if i were not intimidated, i composed two books which kept me very busy. i also went over the question and answer session i had with my interrogators. i would give a lot of details about how i spend my day in my book. i knew that they would come back to the same questions may be a few weeks later to catch any discrepancy. i also spent a lot of time exercising in my cell. i would walk up and down for hours and hours or i would to exercise on the floor, thinking about my family. i knew that would move me to despair. i did not have a watch.

i did not know what time of day it was or how long i had been kept. i felt the moon in the sky through barred windows. i knew i had been there for several months. host: [unintelligible] guest: they had removed the wall between two cells. it was a small room, but enough for me to pace up and down without getting too much space. .

host: coming up tomorrow on our roundtable, margaret carlson of bloomberg news and tucker carlson. we will talk about recent events, including the health care and economy. matthew and -- you may remember him because he resigned over a protest -- in protest of the afghan war. and the republican senator from tennessee will also join us. that is "washington journal" that starts tomorrow morning at 7:00 a.m. we will see you then. [captioning performed by national captioning institute]

[captions copyright national cable satellite corp. 2009] >> next, treasury secretary timothy geithner on the u.s. relationship with the g-20 nations. after that, defense secretary robert gates announces a review in connection with the ford road shootings, followed by a senate hearing on those shootings. -- with the fort hood shootings, followed by a senate hearing on the shootings. now, treasury secretary tim geithner testifies at a senate foreign relations committee hearing on the u.s. religious

with the g-20. he talked about our financial relationships proposed could impact the u.s. massachusetts senator john kerry chairs the one hour, 25 minute hearing. >> the hearing will come to >> the hearing will come to order. mr. secretary, thank you for taking time to be with us. i know this is a busy time in every respect, but a particularly good time for us to be thinking about some of the issues in front of this committee that you also deal with. we are pleased to address today the future of the g-20. the imf, the world bank, and america's role in remaking our global financial architecture. it has been almost a decade since the treasury secretary has lost the address this committee.

back then, it was to discuss the imf and the asian financial crisis. crisis. while those events unfolded far from our shores in many ways, america has been ground zero or financial crisis today that nearly resulted in global economic collapse. we're not out of the woods yet, but it's not too soon to start rebuilding and rethinking our international financial institutions. the global economy is changed dramatically, weekly amah and profoundly. twenty years ago, worldwide capital flows were less than 20% of what they are today. ten years ago much of asia was an economic disarray. today the old order has been shaken up by new realities emerging powers, and entirely new financial entities. increasingly, the economic policies of any single nation, it no matter how powerful, are inadequate to meet the demands of the world with both risk and

capital move globally. alongside our financial challenge, we're pursuing new development priorities such as mitigation and adaptation to climate change, protecting food supplies, power and women, all of which we increasingly view as fundamental to future security and stability. we need institutions that are designed to equip to thrive in this environment. organizations with stronger multilateral leverageempowered to attack the monetary system. banks with priorities consistent to the continuing goal of ending poverty. when president obama and announced from pittsburgh that the g20 would replace the g-8, singapore and prime minister called it a -- but the post

world war ii had come to an end. and indeed i think that this transformation from g-8, from g7, g-8 and then g7 with the various plus is ultimately to g20 is a stark acknowledgment of a fundamental transformation that has taken place in the use of power and in the global decision-making process. it's certainly true that the rise of the so-called great countries, brazil, russia, india, and china represents a global economic shift. twenty years ago some of the president's most important local financial trip would have been to europe. today it is beijing. really the developing world needs a legitimate seat at the table so that all of us can better address shared challenges. we party begun this process through recognizing g20 as the

premier economic coordinating forum. and it has made encouraging progress since. a year ago, at the height of the crisis, it convened for the first time at the leaders level and it launched the largest and most coordinated fiscal and monetary stimulus ever undertaken. my senate colleagues and i worked to make good on our g20 committee last spring, to dramatically increase the imf's lending capacity to detain the crisis. without legislation action, keeping with your request, mr. secretary and the president, the world economy which still is much more precarious place. the international monetary fund and its sister organization the world bank must also evolve to reflect this changed world. after world war ii, a handful of developed countries understood that an international framework was necessary to avoid repeating the chaos of the 19 30's. and so they put one in place.

in 2009, the imf and world bank's continued legitimacy and effectiveness depend on transcending their origins to offer underrepresented countries and increased voice. we need to explore how these changes would affect american interests and how we can lead within these new frameworks. to be sure, the imf and world than to have revolved responding to the end of the gold standard, incorporating the colonized countries around the world and eventually taking on board the countries of eastern europe hear it however, as the rate of global economic change accelerates, we need to ensure that our global economic architecture can keep up. today the world bank and other multilateral development banks are seeking more capital contributions from member states in order to address the current crisis. these institutions have been vital in protecting vulnerable

people in countries and supporting development. this committee has a long history of working with them and we should be sensitive to their requests. but we should also be prudent in our response. capital is flowing back into many emerging markets and the budgets of many donor nations around the world have strained. we need to ask ourselves, do these institutions truly need additional funds now? if so, how much is appropriate? and finally, should new funding be provided temporarily or permanently? any increase in funding must be coupled with the reevaluation to ensure that these institutions are actually fulfilling their mandate to focus on the world poor. our own funds in developing and spending are limited and our focus should not be on the needs of middle income countries. the g20 has singled out climate change and food security as

challenges demanding greater attention. and i agree. tanks deciding whether to fund a major energy projects in developing countries, particularly middle income countries should take care, not to lock them in to a high carbon future that will be costly for all of us. and especially devastating for the world poorest nations. instead, we must help countries to craft well-balanced energy strategies. our efforts to address energy poverty and climate change must not work at cross purposes. that means we must persuade our institutions to focus their investments on building energy efficiency and renewable energy capacity in the short term and carbon capture and other advanced technologies as they too become available. secretary geithner, we know full well the enormous responsibilities that you've taken on at a moment -- just

unprecedented strain and transition and we very much appreciate the job you are doing and appreciate you taking time to be with us today to answer questions and share the committee your thoughts about this new architecture in the new rules the road. we look forward to hearing your thoughts about the g20 and those other issues shortly. senator lugar. >> thank you much research airmen. we think mr. geithner for appearing before a committee today. as we seek to emerge from their worst economic crisis since the great depression, we need to consider how the united states may change this influence, address this national security deficiencies him and provide global leadership in an era when the american economy may not be the overwhelming source of power it once was. increasingly, national influence will be determined by whether the countries can contribute to solving global problems or at

lease whether they are making themselves indispensable to other nations. china and other developing economies are demanding a greater say in the management of the world economy through the g20 and other mechanisms. china's global leverage has increased as it liberally positioned itself as a creditor nation with more than 20% of the world current account balance surplus. we cannot depend invasively on china investing heavily in the united states government that. some thought must be given to how we work with china and other nations to establish a more sensible global balance that depends less on demand by american consumers. the united states in the g20 also must rethink the role of the international financial institutions that provide crisis support and assistance to the developing countries and emerging markets.

as one of the largest shareholders in these institutions, the united states joins an opportunity to influence their policies and pro-grams and to ensure that hundreds of billions of dollars are managed effectively and transparently. the imf, the world bank, the african world bank tom at the asian development bank, european bank for reconstruction and development and the inter-american development bank achieving their missions of fighting poverty, encouraging growth, and promising them promoting democracy. what did the international financial institutions have done differently to help mitigate the current global f what could the international community have done differently to avoid this crisis? the six years ago, banks were at focused on ensuring that their financing reach the intended people and projects.

