, i don't know how many years did away with the farm subsidy program. took many steps in the right direction. was it perfect, no? i voted over 2,400 time since

i've been here and none of the bills have been perfect but did i vote no and says not everything i want because it's not going to do everything. no, that would be responsible on my part. my part is to support investment that creates a thousand jobs in my district. with reforms i can support it. with that i yield back. >> the gentleman yields back. the chair now recognizes the gentleman from california, mr. sherman. >> i'm hoping you as administer xm bank in the future that you will focus especially on small businesses and focus on new products because the future -- we were trying to maintain a wage rate way above the average rate rate in the world. the only way we're going to do

that is by making things here that they don't make elsewhere. now, a lot of this debate is between those who think we should focus on ann rrk and's book and the purity of that versus the practicality. the practicality is germany has more than three times the export per person as we do in the united states. germany has an export credit authority or agency in a is roughly three times the size of ours compared it the size of our economy. obviously germany is a somewhat smaller country. while we have a declining manufacturing sector and a huge trade deficit, they have outstanding manufacturing jobs

and a huge trade surplus. so the practicality side leads toward us also having an export credit agency. so the question is on purity. i want to point out to this committee that xm bank has a little sister, it's called opec. it is also u.s. sponsored export credit authority. it comes under the jurisdiction of the foreign affairs committee. we reauthorize them on the floor of the house of the representatives under a bill written by my good friend chairman royce of the foreign affairs committee. yes. that good friend. 106 republicans voted for that bill. so if you are torn and you think well, the xm bank is good

practicality but i got to preserve my oideological purity. if you're one of those 106 republicans that voted for the opec re-authorization in it. you already lost their ideological purity. come with us and be practical. as to purity as the gentleman from tennessee just left pointed out that delta airlines has no ideological purity nor do i expect them to have it. they bought canadian aircraft and they got financing from the canadian agencies that is analogous to xm bank. one thing that is practical about xm bank is that you are scheduled to make $14 billion over the next ten years. do i have that right. >> that's the cbo estimate. >> that's the cbo estimate. okay. do you have a different estimate.

>> well, i don't make estimates for ten years. we simply made a projection, a budget proposal for 2015 and they projected them out ten years. >> okay. and so we have to live under the tir any of cbo, if they say we lose $14 billion than we have to adjust those debt clocks and announce to the country that we're increasing the national debt by $14 billion or we have to wait for the chairman of this committee to join me in a prorevenue bill. that would take a long, long wait. it's argued that -- the fair value accounting which is not the law. every time somebody wants to increase the national debt by a proposal, they say well, just change the accounting because i'm not increasing the national debt. i've heard this all the time. dynamic scoring. now it's fair value accountable.

i want to make sure i understand this. fair value accounting would mean for pizza hut that we don't see whether they made lost or made money, we see whether they would have lost money if they had to pay as much to borrow money as the local petsizzeria which wou be a very strange thing. the investigators in pizza hut would be very surprised to say that they lost money. >> pizza hut is prohibited from using fair value accounting, thank god -- >> the chair now recognizes the gentleman from south carolina mr. mulvaney. >> thank you mr. chairman. we've heard a lot of talk today in the last 5 1/2 hours about reforming and making a better bank.

let's look at that a little bit. you were here a year ago. at that time, i asked you about the inspector general's report who said you had problems that were not routinely reporting the performan performance. i find out from the ig's office today you still haven't fixed that one. i also said a year ago that it looked like you had trouble according to the ig's office with a lack of due diligence and asset monitoring efforts conducted by lenders, specifically the ones who have a history of defaulted trands actions even though there's an expectation that such efforts are taken, xm bank does not require participating lenders to conduct due diligence or asset monitoring of their investigations. i find out you haven't done that one either. there's a list of 78 different things that have asked you to do. either the igo gao has asked you

to do. of 36 of them the ig can't verify that you've fixed them. there are 9 of the 78 that say your responsives are unresponsive and they don't count you as trying to fix things. you are required by law, in authorizing any loan or guarantee the board of directors shall take any account any serious adverse effect of such loan or guarantee on the competitive position of the united states industry. and employment in the united states. we heard this morning that you have done that one time. one time in 2001 when it comes to selling air craft -- helping boeing sell aircraft over sees that was in 2001. staff tells me now that you have conducked a grand total of 24 of those reports as required by law over the last 17,000

export/import transactions. in 2012, we asked for some reforms. in 2012, this body asked the export/import bank for some roo forms. one of the secretary of the treasury and nonoec members to reduce subsidizing programs and other subsidies. that was almost two years ago. you all have managed to set a meeting. the administration recently sent over its proposed reforms. they call it a re-authorization. i don't know if we call it a reform. it essentially says that you want more money. you want to change the way you count losses. you want to eliminate the need for producing stuff in the federal register regarding notice, lowering the accountability and transparency and i wish the gentleman who was here from the previous panel

small businesses, you ought to be able to count toward your mall business quota small businesses that sell to big businesses. so forget about the tipickles o green energy, unless you're selling to one of the big guys, you don't get to count under the president's proposed reforms which i guess you participated in because it's under your signature. i look at all of that against a political environment where this investigation has regularly shown that they don't really care about following the law very much. they certainly haven't followed it on health care. they are not following it on immigration. don't seem to be involving it on how they are supposed to keep their e-mails over at the irs so it makes me wonder for everybody here who says listen it's great. let's pass some reforms. that would be wonderful. before you run to the reform ban wagon i encourage you to ask some questions to make sure before we do that let's see if the bank can actually reform itself under the existing laws that we have already passed. let's see if maybe the bank can

make the suggested reforms that the ig and the gao have suggested. i say that the time is way too early for talking about reforms with that bank. with that i yield back the balance of my time. >> the gentleman yield back. the chair -- okay. chair now recognizes the gentleman from illinois. mr. holgren. >> thank you mr. chairman. thank you all for being here. first mr. chairman, i would ask to -- for leave to be able to -- i'm sorry for unanimous consent that my full statement be inserted into the record. >> without objection. >> thank you. i really would like to thank the panelis panelists. this is an important discussion. i know as many of my colleagues we want to get information and do the right thing. i think congress should take a hard look at the current