i charge six hearings on the topic that included examinations of individual projects and policies of the respective banks. in the months to come, the administration is likely to seek substantial capital increases for the banks the chairman has just mentioned. it is important for the success of any such requests that the administration fully engaged congress. the administration's $100 billion loan request for the imf last september came very late in the process of the supplemental appropriation act of 2009. there was no opportunity in the house or the senate for hearings or authorizing legislation addressing whether the money should have been conditioned on the forms. after the supplemental past, this -- the president sign the bill which the administration asserting that they disregard

the few provisions added by congress promoted for reform at trongmf national security and humanitarian interest in alleviating poverty and promoting progress around the world. and that is why the congress regularly supports appropriations for subsidized loan and grant programs through the multilateral development banks. but the american people must have confidence that our funds will be managed effectively, efficiently, and transparently. even our domestic budget and employment situations, makes it all the more critical that we ensure our contributions to promote the united states interests. it also is imperative that our government examine capital increases for each bank as a unique request. each financial institution has its own distinct management challenges. for example, the european bank for development must be

accompanied by a much more information concerning whether wealthy resident business entries are benefiting from the 41% of bank funds that flow to that country. similarly, capital increases for the inter-american development bank with address combat the bank is reforming its practices. after its unrealized loss of $1.9 billion in 2008 permits lakewood for folio of cash management. it has been a leader in addressing concerns about corruption and government. among other steps, it regulates of contract in companies that have violated world bank policies. given the linkages between our financial or in that of other countries, we cannot received economic recovery in isolation from the rest of the world. in the face of job losses,

evaporation, homelessness, and other outcomes, the fabric of many nations will be tested. we have to expect additional, political, economic, or national security shop. the global crisis will decrease enthusiasm within the united states and beyond for otherwise trade measures that will benefit our country. the united states must continue to offer a clear leadership that ensures the major economies will cooperate on financial restructuring and resistance -- protectionism. i think the chairman again for calling this important hearing. i look forward to secretary geithner's testimony. >> i appreciate your comments as well secretary geithner, if you would summarize and we'll put any full text in the record that you have and we look forward to your comments and other good

dialogue. >> thank you mr. chairman, mr. lugar, and the committee. it's a pleasure to be here today. this committee has played an indispensable role to strengthen america's leadership in the national financial system. this is one of those moments. as you understand and as he said in your statement, economic policy is central to achieving our national security and foreign policy objectives, our capacity to advance and protect our national security interest depends fundamentally on our economic strength at home. but our economic strength is increasingly dependent on the strength, openness, and stability of the global economy. six years ago the u.s. played a central role in the creation of the international financial institutions of the multilateral trading system. today that system has to be reformed to address the great challenges of our time. and we are now engaged in a process of advancing a set of very forms that will other nice

these institutions and arrangements for international economic cooperation. replacing the g20 at the center of. it was focused on a small number of industrial countries we've made the g20 the premier forum for international cooperation. we are working to strengthen the international financial institutions or they can play a more effective role in promoting our interest in global growth and development. as part of this, we are examining a set of reforms to improve internal governance in the institutions, to provide more focus on core priorities and development, and to strengthen the financial structure of the banks. we're supporting a set of reforms to the government structure of these institutions to increase the rights and responsibilities of our major trading partners and the most populous rapidly growing economies in the world. we're working to create more effective means of cooperation on financial reforms to help prevent future financial crises. this is why we created the financial stability board as a complement to the existing

institutions and why we expanded this for them for cooperation include all the g20 countries. these reforms to the architecture are critical to advancing u.s. interests. and as you see in the g20 they have very broad support internationally. i just want to highlight very quickly, mr. chairman, some of the major pepsodent priorities in the international agenda that we face today come although both of you highlighted all of these. ..

as you saw in g-20 and in a pet, there's broad support for this you are on the world. second, we have to enact stronger global financial standards to create a more stable financial system. this is about capital requirements. that is about oversight of critical markets like derivatives. it is about managing the failure of financial institutions that operate globally. for our reforms in the u.s. to be effective, they must be accompanied by stronger standards locally, otherwise, risk will just move after would regulation. -- uighur regulation. addressing global development challenges. president obama as proposed support for a major new international initiative to strengthen food security and as a part of this establishing a multilateral food security trust fund at the world bank to increase and improve agricultural assistance to low-income countries central to this would be advancing new strategies for increasing productivity in agriculture through research and development

policy reforms and through investment. we have to work to address climate change and we are working in the g20 to do so in a way that will best promote reforms not just in the major economies but in the major emerging market economies. in this context i appreciate the support of this committee for the comment and funds along with the global environmental facility we hope these funds can be building blocks for leverage in future u.s. climate investments. these are some of the priorities. we are working very hard to try to help rebuild an international consensus around the world and in the united states in support of reforms to open markets for u.s. exports to strengthen the international trading system. all of these require the u.s. to play leading roles but we cannot solve them alone. we've been witnessing this crisis to enact a very powerful, very effective coordinated response to avert the worst financial crisis since the great depression and i believe this extraordinary cooperation makes

it more likely we are going to people to advance these longer-term reforms. we are actively engaged now in building a 21st century architecture that better service future generations. we do this not just out of idealism that because of the pragmatic and realistic calculation of our economic and national security interests are often best served through multilateral cooperation. we look forward to working closely with this committee on these challenges and answering your questions. thank you very much, mr. secretary for a quick and comprehensive summary. let me ask you, one of the things that struck me as i read the leaders' statements coming out of the g20 meeting, and also looking at some of the meetings that have taken place in between that the response to the crisis

in terms of the stimulus and the sort of global consensus where you've got to put the stimulus out and do this investing was unique and powerful and it had its impact. but is it unfair for me to sort of still say that the talk of reform and restructuring still remains perspective in a sense? what i keep seeing in these meetings is we must reform this, got to strengthen that, redo this, but i don't really see that that has yet taken hold, and if so what are we looking at? >> i think that you cannot look at three areas to judge whether this consensus on reform is going to have any attraction over time. you can look at what is happening on the international financial reform debate. you can see it in the government structure of the institutions reforms to the international financial institutions and you can look at it in this broad

framework on growth. and if you look at financial reforms for example there is very detailed negotiations going on right now in parallel with the work of the senate and house on financial reform here on a new global accord on capital standards on how to bring as i said mark oversight to derivatives markets to the credit markets critical to the we systems work today and build a framework for helping manage future financial failures more effectively. on the international financial institutions we've made a lot of progress on the early architecture of reforms in the government structure to give more as i said police and responsibility to the major economies. on the framework for growth you're seeing even as the recovery takes hold countries put in place reforms that are going to make it more likely this recovery is more sustainable over time as more balance so just as an example, use the domestic demand in china, in japan, many of the

major emerging markets advancing more rapidly. you see thea lee shape of the recovery reflect this basic pragmatic recognition that if we save more in the united states demand will have to come from sources elsewhere. so i think what you see in the reform agenda is promising. of course the test will be what countries actually do over time. but i think it is very promising and i think it reflects the basic strategic judgment which i hope you share, which is that you need to move on the reform agenda while the memory of the crisis is still acute. if you wait too long you won't have much support. support will fade. >> i agree completely with that. i'm delighted to hear of those negotiations are making progress. when what you anticipate that you think they would come to fruition and the structure would be laid out? >> on all of these fronts? >> i will give you an example, on a new accord on capital requirements for financial

institutions, capital broadly defined more conservative liquidity management constraints on leverage etc. those things which are critical to financial reforms we set a deadline for agreement internationally by the end of next year and there's very active detailed negotiations going on right now on the details elements of that framework and our hope is we are committed to at least a notional deadline putting in place to years after the initial agreement. >> what we do want financial regulatory reform of next year have an impact on that? >> absolutely. i think we have to be able to set the international agenda on reforms. because we can't have a system without a little playing field and if all we do is raise standards. the rest of the world operates at the standards will be bad for u.s. institution, that force ability to read for us to set the agenda to get the world to come with the higher standards have to show we deliver in the

united states. we will have no credibility if we can deliver in the united states, and if the process moves too slowly we will lose momentum and they will be bad for our interest. >> what i have heard is the reforms with respect to pay are particularly complicated what ever. can you share insight on that? >> this is a terribly important and terribly >> there is a basic incentive that we all share, which is that incentives in the financial system created is more risky. that helps magnify the vulnerability to these kinds of crises. to change that we're trying to do two things. and one is to promote legislation that will force companies to send it to their shareholders for a vote, how they pay their senior

executives. simple principle, we think will be very effective, but we do not think it is enough. we are also proposing the initial outline of standards that our supervisors set of broad standards for a compensation structure and enforce those standards. we think these are necessary complementary reform. they are not enough on their own, but they will help make sure capital and leveraging will not be undermined by future compensation practices. we are doing that across the system. as you have read, we have been very -- have worked very hard to make sure that those institutions that took assistance from the government find themselves with a very tough constraints on compensation just to make sure that the taxpayers' money is going to fix those institutions, not to report with excess of payback packages a set of the senior executives. executives. on that basic framework there is

very broad support across the major financial institutions -- major financial systems in europe, in the u.k., and that's important because again without a level playing field these reforms would be ineffective. >> you were just in china. the president i think is spending his last night there now. they have concluded the talks. how would you characterize the economic outcome with respect to our goal versus accomplishment in beijing? >> i think the president made a lot of progress. i think the best test of that is going to be to look at what you're seeing in terms of what china is actually doing in terms of policies to shift sources of future growth away from exports, the kind of heavy intensive, constant growth in the past to realize more on domestic

consumption and investment. and that's going to take a lot of time. it's going to take a long period of time and a lot of reform. but the broad strategy of the reform agenda is very supportive. if you look at the shape of recovery you are seeing very promising early signs of shift. now, china is very important in the united states economically. we want to see more open markets in china. a more level playing field for u.s. companies that compete in china and with china around the world. and it's very important we see financial reforms, broad reforms to the exchange system over time to help reinforce the process toward a more balanced bull recovery. this is not stand issue between china and the united states. important for both of us but the global economy and on those issues, on climate change as we read about on our broad national security priorities in terms of north korea and other areas of the world i think we have a very strong foundation for cooperation. we are not going to agree on everything.

our interests are necessarily going to conflict and a future. but our basic -- the basic judgment is we are going to be more effective working through those problems if we invest early in a strategic relationship where there is a better mutual understanding of our basic interests and we can work more effectively to advance the things we both care so much about putative >> one final question of my colleague would permit. the world bank and development banks have been strongly focused on energy poverty. and in assuring access to electricity for the world's poor. but that has very often almost always come at the expense of jury high carbon emissions. how would you recommend that the banks reconcile the need to hold the world's poorest today with the threat of climate change that's going to disproportionately affect the world's poor? >> as you said plea in the leadership role in this very comprehensive changes in how

countries use energy around the world. not just here of course, and we are behind much of the rest of the world in this, but in the most populous most rapidly growing economies in the world. the, as you said, the institutions like the world blank nei to be working in support of those reforms. to make sure that growth in those countries is more energy efficient, less energy intensive, less carbon intensive. that means they need to be supporting reforms that encourage that shift in transition. and need to make sure the resources they are putting at work in those countries in support of the islamic or not working against these broader objectives to support the global consensus on addressing climate change. so i think you're right to emphasize it. our judgment is three critical priorities to shape the institutions and we need much more focus on these priorities. they are climate change, the broad green imperatives. it's a hour food security,

agriculture development. a classic traditional emphasis on development where we lost focus as a world and we are trying to redress that balance. and on supporting the basic institutions that are critical to private markets, private lead to some women strategies in these countries. those three priorities need to be the center of what these institutions are doing. and we need to make sure they are doing those not just as the focus but that they are giving them more effectively with the types of governance changes that both of you referred to. >> thank you very much, mr. secretary. i appreciate the synched direct answer. senator lugar? >> thank you. secretaries geithner, let me double back to a comment i made in mind opening statement in which i said i'm hopeful that in the months to come the administration will if it seeks substantial increases for the six banks that we have discussed

that such requests for the engage the "congressdaily" and without quibbling over the past history although as fairly recent the problem that i receive is the administration asked for $100 billion for the imf last september for good reasons, which you could elucidate some more. it can lead in the process the supplemental appropriation act now sort of adding insult to injury after the supplemental past and someone gave the president a statement to sign with the bill asserted that the administration discretion that promoted reform at the imf the awareness of sort of a blank slate and we are out of it. this is why your appearance today is very timely. only two months later in the situation, but as we have been discussing today, the united states may or may not seek

increases for the banks. but given the portfolio go of six different situations even if we decided not to do so with some with other sweet mayfield in terms of financial crisis or recovery as one looks at it and we need to do more. my hope is that both the timing of the requests or even if there is a short time frame that you and others that are responsible would approach the chairman and indicate that we don't have much time. you folks have got to have your hearings or deliberations and meet your suggestions. but i think that would be a help your process in terms of the intergovernmental relations on this, knowing as you know, that we are deeply interested in these banks as you are and then finally we bear responsibility for appropriating the money. and that we've really need life goes on even after one

appropriation bill by the administration won't be back again for three years or so. but do you have any fault for comment about this process, and even more importantly about the future? >> senator, let me state clearly absolutely i welcome it personally to consult with the chairman and with you and with the committee. before we get to the point where we are going to formally recommend to the congress a set of broad reforms, any potential increase in resource and these institutions to be and you were very gracious in the way they use it when you said, recognize the process earlier was not ideal. and we had to do, move very, very quickly in the face of a, as you acknowledged enormous delegate situation, and i know it was not ideal. would not want to put you through that again but i want to underscore the actions you made possible were decisive in helping turn confidence. if you look back and look at when confidence and global economic activity, financial

markets, trade stop falling off the cliff and started to turn it was around when the will solve the united states acting forcefully not just to fix recession, the financial crisis, but to put substantial financial force behind these institutions so they could do what they needed to do to address the crisis facing the rest of the world. it was decisive but i agree it was in the ideal way to do things and i personally cannot we will consult closely with you before we get to the point where we want to consider any material changes in the basic financial structure and i completely agree with you, and i will not support -- i would not support a change in the capitol base of these institutions without a fundamental reassessment of the world and without a set of reforms that give us confidence in asking you to use the peers money to support these. and i agree with you, too that we need to look at these institutions individually. they have got different challenges on the management side. they've got different records of

using resources while. they've got different challenges , but it's also important to recognize we have to look at them together. we can't come to you and say we would like you to support this one this year without i think having some sense of a full package will look like and that is what we are trying to take a careful look at now. >> i appreciate that very much. and likewise to the extent we can furnish information even prior to request so that we are all up-to-date on your appraisal of the six and their situations on our efforts in the staff and work in this committee i can recall visiting with the leadership of the american development bank and the problems i discussed and they came to us privately and made a very good statement and then

followed through, and so i hesitate even to offer an argument of criticism today also very clearly. it was a rather large loss in their portfolio and all of this occurred really outside the dialogue we might have had with the administration, with anybody in the treasury, granted much of that occurred in the last administration quite apart from your watch. but i just am grateful for this opportunity and the interrelationship with you and the committee. to work on a different relationship. we are not interviewing the bank presidents while treasury is off somewhere else. >> i would appreciate that. >> let me just ask this, given what we have just indicated some americans what ask do we really need any more of these international development banks. downs with fudgy 20, the interrelationships now which are

created, they may be fairly fragile or new or however one must characterize them. are we entering into a new era in terms of international finance and which these geographical situations make less cents, and if so do other nations see it the same way or as you attended these conferences are they still at the same status quo with regard to the banks however wealthy have been run one way or another and i ask this because a lot of our hearings that i cited were with regard to dams that never got built, roads that never happened, money that this appeared. it gave for the first time the free press of some emerging nations and opportunities to question their leadership as to where is the money. but it also increased questions as to our surveillance of this. our oversight. so, i wonder and the remaining minute that we have here what is

your prognosis as the future of the institutions. >> let me just begin by making the basic statement that even if one believes, as i do, that these institutions are critical to our interest as a country, and even if one is daunted by the challenges you see around the world in terms of poverty development etc., it's not possible i think for us to come to you and ask you to support resource of these institutions without being able to make a very compelling case that those resources will be used effectively and wisely or more effectively than they've been used in the past. so, i deeply understand. it's not enough to assert the world faces enormous challenges and enough to answer to these institutions play a central role. we need to be able to demonstrate that there are a set of reforms in place, not just in