structure of the export/import bank but also i hear from my own district's businesses that tell me that they rely on the bank to ensure that their exports reach their customers. so before congress abolishes the export/import bank without a strategy. we need to explore reforms to the bank. this leads me to my first question. the bank's role in providing export credit assistance is to serve customers who are unable to obtain funding through commercial markets. >> congressman. thank you for giving me a chance to talk a little bit about that. first of all, 98% of the transactions at xm bank we work with a private sector bank to either make the loan guarantee the loan or arrange the loan. we are doing it with 98% the

transactions. furthermore, every application needs stay unequivocally why they are coming to us and why they can't do it this in the private sector. that's a requirement for us to be making the loan. the term used is addition alt. what additional value are we providing. our loan portfolio hasn't grown as much in the last two years. there's been a little less need for us of late. i don't know if that will continue but as of late there's been a little less need. that's a good sign. that's a good sign that banks are making more loans and they are also dealing more with small businesses. >> your office regularly engages with private sector stakeholders to obtain input on the bank's operations. i wondered in your opinion is the bank effectively limiting itself to customers not being served by lenders what steps could the bank take to mitigate the risks and that the

export/import bank is the lender of last resort, not the lender of choice. >> thanks for the question. the bank has a requirement to only offer financing for three situations. one of them is competition, lack of financing in the market or additionalt. so the requirement that he is talking about is a requirement that any transaction that goes through the system has to have a declaration to some extent almost like a certification saying the reason why we come is because x. now whether or not that is verified is another story. we did a report on the direct loan program. we highlighted that sometimes on the loop doan documents we can'd documentation backing of that statement. now that's the extent of what we have looked into. we haven't really got into whether or not marketing strategy of the bank across the

country meet the charter requirement on that. we haven't got that far. as focused on the direct loan program we did address some of those questions. >> chairman, back to you. >> i would just add, it is required in the loan application. so the applicant needs to certify that their financial records are accurate as presented, that everything they state is accurate as presented. so i would -- we do an audit periodically but i have to make an assumption if an applicant is signing an politicsation that they are corporate office is not stating fraud in doing so. they have to state why they are coming to us. >> the current risk management function of the bank is fragments and neither addressed how risks may be interrelated. given the bask as recent risk trends including the authority

to extend credit from 1 billion to one $40 billion. what additional procedures are you putting in place to ensure a central risk management structure. >> as i stated we added the position of a chief risk officer. i work closely with the inspecton general to make sure that they are entirely two different structures both reporting to me and the chief risk officer looks at not only credit risk but legal, it. there's an enterprise risk committee and two senior people who report. >> the time of the gentleman has expired. there are votes currently on the floor. the committee will recess until approximately 4:45. the committee stands in recess.

and a couple of the witnesses in the second panel, include the chairman of the board and the president of the export/import bank. they expect to hear more from him when the house votes are over. we will be back here live on cspan 3. right now as we wait for members to return. make rogers spoke to christian science monitor this week. >> mike rogers chairman of the house select committee on intelligen intelligence. we appreciate him starting his mourning this way. he grew up in michigan, after serving in the army, he became a fbi agent specializing in public corruption cases in chicago. he returned to michigan in 94

and was elected to the state senate the next year. in 2000 he won by a resurrounding 111 votes. he has been re-elected handily to six additional terms. he became chair of the house intelligence committee in 2010. he announced he would be leaving congress at the end of the current 10 to host a radio show. as always we're on the record here. please no blogging or tweeting while the breakfast is under way goif to give us a chance to listen to our best. as regular attendees now if you'd like to ask a question pleas do the traditional thing and tend me a subtle nonthreatening sl. nonthreatening signal. i will happily call on one and

call. we will start off with our guest having the opportunity to make some opening comments and move around the table. >> thank you very much. thanks for the opportunity. i appreciate invite. thank you for lowering your standards and letting a house member in. we appreciate that very much. i just thought i'd real quickly go around the world as briefly just to let you know the challenges that i think face not only the u.s. intelligence services but our defense and what those of us who are often crying about our security mat rix, the threat matrix being so varied and deep an wide that makes all of us not sleep at night. i'm only 25 year old. look at what this job has done to me. one of the things if you look at both strategic and immediate threats, so on the strategic side you have north korea that is pursuing nuclear weapons. it is working to perfect the missile systems that way that is very concerning.

if you recall about a year ago when they stood up a missile and were bragging about the thought that they had the capability of hitting the western united states. pretty serious threat to the united states that got washed over by all the other threats that we face. china has been very aggressive in militarization of space and they are very aggressive about investment in technology certainly to try to mute the strength of our u.s. naval forces around the world. once those things happen, you watch what their aggressiveness in the south china sea. that is clearly something that is concerning. i think it's a growing tension. i still believe that between vietnam and japan, there will be some maritime squirmish within the next 24 months. i don't think it will be huge but i think there will be a

maritime squirmish between vietnam and japan with china to push them out of the boundaries in the south china sea. we've been as a u.s. navy been there since we've been a a coun when china starts telling us the u.s. navy can't be in the south china sea, that's a huge and significant strategic threat to the united states, and certainly or economic prowess in the world. clearly russia is -- you can just turn on the tv and see where they're at. they've spent the last ten years in that rise of oil money investing in their military, modernizing their military, professionalizing their special forces. that has, as you can see, has proved to be a valuable investment for them when it comes to ukraine. so that the fact that they were able to dplid through and annex crimea and their activities in eastern ukraine are certainly troubling, and it shows you that the payoff of their investment,

and they know it and they understand it. they continue to invest in their navy modernization, they've dropped some submarines in the water that is very, very sophisticated, very high tech. we hadn't seen that since the early '90s, so they're making their investment in their ability to project power around the world. when you look at where we are on al qaeda, this is the one that is worries me most. this is the mod immediate threat is this proliferation of al qaeda affiliates with capabilities and intentions to strike outside of their areas of operation. so clearly when you look at what's happening in iraq, and it started in syria, by the way. we need to be clear about that. we watched this development of al qaeda in eastern syria for three years. we watched them pool up in ways we have never seen before. and when i say recruit, i mean

successfully. in other words, they are gaining strength, really by the day, the month. the longer it went when there was no more disruption, the more aggressive they became. about a year and a half ago, you saw the tensions start between the islamic state in iraq, in the le vant, and many argued they were so -- it's hard to argue that this group would find anyone more brutal than themselves. it is about control. somewhat wh zawahiri was trying to exert control. they believe if you want to be in this fight, you want to hold land, toward a caliphate. the disagreement with us