the horizon but in place the confidence the resources will be used effectively. it was conventional wisdom i think and this has been troup over time. if you look back 15 years ago, ten years ago i will say there was a strong view held in many circles that the advent of global finance and growth in private capital flows rendered these institutions irrelevant. and i think one of the tragic things about this crisis, a crisis that in many ways as the chairman said started here it wasn't sold the hour responsibility but we bear some responsibility for this crisis. this crisis caused enormous damage and would have cost much more damage if you didn't have is that institutions like this in place that could respond very quickly to cushion the blow. and i think if you look at, again what is happening on food security and what needs to if you look at what has happened with climate change and food

security, what it takes for necessary private-led, market- led facilities, mrs. critical going forward. i think these resources offer the highest return than we have seen on almost any development in the united states the last 65 years or so. i think there is a good case for continuing it. but we have to meet the high bar, a high and skeptical bar if we come to you again to ask for an increase in resources for these institutions. >> i thank you for that answer and you can tell that we are following the nitty gritty of what is occurring in each of the six, without a prejudgment that they should not exist, but that we are looking better to a better performance. thank you, mr. chairman. >> thank you. senator lugar. -- thank you, senator lugar.

senator? >> before i get to the question relative to the topic of this hearing, you will forgive me that i do not get to see you on your debases and i will raise another issue with you. -- regular basis and i will raise another issue with you. some stability return to the financial markets that we are beginning to see some signs that the u.s. economy is growing. but as you know, jobs and employment continue to be a huge issue. and one of the challenges that i am still hearing from businesses in new hampshire particularly small businesses is that they are still having a very difficult time getting access to credit. so i hear some reports that the administration is working on other ways to help small business with credit and i would just encourage you to continue that effort because it continues to be a very big issue for small business. >> i agree with you. you're right. and we are -- the president

proposed three weeks ago convening a whole range of people from the broader financial community, small business community at the treasury tomorrow, karen and i are doing that to examine a range of additional ideas. even with the broad improvement in access to credit price you have seen across the financial system small businesses still face a very tight credit terms and there is a very strong economic case for trying to make sure that we are trying to help mitigate those financial, the classic credit crunch, though credit would be weaker if we are not successful in trying to mitigate those things and we are working on it. >> thank you. as you pointed out, if we are going to rebalance the world economy that means we are going to have to save more in the consumption demand is going to come from other developing countries and developing parts of the world. i love the xm bank's comment about this that over 90% of

markets are outside of the u.s. and only 1% of businesses do business outside the u.s.. and clearly we have got to change that equation. so as you are talking to our g20 partners what kinds of initiatives and efforts are you urging so that we can continue to open those other markets to american business? >> i would focus on two broad sets of changes and it is a very complicated set of reforms you need. one is to make sure that you're seeing again growth come from domestic consumption, lesson from exports in the future. and that requires again a very substantial shift in the broad orientation of almost any economic policy in these countries. and as you said we want to see the markets more open. that is a more simple less

complicated set of challenges but it's a very important part of it. and i think as you referenced, you referenced xm there's things we can do, too, to make sure american companies have access to competing in those markets as well. and so i think that we need to make sure we are building support here in the united states for more open trade and so we can be credible in advancing an ambitious agenda for more open markets outside of the united states and that is an important part of this effort to shift the source of future growth toward consumption against the united states. >> you talked about financial regulatory reform as being critical and mentioned executive compensation. but other elements would you like to see when it comes to that reform? >> i think the most important things are about the basic standards that determine how risky major institutions are. and that is essentially about

how much capital, how much financial research you force them to hold against future risk. it's about forcing them to find themselves more conservatively so they are less vulnerable to run. it's about trying to make sure that there is less leverage in the future and that's something that we have to do in the united states. we have to meet the standards more conservative. the need to be higher than they were and they need to be applied across institutions that serve the basic function of banks. they may not look like banks but if they are banks in the basic sense, the need to be subject to those requirements. but again, for that to work we need to have a level playing field on capital a world. we actually were more conservative than most major economies in terms of capital requirements, banks forced to live with. but we did not apply those requirements so a bunch institutions that operate effectively like banks, aig,

major banks and the was a very tragic failure in a regulation. but outside the united states, the constraints of light on things were actually less conservative. i will give you an exhibit. how were entire banking system today including the investment bank's if you count them as banks is about the same size as gdp. as the overall income the u.s. produces every year. that number is about five times gdp in the united kingdom, eight times gdp in switzerland, about two to three times gdp in much of continental europe, and that just illustrates the importance to make sure you do this on a level playing field because the system won't be stable and it won't be fair if we push requirements of higher in the united states but don't see the standards raised around the world. there are other things important to do. so all the stuff we are trying to do on derivatives, on crisis management, to be the to manage

failure in the future come protect taxpayers and make sure they are not at risk in the future, those are things i require complementary reforms outside of the united states as well so you need to do these in parallel. if we do them here first and then try to get to come with us over time than we are going to be less effective so we are trying to do it in parallel. >> and my final question, -- i think the administration has been successful in going after some of the tax havens that are in existence, and i think that has been very encouraging, the agreement with ubs and some of the dual track that the administration is on. can you -- can you talk about what your priorities are going forward for the next efforts that you see under way? >> thank you very much for highlighting this very impressive set of changes.

in just a short period of time. there have been more agreements signed to deal with these problems in the last ten months, and i think they were signed in the last ten years globally. >> sweeping changes. with switzerland and the major offshore financial centers coming in from the coal makes it much harder for those who want to remain outside and we want to just build this momentum. and it's very promising. and very important. >> so, now, specifics that you want to point out? >> you will see more. we want to see more agreement on information exchange with the remaining countries that are still not moving quickly enough and we would like them to move more quickly, and again we've got the momentum now and it's been a change. basic regime change globally on this, and i feel we will make a lot more progress. >> if senator coffin were here

high sure he would want to know if would be helpful to pass them all? >> i'm sure that would be helpful and i am sure there are other things you can do to help reinforce the incentives to move with us on this. >> thank you. >> thank you, senator. senator isaacson. >> thank you for your service, mr. secretary and i appreciate your comments about referring to banks, people that look like banks but weren't banks in the disparity between the oversight and accountability and investment banking versus traditional banking. in fact, senator shaheen, i want to associate myself with everything she said about credit in terms of those small business, in terms of american business, and i do think because our bank system is as -- the traditional banking system is as regulated as it is it is now constructed in the amount of credit it can extent because of the capitol requirements loan-loss reserve said saturday. so hopefully as we bridge ourselves for what you refer to

which i think you are right, period of stability to a period of growth again that kurth is only going to become of the traditional banking system can meet the main street, small-business requirements in the economies, this kind of a state, not a question but i associate myself with what senator shaheen said a and i agree totally with what he said. in fact, i think of the investment-banking community had been subjected to an annual audit like fdic and accountability and transparency in the tier one capital requirements of banks we might not have had the problem that we have. i don't know if you have a comment on that. >> i agree with you. you said it will but i would note banks were not perfect. >> nope, nope. >> lots of banks -- >> it was able to statement. there were weaknesses and supervision of banks as well. >> two quick questions or observations. one is tell me what you see in this oversight after the it to look like.

>> we are trying to do the following two things. the first is to bring the standardized part of the derivatives market on to central clearing houses. that is very important. right now if you are in this business you are going to have hundreds if not thousands of counterparties, tens of thousands of positions. that risk is all managed by literally. so that complicated spaghetti like structure of riss. it's very hard for you to know in real time with your exposure to loss would be. if a major firm of the faults. a few of the standard as part of the clearinghouses you reduce that very complicated picture really one number. much easier to assess what your exposure is, loss is, and that if done well, if you design the financial protection and a clearinghouse carefully that will make the system more stable, less likely to see the kind of panic contagion you saw

in this crisis. many other things are important, too. the other important thing is to make sure the regulatory authority is responsible for market integrity for preventing manipulation, for protecting investors. the need to make sure that they can go after practices in the derivatives market saw the need the information and the authority and the tools to police those markets. those are the two -- that is the simplest way to see the two important things of this. many other things important, too. i think in some ways the most damaging failure of regulation that related to the derivatives was we let a number of institutions like the model line insurance companies like aig right huge protection against falling house prices for example without adequate capital to support those and we need to make sure they hold capital against those commitments. if we do that well it will make the system more stable in the

future. >> the was the basic genesis of the 85 billion-dollar called in on aig if i'm not mistaken. >> aig, one of the worst examples but not the only example, again, of the firms that wrote a huge amount of commitment without capital to back them. many of those in the credit derivatives linked to the real-estate market. >> one of their question. when you refer to restrictions on compensation as i understand it, a lot of that has been not so much in the amount but the change for maturity over time versus incentives for one year props to get a big bonus and then your out of there; is that right? >> we do not believe, although a lot of people seem to think this would be just and fair and we do not believe it is appropriate for the government to set limits on amounts of compensation or to get involved in the detailed design on those basic questions. we think if you -- you

understand that risk. we do think of the structure of compensation the incentives create a very important for relations supervision and we support that. so as you said we want to make sure that compensation for senior executives is predominantly paid out in stock, that invests over time. it's at risk over time. you don't have a guarantee multi-year bonuses where you get paid independent performance of your firm. those are very important changes and will align the incentives of managers and executives with shareholders and the system as a whole, and that is a necessary appropriate object of government policy. >> do you see the threshold in the to be a t.a.r.p. recipient or that should apply whether they receive t.a.r.p.? >> those are important across the spectrum. the aubrey c >> remember, these institutions has to set a set of constraints

on assessing risk taking. if you ignore compensation, it will undermine the constraints that a capital requirement is designed to impose. >> on that subject, and i will conclude, there are corporations that have done their best to make good efforts to be accountable on their compensation. i would encourage you to look at american family life insurance in columbus, georgia. as you know, they went to stockholder of vice and at the time got a great deal of flak from competitors for doing so, but they were engaged -- if they were engaged on and accountability basis, it would have worked out better. >> i agree. we want to requires your elders to have more transparency in the vote. . . >> thank you, mr. chairman. >> secretaries geithner, let me

follow on the transparency issue. and let me thank you for your service on this issue and the importance now, the g20. that certainly provides additional opportunities expanding the realities of the world economy to deal with the management of the world economy. but we are now dealing with countries, where transparency is somewhat different than it is in the united states. we have been, senator lugar and we have been, senator lugar and i have been working on participation in the extractive industries transparency initiative to try to have the united states shared leadership in this very important segment of wealth where we think openness and transparency needs to be dramatically improved to help basically minnelli wealthy countries that are poor. i guess my question to you as you see the g20 playing a more critical role how do we deal with the transparency issues of governments that have not been, not have a great track record in

this regard? >> i agree with your emphasis. i think that initiative is a very valuable initiative. and i would -- we would be happy to spend time on how we can work to make it more effective. it's very important that alongside that you see institutions like the world bank following the leadership of the world bank and promoting reforms in these countries that can reduce opportunities for corruption. and that has been frankly a late focus of those institutions. the bank is doing very important things in that regard. we can build on that. i couldn't agree more about the basic design and how we can best evidence of that. >> thank you. we will take you up on your offer on the ways in which we can be helpful in dealing with international institutions to leverage their importance to transparency in the participating countries. i would be curious as to how you

see what your budget 20 itself, how it would be expanded. we have the complaints from the emerging and developing countries as to whether there is appropriate attention in the international institutions and their needs. one of the advantages of moving to ag 20 is much broader interest. but there will be concerns as to how rigid the g20 will be in the future. >> you describe the basic tension exactly right which is if you make it universal you won't be able to do anything. but we have made it valuable enough people to come which is a good test of whether the thing is doing something consequential. we think we have got a basic stable arrangement now which is pretty representative of the major economies around the world, and i think i want to have some stability around that now. if we keep changing the seat to the table expanding changing then you want to have the kind of continuity of engagement it would be harder to get them done so i think we've got something

that brought the works now. it's not perfect. it has a lot of europeans of the table which is slightly analyst. it has got some regions somewhat underrepresented in their views so we may find a way to change that we have to have that period of stability now. >> let me change the subject if i might and talk about a subject we haven't had much debate in congress during these economic times and that is better national savings rates. we are all interested in trying to create jobs and stimulating our economy. we need to get back to policies that encourage domestic economic savings. and part of that is to get our budget in balance. understand that. but it also requires policies to encourage americans to see from a very simple things such as financial literacy to some recommendations president obama has suggested on infringing

additional savings. i just want to get your view where this is on your priority order as we strengthen our economy getting back to increasing america's savings rates. >> again use it well and that is the basic intent of facing the country among many. it is encouraging to point out you have seen private savings moved from negative to sum up modestly positive. that's very healthy. that is a necessary of the transition for us. the same time you've seen the amount we are borrowing from the rest of the world fall very sharply. current account is how we are borrowing from the rest of the world as the share of the economy was about 7% of gdp at the peak and it's now wonder if read. that's interesting. it means we are borrowing less even though we are facing these high deficits. but we are going to need to see very, very substantial changes over time in our fiscal position. to make sure we go back to living within our means that people will understand that and as a part of that, trying to

provide ways to encourage americans to save more will be important. i think you're right that you can education helps and there are things you can do to the design of the tax incentives week rate for savings that might do a better job of center ridge in the savings at the margin. i think the most powerful thing that's going to affect behavior on savings in the near term is going to be just the cost of the crisis, the damage caused by a set of judgments made by many americans that left them with too much debt and it's going to take some time for them to reduce the amount of debt and get their basic household budget balanced and to a more stable foundation. that's a necessary change to go through but it does mean we are lucky to grow at a more moderate rate than we have coming out of past recoveries. and that's one reason why this is going to feel harder for the average american for a longer

period what time. but you're right part of this will be what the government as, the president does in terms of moving our fiscal position back to a sustainable balance over time. >> i would just point out that when america's economy was growing at a pretty fast rate just a few years ago when our national savings were in some case some quarters negative during this big boom americans said well, we are increasing or savings because of the equity in our homes and the value of the increase retirement savings through appreciated values. well, that is not there any longer. so, i really do think we have had for a long period of time a serious problem of americans saving. the rates have been historically low for a great economy. and i think when we get our economy back on track we need to look for structural changes that

reward savings. and we look forward to working with you as we try to figure out the types of fiscal policies that provide for a think a more balanced approach to its national savings. >> i completely agree with you and like the way you said it. the financial reforms we are engaged with will help in that regard because i think that they will make it less likely that americans borrow responsibly and are not left with debt they can't afford, obligations they don't understand. they will help reinforce those broad processes of increased savings as well. but you are right to emphasize it. >> thank you, mr. chairman. >> my pleasure. >> sorry i wasn't here to recognize you but i am here now formally recognize you. senator corker. >> mr. chairman, thank you for having this hearing and mr. secretary has always been to see you. >> as always, good to see you. >> as you can imagine we are in

some pretty intense meetings right now as we are getting ready to work the markup in our own financial regulation, and obviously i know there is a lot of harmonization that's been talked about between what we do and what happens with other major economies. i know you've been working on that and obviously we are playing the lead role. and the european union i guess a lead role also. i know a number of other countries are not being quite exactly the world it seems to be between the two entities that this is happening. and i know this is not a big your proposal was sort of put forth a semi codification of t.a.r.p., where in essence there is an ability to use taxpayer money and i don't want to debate them as a surly. i know we have done it both publicly and privately. what are other countries doing in this regard when it comes to a resolution or at least the e.u., what are they thinking in this regard?