zawahiri telling them bept you to focus in iraq, and don't do external operations. the concerning part of that operation was the reason isil wanted to do external operations is because they had a large number of foreigners with western passports working with nim. they saw that as a huge opportunity to conduct very easily and quickly operations in europe, in the united states. zawahiri thought it was too soon. he wanted them to focus in iraq. so now what you see is they apparently decided to focus in iraq. so that split, where they dessert filled al qaeda, i would look at it as two organized crime families in chicago, right? at the end of the day their goals and intentions are exactly the same. if they can work together, they'll work together. but at the end of the day they're brutal criminal

organization, in this case terrorist organizations that are functioning the same way. so el nushra is now reaching out, to aqap in yemen. yemeni leadership is looking for the aqap -- not the yemeni government leadership -- is looking for a way to have success in an external operation. if you remember, they were the first ones to hold territory in the south of yemen that they believe watt the initiation of their -- so you have all of these new relationships happening in a way that's really concerning. al shabab, as you know, two years ago we were able to establish the relationship between al shabab and aqap. i won't go into all the details, but now you can get a better

picture of this al qaeda threat is getting worse by the day, not better by the day. the fact that they hold a billion in cash and gold bullion, and if you think about 9/11 took about $200,000 and maybe a year and a half of planning. that's a lot of dangerous cash laying in the kitty. these folks aren't worried about building schools and roads and taking care of public services. they're worried about killing and trying to dominate individuals across iraq, syria. they would love to take lebanon. now they're on the border of jordan, they're on the border of israel. this is as bad a situation as you can possibly imagine, and with that i think we should all have a ding. >> a stiff orange juice. in the monitor tradition. >> let me ask you one or two, and then move to my colleagues. you remember the house republican leadership team lesson or message, if any do you

take from the true ump of that had cochran and the loss of tancredo. does it say anything to you about where things are going in the republican party? or is it just all politics are local and there's no message? >> hannah survived, yeah. despite what you might see portrayed, the republican party is a big tent party, and parties are collisions, if you see parliament overseas, they're made up wildly different coalitions of cobbling certain groups and philosophies together to form a governing body. here in america we do it within two parties and within those two parties are a tremendous amount of coalitions. what you're seeing now is a filtering out and struggle and healthy debate about which of those coalitions gets more seats in the republican party than the other coalitions. i thought it was a -- tess end of the day, i think americans

are ready for governance. the last five years has been so devastating to the middle class, it's been devastating to energy prices, it's been devastating to our national security, devastating to their own health care. they're looking for some leadership. sometimes that means people forming a coalition that means you're going to get something done. i think the election showed across the country that people are ready for that. they're ready for a change in the way the country's being governed. i think that's what you saw happen last night and over the last few months. >> one other, and that's about intelligence. >> sure. your counterpart in the senate, senator feinstein, has been critical about the 4relevef detail and quality of briefings that has been provided by the administration. yesterday on a conference call, an intelligence official said the american intelligence agency that provided, quote, strategic warning that i.s.i.s. was

growing. is it your sense you've been well served in terms of the i.s.i.s. intelligence that you've been getting? >> you know, about two years ago, i and others were ramping up this notion we had to do something in eastern syria. i did an op-ed on it, i talked about it. well, i came to those conclusions based on the intelligence that was afforded to the committee, as a consumer of intelligence, right? we get it all, sometimes it's raw, it doesn't draw the conclusion, you know, that i.s.i.s. on this day is going to do this. we get all the wrong intelligence. it was very clear to me that years ago i.s.i.l. or i.s.i.s. was pooling off in a dangerous way, building training camps, recruiting, drawing in jihadists from around the world. we saw all of that happening. then we -- remember, we talked for a long time, nothing happened to disrupt that.

then we saw them cross the border and go into fallujah. nothing happened. that was six or eight months ac, so some notion that we wouldn't have seen this coming means that you weren't paying attention to the intelligence that was afforded us. now, you know, could they have come up and said, hey, this is the -- let me give you the fallujah update? maybe, maybe not, but nothing happened when they crossed the border, knowledge happened when they took fallujah, nothing happened when they took mosul, nothing happened when we took tikrit, a. they clearly stated their intentions, we knew what their intentions were. they clearly were arming and training, we saw that. so, you know, maybe they didn't say they're crossing the berm on this day, but it would be hard pressed if you didn't pay attention to the conclusion that something -- >> so your complaint isn't with intelligence, it's with how the

administration responded? >> or not responding is a decision. not making a decision is a decision. and i have been pretty vocal about trying to bring this problem to the public, about why we needed to do something in syria because of the potential. did we know they were going into iraq? i'm not sure, but clearly they want lebanon, they want jordan, they want israel, they want all of syria, and they do want iraq so it was very clear they were going to try to expand their interests from eastern syria, and it was a safe haven for 2 1/2 years. >> jeff? >> mr. chairman, a couple senators said yesterday after the closed-door briefing that the threat has -- the threat to the homeland is more urgent than it seemed last week, and one senator said, you know, if you -- anyone who watched out of the briefing could not quibble

with the fact there's an urgent and dire threat to the homeland here. do you agree with that? and how urgened is that threat? >> i do. now, remember how we come to this conclusion the the fight a year and a half ago was do we do external operations. zawahiri said focus on iraq. so the very fact they're having a discussion sends a chill down my mind. that means somebody is in an operational status trying to put together something that would look like something that could get the green light, including access to people who had western passports. you fly to germany and you're a german sit cyst, you're flying to the united states, you don't need a visa, right? that's a big problem for us. or fill in any other countries in eu, or vice versa. what we've seen now -- they're a bit drunk on their own success, in they understand -- as a

matter of fact, i read an interesting report recently that baghdadi was talking about the fact that if zawahiri would have to come to iraq, he would have to pay deference to him, because he is the only one establishing a land-based caliphate. you think about that mentality. they don't want the same exact thing. they don't want to attack the united states. they're going to go about it maybe in different ways. with access to these western passports and their stated intention to commit acts of terror beyond their areas of operation, that is why i'm -- i wasn't in the senate briefing, but i imagine that's what those senators walked out, thinking this is pretty bad. and they have complete safe haven. there's nothing to disrupt their activity. they can plan it, financial it, train for it. the training camps have been unabetted for years. they've just let it go.