>> with me reassure you as we have in the past we are not proposing and i would ball support putting in place the kind of permanent authority like to make possible in the t.a.r.p. to read would not be good for the country to do. i wouldn't support it. the things very important for us to have which we do not now have our the authority to make sure we can -- >> i don't want to talk about what we are doing. i'm familiar with all three proposals. what is it that europe is doing? >> i think it's relevant to this because it's important for this foundation of what we want to get them to do with costs. simply stated we want to make sure we have capacity to manage the failure, not preserved, but managed the failure of large institutions with less damage to the economy to it and we need to have some emergency authority to contain the risk of financial panic. limited authority, carefully circumscribed to make sure we can draw a circle around the fire and prevent spreading to healthy institutions. those are the two things we did not have coming into this

crisis. it was a tragic and costly failure as you understand well. we can't -- node reform process will be adequate unless it gives a carefully designed balance of authority like that. otherwise taxpayers will be more exposed in the future and there's going to be more risk of moral hazard because in the end if you don't have those in place, government is have to do what we did last fall which cost more moral hazard and cost the taxpayer to put out the crisis. many other countries already have those policies in place. very few are adequate. the way they are designed. somewhat better than what we had but not good enough. and so we are working to make sure there are complementary changes to provide a better balance between again, taxpayer protection, moral hazard, stability, crisis tools, and there is no system i have seen outside of the united states that i think is adequate to the challenges that we are -- >> so it is not yet adequately addressed? >> i don't think it is adequately addressed.

>> and you guys, the treasury has made improvements in what they propose. there's still a pretty gaping hole that creates moral hazard and i guess i guess it to your assistance secretary i think that is where the heavy lifting is in figuring out how we have some degree of flexibility and not create that moral hazard. >> i agree with the way you put it. >> i know you are still coming our way and there is more to come, but i appreciate that. >> you come our way, too, a little bit. >> we are working toward that resolution. the resolution piece is obviously -- cizik we did nothing else here, the most important piece we need to work on. and what are they doing in that regard? hardee relying on bankruptcy court or creating a mechanism? have they felt that through yet? >> i think basically they are behind even where we are on this.

in most countries have a different regime for banks than they have for companies because banks are different. they recognize it requires a defensive mechanism. bankruptcy itself for instance doesn't work because the run can happen so quickly you don't have time to go through that process and there will be no willing did find answer. most of the countries recognize the basic distinction and have some basic architecture for the resolution of bank entities and most of those countries like you know operate as universal banks. so they don't quite have the same disparity the we have between institutions that are narrow banks and bank holding companies built around them or investment banks or other large complex institutions that are like the major globally active banks in function but in legal structure somewhat different. so they have basic bank like resolution architecture and its rudimentary form. it's easier for them in part because they have universal banks. but i don't think any of them

really have -- >> again we are ahead their -- >> we are not ahead debt. >> as far as thinking goes. the consumer protection peace has european union and many of the entities they actually set up a separate entity like is being proposed by the atlanta station. i guess all the major bills now have that component. separate from provincial regulation. >> a good question and i think it varies across all those economies. and i don't -- i can't tell you exactly but looks like the best model out there. but again, we have a challenge they don't have because with the federal structure of bank in the united states and greater diversity of institutions we allow provide consumer credit in mortgages the have a simpler problem to solve than we do. as you know in our country we left the responsible a spread of around at least six or seven institutions of the federal level and 50 or more at the state level. and our judgment is that that

system failed miserably. and that we are not going to have an adequate set of protections unless we concentrate of accountability and of 40 in one place with a better set of@@@@@@@@d)r@ @ @ @ in a separate entity, i think that is an oxymoron. i hope that is one area we will narrow our differences. >> we thought we could run them separately. for the country. if you separate rule-writing from enforcement, the rules are likely to be not that good because people do not have an responsibility for enforcing them. they will be less-well designed. the basic risk is that the rules will be -- >> i was talking more about

reinforcing the role in the prudential, at least in the regulated areas, in the regulators that exist. i don't think we have had somebody who has been approved by the senate in that position. know, somebody that has been approved by the senate in those positions. i think there are ways we can get at this without weakening the safety and soundness provisions and i hope we will get there. it sounds like there is not a lot happening in the other countries, in the three most important areas. let me just ask you this. other than the european union is there, latin america and other places, is there much thought being given by policymakers to overall financial reform and trying to, quote, harmonize with some of the of the things we are going to here? >> i think there is a lot of thought and support on the design of the capital court as well. but the irony of this crisis is

because so many emerging-market had such a traumatic wrenching financial crisis and 90's they actually put in place a sensible reforms that made their systems much more resilient in the face of this global recession. i'm not singing the are ahead of the united states but because they have a deep crisis early de -- that produced impetus for a lot of the reforms and other systems were remarkably resilient and stable despite the pressure of this recession. so this is a challenge now and the sort of frontier of thinking and reform is going to still be in some major -- in a major financial centers of the world principally united states, europe, and japan. >> secretary, thank you pure i tried to stick to the subject matter at hand. i know there's a lot me to talk about and i appreciate your testimony today. >> thank you, senator corker. we will wrap up here very dee

dee coverley promptly. colleagues have a lot more questions. let me try to if i can just been down a few things with respect to the g20, the new g20 structure. understand -- the g20 is going to do the economic policy but obviously in practice sometimes that line is fauzi, complicated and to draw. so who is going to decide in practice what issue is going to go to the g8 and what is going to the g20? >> can i slightly amend what you said? on the financial area, central banks and finance ministries, we are still going to get together as a g-7. occasionally. and as the g8. and you would expect us to because there are important things that really we have to keep doing together. and i think there is no reason

why the what undermine the broad role we are trying to give the g20. and -- >> said the g7 group of the finance ministers to continue -- >> again, we want to make sure what we do and formally in that group is contributing to not undermining this broad shift to the g20 as the center of gravity. but i think there will be an important role to be played on occasion by the eckert of the major economies. as you would expect there. roughly 60% of global gdp, much larger share of activity they are the major flexible exchange rates in the national financial system. the world looks to those major economies to provide a source of brought stability to the financial system and it will be an important role to be played in that form. >> is it the -- are you convinced the great parties are at the table at the gif 20?

>> i guess it's the best of the alternatives available today. it's not perfect and again if you look at it today there are things that seem somewhat anomalous but we can't keep reinventing it and changing it, and i think again it meets the basic pragmatic test it's better than the alternatives. >> so can new countries join the gif 20? >> again, our view is that can't make it bigger without undermining its effectiveness. and we have experimented with various ways to have observers, other people at the table represent regional that have worked relatively well so we will be pragmatic in that case but one to keep the membership stable. >> and how do you bring into the lucrative process the big decision concerns of the folks outside of it but pleased at the control to carry instance singapore? >> well, singapore is a good example. singapore has been at the table in these meetings at least over

the last, the ones i have been part of, representing an affect a peck. we've also table. we try to make sure we look for practical ways -- >> sitting at table less plus members or -- >> we don't use the word plus but they are sitting at table and have an opportunity to contribute and let me point out their contributions are very voluble. >> they aren't there in the way that people complete prior with the g8 sort of coffee breaks and to speak? >> no, it's there from the beginning. they sit around the table from the beginning to the end of the conversation. ..

>> we take a pragmatic test of these things with an important interest rekindle the advance with the cooperation and look for the four that do the best job to build consensus. >> does the hosting rotate automatically? >> guy forget the rotation but it is enough for now. >> is there any fire wall against the possibility that the entity by devolve into

not just economic but political? >> these are now meetings of leaders not just the financial ministers and bank governors. heads of states will decide how they want to use their time together most productive labor code that balance has changed over time and i am sure it will change in the future. but if you make it too broad there is a risk you did use the basic impact of the group them for write now the consensus is to focus on existential questions. >> ag eight was made up of capitalist countries and the al winkler has next. you have state led, some capitalist countries how, in your judgment will this impact the way the capitalism and globalization evolves as we go forward this century?

>> it is fundamentally on how effective we are. in bringing to the table not just policy to demonstrate that we are capable of running our country well and addressing the economic challenges we face the credibility ever wear depends on that. so to bring ideas to the table. we have no capacity. very limited capacity to compel consensus on these types of things. it depends whether we bring brought ideas for these challenges of other people see and their interest to support. on and the basic shape of market oriented economies economies, we are seeing very broad support for the court economic strategies this president has laid out for our country and globally.

what is remarkable, they're beginning to listen to countries like china, india, brazil, say about the basic reform agenda, how close it is a basic by year's end judgments to we are trying to do. >> with the different members representing the oil-producing countries but also the biggest consumers, how do see that? maybe that is beneficial but how do anticipate successes in energy security? >> you saw the president in boots her get back group of countries including saudi arabia and countries that subsidize the use of the cost of energy very aggressively and expansively commit to a broad commitment

to phase out over time those types of subsidies. so it is possible when you get countries like that together, you can see they should be in the collective interest. that is one example. as the interest diverge come it is a better chance or we can work together if you sit across the table from each other and tried to work through it. >> this the g20 need an enforcement mechanism? >> gettelfinger fed is right way to think about the 86 her as redesigned the political agreement on climate change and reform signed the financial system, there will be things that we will do in terms of commitment monitoring there would be inappropriate to those issues but i don't think the g2 -- g20 should be independent what they go enforcement. >> i have been informed you

have a boat shortly so i will not continue. no additional questions? first of all, do you have all of your people in place? >> thank you for moving so quickly to move out of committee to said the very senior important officials. consider the president's nominations of four or five remaining senior people and we're hopeful. >> it is only november and we have a lot of time ahead of us but it would be good if they were in place. >> it is stunning it has taken so long if i am sure with you coming and of the private sector and it boggles my mind. >> bair great people and i am very lucky we have people of this experience and talent. >> i know that. we'll afford to approving

them but i do want to say i do think you have had an extraordinary job to fit respond to some of the largest economics challenges with very few appointees coming and that is a credit to the professional staff and those who are there any way and i think you would agree there well served in that regard also thank you for your answers to your questions today. you have been concise and precise and i appreciate it the directness of your answer. it has been a good exchange and we are appreciative. >> we look forward to continuing it. >> we stand adjourned

[captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2009] >> here is the latest on the economic stimulus -- of the $787 billion economic stimulus funding, signed into law in february, over $297 billion has been committed to states by the federal government to spend on stimulus projects. that is up to billion dollars from last week. over $136 billion has been paid out for those projects. at cspan.org/stimulus, you will hear debate as well as links to government and watchdog groups tracking spending. that is all that c-span.org /stimulus.

>> next, defense secretary robert gates announces a department review in connection with the fort hood shooting. followed by a senate hearing on the investigation. later, the indian ambassador talks about the upcoming dinner at the white house. this week on "america and the courts" preview of upcoming court cases including one on gun rights and testimony by jeffrey s. killing. -"america and the courts," today at 7:00 here on cnn. in 1989, judy shelton wrote

about the coming soviet crash. in 1984, the monetary system. now she is talking up the u.s. economy. >> this is unprecedented. spending on ending deficits and what i consider an unconscionable accumulation of debt. >> economists and wall street journal contributor judy shelton, sunday night on cspan's "q&a." >> robert gates announced a wide-ranging department review in response to the fort hood shooting. he is joined by joint chiefs of staff chairman mike mullen. this is just over half an hour.

>> i should tell you that we will not discuss any details of the ongoing criminal investigation. that inquiry and any related military justice proceeding must, by law, be carried to completion without outside interference and must be conducted in a fair and impartial manner. furthermore, during this time, a senior dod leaders must be careful to avoid statements or actions that could influence the process. i urge other senior leaders to be mindful of this and urged those with firsthand knowledge of the fact to refrain from comment on last expressly authorized. the shootings that ford would raise a number of troubling questions that demand complete but prompt answers. as you know, the president ordered a government-wide review

to look at intelligence related to this manner and how such intelligence was handled, shared, and acted on within and between individual departments and agencies. an initial response of that review is due back november 30. today, i am announcing that the department of defense will ensure the safety and health of dod employees and their families. we do not enter this process with any preconceived notions. it is prudent to determine immediately whether there are internal weaknesses or procedural shortcomings in the department that could make us vulnerable in the future. to this end, i have ordered a 45-day review with three areas of emphasis -- first, to find possible gaps or deficiencies in the defense department programs, processes, and procedures for identifying service members who could potentially pose a credible threats to others.

second, to assess among other issues, personally liable to programs, medical screening programs, service member release and desk charge policies and procedures, pre and post health assessment programs, periodic counseling sessions, and procedures on reporting and handling of adverse service member information. we want to examine the efficiency of the domestic and physical security programs at the department of defense facilities and its emergency response capabilities for mass casualty event at our facilities. former commerce secretary togo west and burn clark have agreed to have this 45-day review. i think for their public service and contribution in what will be an intense effort. both are intimately familiar with the department and devoted to the safety of defense

department employees and their families. i know they will conduct a serious, thorough, and honest assessment. as part of this review, each service will appoint a senior official to work with secretary west and admiral clark on service-specific issues. in light of the fourth incident and unique challenges, the army will conduct a more in-depth detailed assessment whether army programs, policies, and procedures have reasonably presented the shooting. those findings will be submitted as part of the army's contribution to the department to review. his initial review is by no means the end of the process. it is just the beginning. its results will inform and largely shaped a department-wide of follow up examination of that systemic institutions for coming. an examination i expect will be completed within four-six months. this more in-depth review will

intelligence service selecting and investigative panel. these panels will in turn report their findings to a dod-level panel. the look at areas where additional resources are required. among other issues, this review will cover topics such as service members support programs, care for victims and families of mass casualty event, how we ss and sustained performance of health care providers, and overall stress on the troops and their families. in all of these, i promise of the department of defense's full and open disclosure. there's nothing any of us can ease the pain for the wounded, the families of the fallen, and the members of the port but community touched by this incident. this is pay rise of vividly and first and in tennessee. all that is left for us to do is everything in our power to

prevent similar tragedies from occurring in the future. and comments? >> do you believe there was management failures in the army from what you know now? does the fact that you are launching a department-wide review indicate a lack of faith in the army investigative portion? >> the latter is not all the case. i think the army as every capability to investigate itself. men all the services potentially have some of the same problems that the army is trying to deal with. that is why, for example, let's say the security of our facilities. that is not just limited to the army. i have every confidence in the army's ability to do this. it is important that we look at it from a department-wide

perspective. the whole purpose of what i have just laid out is to enter the first question that you have asked, to determine whether there were lapses or problems. more importantly, and it is focused more on where we are today and looking ahead, what can we do to prevent something like this from happening again. >> one item he mentioned is that you want to identify service members who may be a threat. what can be done when someone is suspected. ? >> that is one of the three areas that i am asking this

panel to look into, admiral clack -- admiral clark and general west are part of that. >> yesterday, attorney general are colder said he was disturbed by information that hassan had e-mail communications with terrorists. are you disturbed by that? >> yes, it is disturbing. before i draw any conclusions about it, i want to find out all the facts. >> what is your advice to army families going in and out of fort hood who may be looking at their neighbors with suspicion? what are you telling them? which should they be watching for? >> i remember after 9/11 and

cautioned that president bush and others in the government exercised against identifying certain categories of people as potentially suspicious. the thrust of their remarks was that, in a nation has to burst at the united states, the last thing we need to do is start for any fingers at each other, particularly when there is no basis of fact for it. until the evidence is in, i think the comments about how we treat each other still should apply. i know this is an issue which concerns to the servicemen. >> it does not take this kind of direction to -- for the leaders to recognize the challenges

associated with this. every base, every unit, literally, leaders have grabbed this to look within and see where they are and to look at whether there's potential or not and to reassure members and families that not only do we take it extremely seriously, we are looking at it and to really come together in what was a tragic, tragic incident and a reminder of the times in which we live and that leaders are in fact taking action literally before this guidance to ensure that this does not happen again. >> [unintelligible] >> my message to all those in uniform, including muslims in uniform, is we appreciate their