that's how you get to this place where you wonder we're in some trouble. perfect. that's a great recipe for disaster i think there's a federal ruling yesterday on that. >> in oregon. >> was it oregon? >> it was the federal district court for the district of oregon. we piatt as well get you to stay more about it. saying the procedures for putting someone on the no-fly list were adequated, violated the fifth amendment right to due process, called on the department of homeland security to provide more information to people about why they're on the list and also ways for getting off the list. so you would disagree with that? >> according to public reports we have an organization trying to build bombs that circumvent security. they're working, according to public reports, on syria that

have expressed an interesting by showing their chops by having an international terrorist attack and now you said a judge rule you can't put someone on a no-fly list. you tell me why i can't sleep at night? that makes no sense whatsoever, and the international community has no fly lists, that means you'll just be able to fly domestically. congratulations. that makes no sense to me whatsoever. if they want to refine them, maybe they can do that and they ought to look at refining them quickly. i hope the case is appealed and the decision is stayed, only for the purposes of making sure we have the opportunity to, if you have a pretty good idea that somebody has an ill intention on that aircraft, that can you keep them off the aircraft. we're going to go next to maureen, then to ken and then to john. mar even. >> the conversation about the coalition and the republican party and the debate going on about which group has more seats.

do you see when you're doing your radio shows, one of the things you're trying to accomplish is to try to push the party in a particular direction? in so, which one? >> my goals as happens been as -- which coalitions are tearing themselves apart, it's really hard to form a governs majority. we couldn't agree on the exact amount. so rather than half of what you wanted because of the way, we got zero. so we couldn't agree that there were 42 job training programs that needed to be 26? 26 is many? you know how many we ended up with? whatever it was, 42, that is not

productive governs conservatism in my mind. which is lean and mean, you know d. not mean in that term, but lean in the sense that it's not functioning, but doesn't do do thing that the government should be doing. if we're together as a force, i think there's a lot of that we could have accomplished in the last two years that we just left on the table. that to me is an unfortunate. we fight about some of the things in my mind that are small potatoes, if we could come to an agreement on bigger, broader limited government issues, that we just couldn't quite get consensus on, for this nothing that we'll have a perfect score, right? i don't know anywhere in life

where that work. >> i think you just alluded to this. the bomb making has migrated to syria, and they're working on perfecting bombs that can get past security. that seems to be driving the threat that jeff is asking about. have they perfected a bomb? >> well, if you look -- i can't confirm any specific reports, but i mean, here's what we can look at that's in the public dough maim main. i think it's fair to draw a conclusion from what's in the public domain. aqap, who has designed the ink cartridge bombs, remember those. they were going to detonate -- i forget how many of those, 8 or 11, whatever it was, 9, in different airplanes over the oceans, right? that was their goal. these cartridges were designed to circumvent security. good intelligence work was able to shut that particular

operation down, but we know they never stopped trying to design explosives that circumvent security. so the underwear bombers was a great example, another iteration on december 25th that they -- that they thought they could get through security and set off on an airport and i want. candidly, but for a quarter of an inch of syringe pull, that plane would have killed up and we would have killed thousands of people in their homes. it flying over a very populated area of detroit boo its landing zone. so you would have had all that equipment falling through the houses while people were sleeping in their beds. this was not just the airport itself which would have been horrific, but the ground damage would have been significant. we know they haven't given up on the notion so now you see those things, and you see this

relationship that started very early in 2013. some of it, by the way was to mediation. it was in the beginning before this decision came down to see certify isil as an clad affiliate, they tried to mend their fences. as a matter of fact all the leadership was saying you need to fix this, right? they doesn't want to lose they very aggressive fighters that shoot people in the head. that's a value to them. it scares us, that's a badge of honor for them. they wanted to keep those folks in the fold. so now you have el nusra, that's expressed an interesting in creating -- that's a group that has sxrepsed an interest, and there's a relation them between aqap and el nusra. that in and of itself would allow any person to come to a

logical conclusion that we have a problem, a definition problem. we know that al qaeda in the past shares technical expertise on eids, how to circumvent security -- surveillance, and all the things that come with those conversations of how not to be a target of the u.s. or our allieallies, you can draw y own conclusion with that bit of information. >> it's automobile tained by sources and methods, and how certainly information is obtained. that may in fact stop an event. protect those ways so if there is a threat remember, the aqab.

>> a pretty significant leak, we saw real changes. to collect information. >> a long time. as a matter of fact th smart. some of it -- -- it was just the procedure about who, what, when and how that got leaked, and changed the way they operated. to the point where we lost our able to see some things. that's dangerous. i think we ought to protect it so we have the ability to catch somebody if they're going to be on the plane or not. if we have to catch them getting on a plane, there has been a failure in the system. >> go ahead, but normally people asked to be called on. but go ahead. >> there's no clear line yesterday between i.s.i.s. and

aqap? we can speculate they may work together? >> we know they all have relationships. they have had intermediary exchanges, we know that. remember, once they were dessert filled, they decided to go their own directs. again their goals and intentions are exactly the same. the tactics of how they get there may have been different. zawahiri's position was if i can't control you, i'm not going to have you as part of that group. he did that primarily because of part of b. part of the group it gets you financing, status. i think what he estimated was they folks were winning on the battlefield, and that attracts other jihadists.

>> so they're exactly the same, they still have this kind of funny respect for each other. again, i would look at it as -- when they have a difference, they'll fight you, but when there's mutual benefit, they'll be together. they are al qaeda-minded, no different. they want to establish the caliphate. they'll use all the tools of political violence to do it. >> a couple mechanical things. we're about halfway through, next to john, and paul, and anybody who came in late wants to question, wave your hand at me. mr. gizzie. >> thank you, dave. >> mr. chairman? >> sir? >> picking up on your analogy of the organize the crime family, it has been said that some of the america's friends in the middle east that we depend on saudi arabia and qatar are akin to merchants in the city paying protection money to done vito corleone when it comes to isil

or some of the other terrorist groups. do you have any solid evidence that qatar, saudi arabia, are indeed also paying isil or other terrorist groups, and what can be done about it? when they talk about a winning coalition, your colleagues on capitol hill inevitably talk about those countries, not iran. >> this is a probably of -- when you see a problem in the middle east, you have to deal with it, end of story. deciding we're not going to deal with it as some notion of a foreign policy framework, this is what you get. so let me talk to you through that. early on in syria, our arab league partners came to us and said we want the united states -- this is not about boots on the ground, not about

big military, but we need your help. we need your help with command and control. we want you helping guide any support, think of this, any support that the arab league is producing so that we do this in a way that's vetted properly and doesn't come back to bite us. wow, very reasonable offer much the united states response was, nope, that's too hard. we're not going to do it. so what happened was other parts of that arab league started to fracture, right? which is why you needed the united states showing the leadership role at the table. that would have been a very, very important role for us to play. and so we know for a faulk that some of the supplies that some of those arab league countries were supplying were getting in the hands of extremists, and it also caused -- because of the way that was ramped up, even our arab league partners started fighting among themselves or disagreeing among themselves, because thermsed one country was

more aggressive tan the other and some of those materials was ending up in a place that was even bad for their own interests. so that's how this problem got started. the united states never quite weighed in. i've had significant appeals from our arab league partners to me personally. i know other members have as well about their frustration with the lack of the united states engagement and leadership on these issues. because of that, we watched that a lot of that money and weapons did migrate its way to the most violent extremists operating in eastern syria, and that empowered the very problem that we have today. . as frustrating as that is, i still think there's an opportunity to reengage, and candidly, having the secretary of state just show up for a chat isn't going to do it. all right? they need to see something. as one arab league leader told

me about two years ago if you are not going to sit at the table with us, you don't get to lecture us as to what that table looks like. that's what you saw happening and unfolding. it didn't make big news at the time, but that was really the gas that got thrown out fire to allow isis to start to develop, because they had access to all this really good equipment. again certainly of those cunning didn't really mind, they figured they could deal with that later, is what they told us. not having the u.s. at the table was a huge problem. >> what was the timetable on this? >> we've known about this for, what, three years? the discussion happen the course of those 12 months. every month over end, our impact to impact this got worse and worse, right? so the options you had at three

years weren't the options at 24 months, weren't the options at 18 months ago. it completely deteriorated before our eyes, and we watched all of this happen, which was, i think highly unfortunate. which to me, again, is why the engagement is important in the world. the fight we have now about isolationism versus engagement, this is why engagement is so important. >> paul if. >> chairman, can you look down to our southern border and what do you see there as a threat to the united states, the story for the past couple weeks has been about this 70,000 unaccompanied kids coming across the border. is there something else that might worry you? >> the first trip i took as carom of the committee was to mexico. why? we had the real opportunity for failed northern provinces in mexico, failed governing states.

that is a huge national security risk to the united states. the organized criminal elements were controlling huge swaths of land. the fighting you saw was because there was lack of police authority, and they should policing themselves. they had all they fights, the beheadings, the bodies on the roadways. that was telling you we were on our way to something pretty awful happening. even with the 70,000, you know, kids, they're not getting in vp vans, and driving up on a nice country drive to get through central america. these are controlled by criminal elements. what outrages me is there is no compassion in allowing these criminal elements -- because i'll guarantee you, there's slave trade issues going on, exposure to drugs. you've already heard the reports about they're trying to figure out which occurrences can be recruited into gangs before they

get up here. this is pretty awful stuff. i do worried about the failed northern states. we've done good things with mexico. in some ways it is getting better. they've been very leery about direct u.s. support, but we know other success stores around central and south america, clop by contrabeing a great example, is now in a position where they could help mexico train their counter terrorism forces that i think could be impactful, but it's been a long, slow road. in the meantime, you know, you get on the south side of that members ka border, it is as lawless as it gets. if that truly deinvolves into failed states, we're going to have a significant security threat from our southern border. >> guy? >> i think it's pretty -- it's

interesting we're having this public conversation now about what isil actually is, and what it is relationship to the other affiliates happens to be. >> what i'm interested in is what you've seen in terms of this recent surge by the group, and its alliances with sunni groups in iraq that aren't necessarily aligned with this idea of creating an islamic caliphate, might actually be partners in the administration's push for an inclusion government in baghdad. what is the nexus between these two groups? how reliant on moderate sunnis has isil become in iraq? one. and then two, you know what specifically should we be doing? you're in a unique position as a senior member of the oversight community of the ic, and we all are hearing people say the

administration did this wrong. what actually could we be doing differently than sending 300 fusion cell troops? and what should we do now? >> and we have a good history on why are the sunni tribes joining isil in their march toward baghdad. if you look at what happened in the establishment of the taliban in afghanistan, so because of the outer regions, and they had differences with the leadership in kabul, that there were, you know, horrible corruption, horrible injustices being done to the tribes that weren't in power? and the taliban came in, actually mullah omar got his start, because there was some allegations of a rape of a 14-year-old girl. and no justice was done mullah omar came in an meted justice on the spot. dragged somebody out on the street and hung them, i think.

it started the swell of, hey, that's pretty good. what the other government was doing wasn't so good. what they found once the taliban took over is, this is pretty awful. it looked pretty good at the time. it turns out pretty awful. stoning of women, made it illegal to teach little girls how to read. pretty brutal stuff. can't leave your house if you're a woman without a male escort, even if that male escort is 6 years old. really kind of crazy stuff. that's when all the chafing started in afghanistan. we saw the same thing in libya to a lesser degree. people joined together, because they were against moammar gadhafi, and then once it was done, this more radical implementation not for me. the sunni tribal leaders are pushing back against what they view as an unjust, unfair, corrupt shia-led government by

malaki, and they're not going to put up with it. what they're finding now, when they kay over a city like mosul, that chafing is already starting, because it takes away those sunni tribe leadership, now they're know longer quite in charge. the mullahs lose a little influence in that kind of an arrangement, so we're seeing that happening. that's the same thing that was tapped into in '06 for the awakening that separated the sunni tribes from zarqawi, and you'll see the fraying begin, and we're seeing some of that. so i argued that you cannot allow isil to continue to have success the way it is. there has to be a disruptive activity. that means maybe training camps. that means you have to directly targets command and control and leadership in a way that's disruptive. one of the things about air strikes or not air strikes,

that's a tactic. we ought not to have -- the president shouldn't be debating over a tactic, and neither should we. we should be talking about a strategy. air strikes may be a part of that, may not be, a special forces raid may be a part of that, may not be a part of that. we have to have a strategy that goes ah after isil leadership and its logistics trainings, which, by the way, starts in syria. you can't be effective if you don't take away their safe haven in eastern syria. the reason they're controlling those border points is they know that's the way they're going to continue to resupply their efforts, and vice versa. if they ever decide to turn that around and head toward lebanon, they're going to need that supply line both ways. the united states has unique capabilities, and i'm not talking about troops on the ground. when i say troops on the ground, i mean big troops, 101st air brother-in-law, 4th infantry division, holding ground, the

1st marine dr that's not what we're talking about, but we're talking about a strategy iic disruption of isil, to give breathing room for political reconciliation to happen in baghdad. i don't think you'll get that until you get some breathing room. we don't have leverage the way we're operating currently. the very thought that we were going to have a conversation request iran about this solution, you can imagine all the calls from our arab league partners about what a god-awful idea that's. we need to show some disruption, stop their momentum, hurt than command and control, hurt their logistics base, so make them to have to reconsideration what aggressive offensive operations they take. >> we go to the gentleman in the green tie. aisle blanking on the name. i apologize, then to catherine and then to francine.

>> now further known as the gentleman with the green tie. >> this is senior moments are terrible, let me tell you. >> i think i've not worn this green tie in two years. >> legislative priorities before you depart? i didn't know what you were looking at before you left. >> yeah, we want to finish up the fisa legislation to make sure we can get the nsa and others focused on all the threats, versus looking over their shoulder. at what is a tidal wave of misinformation about what they do. that's going to be important, to get that so that americans kind of reengage in the confidence that their intelligence services there are to keep them safe, which, by the way, they are. that's important. we just got the 2014 bill done yesterday. why that's important, the

authorization bill, excuse me, is because there's lots of reforms in there. some of those reforming are based on making sure our security clearance operations are changed a little bit so we're more accurate as catches somebody who may be going bad and, say, stealing a whole bunch of stuff and hundreding to places like, i don't know, moscow. the 2015 budget also makes important investments which we have to get done. in continuing our dominance in space, we're at the back end of that arrangement. we better pick up our pace or we're going to be in trouble. making sure we're making the right investment in our ability to protect ourselves from what is a growing list of countries and nonnation states, cybercapabilities, which is very, very -- again, very, very concerning. we're on the back end of that one. we have to pick up our pace. and continue our investment in human collection throughout the year. lastly, this week we had great

rounds of negotiations in the last few weeks with the senate on an information sharing bill, so saxby chambliss and dianne feinstein will vote out a cybersharing bill, i think thursday is the day. this is going to be critically important. if we are ever going to stay in -- this won't solve all the our problems, about you if we're ever going to stay in front of what is a growing threat matrix, just on cyberdisruptive attacks, we have got to have this bill in place so that the private sector can protect itself. right now any offensive stapes we would take, it exposes private sector networks that won't have the ability to with stand nation state style of attacks. so those are my immediate priorities, and then to continue

the internal policy debates we have on things like covert action and other things i think we need to get right with the community, and i hope to do that before i leave in january. >> catherine? >> thank you. thanks for doing this. >> welcome back >> thank you. for a lay person, how would you characterize this relationship with isil and a qumt ap, the skills they're sharing? is it this relationship that's driving statements from others on the hill that it's a direct threat to the homeland? secondly were there consistent multiple strategic warnings about the isil? and if so, who failed to act on them? >> again, i'll start with the last part first. i argued, this is a result of an indecision, which i -- indug, which is a policy failure. this is not an intelligence failure. it's a policy failure. it's pretty easy to blame the guys standing in the dust trying

to collect the right pieces of information. again, we watch them pool up. we watch the debate between el nusra, and isil. we watched the concern between the al qaeda leadership about trying to get them back in the fold. we watched these gem weapons. we watched byrne passport holders. we watched it all the. we heard their stated intentions form the reason they're called the islamic state in iraq and the le vant, is because they have the leavant. they want it all. and they've decided they've become strong enough to actually implement it. the reason they're a small number of folks having a big success in places around iraq is the other policy failure of, we're just pauking up and going

home. we're just coming home, because this is hard. and i think that was a major disaster. if you had had a u.s. presence, and i'm not talking about engaging in combat operations every day, but if you had a u.s. presence there, it would have allowed the security services to be more sustainable. it would have influenced the political fracturing we saw happen after we left. that's the whole purpose of that, so that you get better reconciliation, and you could have seen up close and personal the trouble that was being developed in syria, because syria was going to have this problem at some point. what we didn't understand early on is isil was going to take seven advantage of it. those are all policy failure in my mind that's led to this. you can't blame the intelligence community, you can't blame congress, this is a attorney policy failure of a magnitude that will risk the security of the united states of america. they need to start coming up with a strategy to win this fight. >> where does the buck stop on

that? does it stop with the president? does it stop with the national security adviser? who failed to act here? >> well, i mean ultimately it's the president of the united states. this is his policy of -- i forget what he calls it -- don't do stupid -- something? >> it's almost laughable that that is even the mind-set of a national security team. they see the same threats we see. it's not like they didn't get the same stuff that we got, and some notion that if we don't do something hard that everything will be just fine, i think it's a bit naive, a bit politically self-serving, that you're more concerned about what ratings you have at home than what threats happen overseas. that's a -- that is a really dangerous mind-set, and at some point they just keep doubling

down on this notion that, now it's hard so let's stay out of it. i get that. the problem is they are threatening the united states of america. >> that's the problem. does it make you want to stay? do you regret your decision? >> you know, i've been in public service now with the fbi and the army and legislature for 28 years. that's a long time. this is an opportunity to talk to people hopefully in a way i don't get a chance to talk to them now. i love it, don't get me wrong, the intelligence space, i think is important work, but i think most americans don't get to hear the other side of this conversation, or why if we had been engaged early, we might have avoided this problem. i don't hear that conversation, certainly in talk radio i don't hear that conversation, so i think this is just an opportunity for me to talk to a lot more people about why it's important, why american exceptionallyism matters. certainly or arab league

partners have been crying for it for five years, and to have a dialogue that hopefully -- so by 2016 we have a bunch of americans who are truly interested in national security, international engagement, economic pros speaker that i just don't hear and campbell's soup, it's um um good. and as a journalist, that would be like a kid in a candy store. are you starting to feel a period of withdrawal in terms of knowing so much? >> you know, the problem was once i announced, things seemed to be worse, right? in that regard, without the campaign looming over my head, i've spent more time down there trying to go through all this and hopefully form laulate and and i'm not telling a tale out of school.

we've had our disagreements and we've had our agreements. i think it was right for the president to make the decision to send in 300 advisers with the right mix of individuals that he did. good on you, but now we have a lot more to do, but there comes a time, and i think you know it, and if i can influence by talking to a lot more people about the importance of these issues in a way they may not here today, then i think maybe i can do something more positive in that regard. >> if i may, i had a follow-on that got lost in the excellent answer we had. how would you characterize the relationship between aqap and isil for a lay person to the extent they're sharing best practices, people skills, and is it this relationship that's driving the public statements from your colleagues on the hill that it's now a direct threat to the u.s. homeland? >> well, two things. aqap has a stroker relationship with el nusra front. that is, i believe, a direct and

ongoing relationship that has command and control and advise and counsel roles attached to it. isil is now exactly the same mind-set, but a bit of a competitive nature to al qaeda in general. so their goal is to establish the caliphate now. zawahiri wanted to wait. they decided that they wanted it now. so, again, i think they are a bit, as i said earlier, drunk on their success, and really do believe this is their time to outshine them. same exact wants, desires, techniques, tactics, they want the caliphate, and they also are willing to conduct operations outside of their operations area, and i'm not sure you were here for that, but somewhat i herri, the whole debate they

were brutal, and that's why they were cut loose, is nonsense. it was all about isil wanting to do outside operation, and zawahiri didn't want to dao that yet. he wanted to focus on iraq, have al nusra, and then they would determine what targets to hit next. they all know each other. there's a bit of "i'll show them" kind of attitude. i would describe it as a competitive relationship. >> but same goals, same intentions. they even have this mutual respect going back and forth. remember this was an al qaeda affiliate. this is a disagreement on the tactics of how they want to proceed. >> did you say earlier there was at least a relation twp at least at the intermediaries, on did i

misunderstand? think intermediaries established trying to work out the differences before they were separated from aq leadership. >> anybody who hasn't had one? were you waving at me, nick? >> getting back to thinking about leaving, do you work at all about your home state of michigan losing any of its influence or power in congress? >> you know, i -- you know, obviously you don't want us all to go at the same time, but with the term limits, this is going to happen to other states. other states are going to see a rise in chairman from one state and then they're going to leave, so this is bound to, fred upton will be they are, i think and allowed to have an impact. obviously the timing isn't

great, but it's all based on this time frame of how long can you be a chairman? it was just an odd coincidence, candidly that we got four, which is unusual, especially for a state like michigan. it was, as i told my people back home, good while it lasted. but, you know, the ear ones will come up. i'm a huge believer that people shouldn't be here for 50 years. i think it's better when you get a better of a churn. you get new ideas. it should be a representational body. i think this is a good thing that people go in and come out. >> last question. on the governance issue in congress, yesterday the bipartisan policy center released a whole set of recommendations on how congress and the election system and so on could become more governable.

one of the things they said was power back to the committees and marrying up the house schedule and the senate schedule, working five days a week, that kind of thing. what's your thought about appetite for that within the congress? >> you know, just first of all, i want to dispose of this issue that members of congress don't work five days a week. i'm leaving, so i can say anything i want. if they work less than six days a week, i don't know that member of congress. that is a complete misnomer. the problem, we've gotten ourselves into in congress is that we get yanked around by these sometimes populist trends at home that don't translate into the information we know as members of congress, and that lack of willingness to have that discussion back home. that's a huge problem. a leadership that is geared toward the smallest minority in

any coalition is always dangerous. so you have this you know, nothing that it's better to be at home sometimes than working on these issues there you a committee process. i believe in the committee process in congress. i believe it's the best way to get a bill that will have the best opportunity and challenge to bring people together. you have to sit down and work through some hard differences. it doesn't mean you sacrifice who you are or your principles. it just means you get to a place where people can support something moving forward. i like to think our committee has been able to to do that. we're get to get every budget since i've been chairman and rupert has ranking member, that's unusual, but an important thing to happen. it can appearedr happen and should happen. the questions at home shouldn't be what are you doing to fill in the blank on this other major

issue? it should be, well, on your committee, what are you doing on this particular problem? how are you going to make that problem better? if every member is a generalist, we're going tore in trouble, right? i spent my last four years not being a generalist. i looked at all the issues of national security and i think it helps. members who serve on ag, energy and commerce, and serve on those committees, what we should demand is more time in committee working through these issues, and if that means staying in d.c. five days a weeks, okay, so be it. i think you can do it in less, but you have to force people to show up and do their work in committee. that's hard, and we've gotten away from that. i think that's caused huge problems in the ability to build collision coalitions to move things forward. tune in next month, or in six months, and i'll lay out the whole thing for you. >> thanks for doing this sir. >> thanks for having me. thanks to kelsey for helping set

it up. >> thanks, everybody. sproo we're waiting for the house committee to return. the house is in its last vote. members took a break for about an hour for votes on the house floor. already the committee heard from a pan, the first panel that included the ceo of delta air lines and also the president of the air line pilots association. and as the votes started in house and committee broke, they were hearing from panel 2, which included the chairman of the board and president of the export/import bank, and they expect to continue testimony with fred hochberg when the hearing begins again, which we expect to be momentarily.

as we wait for the house financial services committee to return, an update from today. the conspiracy decided four cases today. the hill writes about one them saying the supreme court ruled that the company air i don't is illegal, striking a blow to technology advocates, hoping the service would revolutionize the way people watch television. the court decided 6-3, that the copyright licenses by, quote, public lir performing their programming without paying them any fees. another one of thor decisions

from "the washington post," a unanimous supreme court says police may not generally search the cell phones of people they arrest without first getting search warrants. the justices say cell phones are powerful devices, unlike anything else police may find on someone that they arrest, so the supreme court today deciding four of those cases. later on here on c spans 3, we're going to hear that orlando argument that led to the decision in the aereo case.

we're waiting for the chairman of the house financial services committee to end the recess and continue with the hearing on reauthorizing the export/import bank. another little bit of news from the hill. congressman charlie rangel has been declared the winner of the primary in his final term in congress and we see there, congressman henserly. he will gavel in now.

committee will come to order. my apologies to the witnesses.

votes do happen. i hope you understand. chair now recognizes the gentleman from wisconsin, mr. duffy. >> thank cow, mr. hair man and i appreciate the witness' waiting as we voted. i was looking at a recent article that had -- quoted a study and it basically says that 42% of employees agreed with the statement, quote, my organizations leaders maintain high standard of honesty and integrity. only 42% of bank employees agreed with that. and i know as i think was mr. mchenry brought up earlier, just yesterday in the "wall street journal" we have an article about the 4 xm bank employees who are under investigation. obvious obviously, breeds some concern and actually, makes sense why only 42% think that the organization's leaders have honesty and integrity as values. i want to follow-up on a

question that mr. mchenry asked. have any of those four had referrals for criminal investigations? >> i'm going to need to denver, again, to the inspector general because these are all in his hands at this point. >> i know but i'm asking you. >> i can't comment. i referred these to -- >> you do not know? >> do you know? >> are they under your jurisdiction? >> duchb if they've been referred for prosecution? >> prosecution, to my knowledge, they are in the investigation stage. >> okay. were the four employees referenced in that article, were they placed on leave? >> i can't comment. >> you can comment on whether they were placed on or not. we know they're under investigation. >> so two have left the bank. >> the two that didn't leaving with are they still drawing a paycheck. >> there's an investigation going. i'm told by council and ig i'm not allowed to comment.

>> whether they're dawing a paycheck or not? >> i'm told i'm not allowed to kmnt on that. >> i was told by council that. >> if you haven't picked up there's a little bit of concern about whether we reauthorize the bank. and i know some have presented it as an institution this should have a little halo on top that sparkles and it provides great job opportunities throughout the country and it's a pristinely run organization. sunshine, roses, tootoo, tulips. some of the kens you might have heard from delta earlier today are concerns that i imagine don't surprise you. we've asked that you do an economic impact analysis on your activities. and we've -- we've heard testimony that you have 17,000 authorizations. only 24 of them have you done in an economic impact analysis. do you wonder why we sit back

and surprise and say, who do we want to reauthorize an institution that can't even ploel our directions from congress? >> congressman, we do an economic impact review of every transaction, not every transaction, warrants a full in-depth full-blown several-month long investigates. >> at 17,000, do you agree with the number, 17,000 authorizations you only did 4? >> i don't know where the 17,000 comes for so i can't comment. >> you agree you've only done 24? >> i don't have the precise number. >> i'm saying. i can say the following. if you'd like to know the process, from a process point of view we do an economic impact analysis when on the surface it says there is more to the investigate here. >> it's my understanding that the chairman's been given a large amount of discretion on whether this bank is reauthorized or not. and i think it would behoove you if you just fully leveled with us. fully straight forward with us. don't dance on questions.

you don't hedge. but honesty, and being forthright met get a few of us to buy into the significant reformed be when you come in and you dance on us and hedge, that makes me go, listen, i'm going to get more of the same. if i vote for reform i don't trust you'll do it. i don't. >> i hear a lot of folks telling me, this has no economic, no consequence to the taxpayer. it it helps job growth. doesn't have an impact to the taxpayer. do you agree with that? >> no. >> from 1982 to 1988, on average, we bailed out xm about $330 million a year. and then in '92 to '96, it cost the taxpayer almost $10 billion. this is not cost-free to the taxpayer, necessarily. correct? >> if i can respond to that? >> sure.

a transfer was made because of federal credit reform. >> you can give me excuses? >> tap money -- >> my time is almost up. you are not convincing me that i should vote for reforms for authorization. you have not convinced me here today. i would like you to but that takes honesty and forthrightness with this committee and i yield back. >> time of the gentleman is expired. the chair recognized the gentleman from washington. mr. hecht. >> before i begin and use my time, i ask the unanimous consent to submit for the record the three statements of support from external organizations, most notably including the statement of the u.s. chamber of commerce along with statement by the u.s. chamber of commerce in support of hr 4950 the bill i introduced last night 201 signatures and sponsors. >> without objection. >> thank you. >> okay. mr. chairman -- how many audits

have you had of the agency since reauthorization? >> my recollection is jo has accountability offices are nine. they could probably confirm that. >> they all completed? >> to my knowledge, seven have been fully completed. and two are in the process. >> mr. chair, at this time i'd ask unanimous consent to submit for the record, a list of all of the requirements and reforms as included in the reauthorization act of their status as well? >> without objection. >> thank you, sir. >> mr. huckberg, there's a lot of conversation here today around what reforms pursued with respect to the funding or financing of wide body aircraft. at no point during the many hours we were here today did i

actually hear a specific proposal from delta airlines, although i thought what i was interpreting was let's just prohibit them. if we were to do that, what, in your opinion, would happen in the market police especially with respect to other eca's? >> my concern would be, unless it's multilateral, or done with the airbus countries as well. we would be unilaterally disarming and putting the sal of boeing aircraft and the thousands upon thousands of jobs that are generated from that manufacturer, at risk. it's as though the honda dealer offers full financing and the toyota dealer says, cash only. there will be a tilt towards that vendor that provides financing. if congress were to prohibit wide-body financing it would open up the market to airbus and the competition could still exist for u.s. carriers because the only difference would be foreign carriers would fly more airbus planes veries a mixed fleet.

>> and the last two minutes that i have with a, i'll ask you to stop, breathe, and then paint a picture. there have been lots of kind of surface projections made about what happens if we wake up in october 1st and your doors are shuttered. i would like you, as a long-time former business person. the former acting administration manufacture and the president of import bank, look forward, not just october 1nd and 2nd, what's the long term consequence to america's manufacturing base? what happens to our economy? what happens to our position in the world? may n paint the picture for us. >> i will and i'll include something flea subsequently overlooked, congressman. foreign companies that are looking to invest in this country to make products for the u.s. market but all of them have said to me, when we move here, it's also to