service, the difference they make. the diversity of our forces is one of our greatest strengths. it is not unlike what the secretary said that no one should draw any rapid conclusions. we need to ensure that we treat everybody fairly. before this incident and after this incident, there are procedures that exist in all the services to look at our people and programs and evaluate ourselves routinely. i ensure that leaders are doing that. >> would you look specifically at the mental health ranks within the army where the allegation has been made that a shortage of mental health professionals may have let unqualified people continue on rather than being kicked out? how's this of it will this be

verse is a general look at all system. >> as i have indicated, they will look at how we deal with stress of our healthcare providers. i would say that it should not be limited only to mental health care providers. you go to the hospital and you talk to the nurses and doctors and those who care for these grievously wounded young men and women -- their level of commitment and i can't imagine the burden on them of doing that all day, every day. one of the things for their own benefit, if nothing else, is for us to take a look at how are we helping them deal with stress. , given the circumstances they

face. >> clearly there have been shortfall spread it is across the department' and it is more significant in the army as far as these statistics. that is representative of the shortfall that we actually have. in the country, we have recruited significant numbers in the last several years. we have increased the mental health providers for both members and families in the last several years. we have not closed that chapter. >> it gets harder as you get to more rural areas spr, in terms f finding an adequate number of health-care providers. we are looking at whether the military medical education system can expand beyond how much it could expand beyond

doctors and try and provide opportunities for the training of psychologists and counselors and so on. we would pay for that in exchange for a period of commitment to serve. we would then go into the communities because one of the things, as the chairman has implied, one thing we are discovering as we go around trying to hire people all over the country and there's a national shortage of these folks. >> based on the fact of what you know, is this fair to characterize the shooting as a terrorist attack. >> i will not go there. as i said, as the senior person in the department and chain of command, i am the least able to render opinions on these kind of issues for it i will wait until the facts are in and we will let the military justice system take

care of it. >> [unintelligible] >> i have no idea. >> there is the issue of intercepted e-mailed being shared with the pentagon earlier. given your background in the intelligence world, is that relationship between civilian intelligence agencies and the government what it should be? >> without reference to this case, i will tell you that the sharing of information between the intelligence community and the department of defense and i would say law enforcement is so far superior to what was when i left government in 1993. it is dramatically different and dramatically better. one of the things that everybody is looking out and the purpose of they president's requirement terms of looking at who had what intelligence when and shared it

with home is to answer your question and we will not know the officer to that killed it is over. >> short of someone in the u.s. military and making a beef, what is allowed and not allowed for someone who might be described as becoming self-radicalized. ? what is allowed in the u.s. military? >> we all have private lives. in any command, you typically are not overly involved in the private lives of people who serve in the command of less circumstances surface that there

are difficulties and challenges. midlevel nco's are intimately involved with challenges that anybody would have across a wide spectrum of areas. the expectation that leaders engaged in that is very much there. as leaders become aware of things like this over time, my -- or something else, that gets surfaced in the chain of command. whether their squad leader's right up through the battalion commanders or ship commanding officers, they routinely deal with these kind of things when they are made known. the question is, how are they made known? that varies depending on the kind of situation you are talking about. >> if you had a young sailor in

your command making statements of a radical nature, what would be the appropriate course of action? >> without trying to map it to the current incident, my expectation is for any commander to be aware of those kinds of things and to take appropriate action but not to sit idly by and address it. there are many ways to address it. a single proclamation does not in and of itself necessarily mean anything. you have to put it into the circumstances. >> what is your expectation of any sharing of information between the criminal investigation and is a broad review you have laid out?

>> clearly, we have to be careful as we put together the terms of reference and as we go forward. ensure that we do not do anything to complicate or jeopardize the criminal prosecution. we will have some very clear guidelines in terms of the information that we are seeking. the information we are seeking in this shorter review really be almost entirely isolated from the criminal investigation because we are really looking at the all rest of the country in terms of what our securities capabilities are, what our capabilities are responding to a mass casualty event and that might not be an act of murder. it might be a natural disaster. what are our policies and procedures?

i think we can deal effectively with the questions that are being posed without creating difficulties for the criminal prosecution. at the same time, there will be clear guidelines. >> what was your initial reaction when you heard about the shooting? what were the questions in your mind as a citizen? >> my reaction was the same as everyone in the country, one of par. -- one ofhorror. the most important thing for us now is to find out what actually happened, put all the facts to gather, and figure out a way where we could do everything possible so that nothing like this ever happens again. >> about your meeting on

tuesday with the soviets, can you give us details on that meeting? was there any meeting -- was there any meaning to it? >> we have a very close relationship, military-military relationship with the saudis and arms going sales programs with them. i would leave it at the fact that we reviewed the programs for which there are outstanding requests and those that the saudis may be thinking about. we did discuss the situation in yemen. the secretary outlined for me the saudi view of the situation there. i will leave it at that.

>> had the election in afghanistan affect the drawdown -- how did the election in iraq affect the drawdown of troops? >> i would say that we have -- we are continuing to proceed on the assumption that the drawdown will take place. frankly, we were heartened when the election law was passed. we hope the current -- concerns that have been expressed can result quickly and new legislation passed so that the election can take place within the constitutional framework before the end of january. we have seen nothing at this point that would make that necessary.

>> are you in favor of setting a precise time line as far as the invasion of the georgia invasion by the soviet union? >> clearly, a very important part of the strategy and afghanistan -- in afghanistan has to be the increase in the size of the afghan national security forces and their training. and part during with us. -- and partner in with us. part of that is the ability to transfer responsibility for security as soon as conditions warrant to the afghans themselves. i see this happening very much along the lines that we saw in a rack. -- in iraq. we partner and then have a watch

situation and then a strategic watch situation. they need to take increasing responsibility. as happened in iraq, that is more likely to happen in afghanistan on a province by promise or even district by district level. clearly there is a desire on the part of all boss to begin this process of transferring -- there's a desire on the part of all to continue to begin this process of transferring responsibility. i think i would rather have those on the ground in afghanistan make the judgment call about when a province or a district was ready to be turned over.

rather than based this of the date. that said, my assumption would be that there would be some districts and some provinces where that handover could come relatively soon. in terms of specific dates, i would leave that to the folks on the ground. >> this sounds like too much reality for you. >> i think it is too early to say. things turned pretty quickly in iraq once they started to turn. i think we just have to wait and see. >> you expressed concerns of the rate were you in get troops and equipment into afghanistan. can you give us some sense of how important whatever you

decide in the coming weeks will happen quickly and are you confident that stuff can get in there as fast as it needs to? >> let me make a couple of comments and by the fed chairman to comment. the situation in afghanistan is very different than the situation we faced in the iraq. we do not have the same kind of transportation access to afghanistan that we did in iraq where we were able to come over a five-month period or so, to bring in five brigade combat teams. almost everything of consequence has to go in by air. -- by error. we are replacing forces in iraq and afghanistan. the ability on the receiving end to receive significant

quantities of equipment and people in a relatively short period of time is very different than the situation in iraq. that is the challenge we basically face in terms of just the logistics of the issue. first of all, let me be clear -- we identified weeks ago the critical enablers that could be sent to afghanistan before the end of the year. there were roughly 2700 of them ver. we have sent all of those sent. no critical or medical or other specialists have been held up by this review process. i anticipate that as soon as the president makes his decision, we can probably again bringing in forces again. it is a bigger challenge than was the case in iraq.

>> in iraq, we had a staging base. we do not have that in afghanistan. we do not have the infrastructure in afghanistan. i want to give a plug to a bunch of on some here as though we often times focus on the front and, the war fighters and combat troops but everybody on the ground i believe it is in combat. those who don't get credit for the logistic support. they have been magnificent. we face the potential afghanistan challenge for weeks and we think we have a way ahead. it will not be five brigades. lobby one brigade per month for the infrastructure -- the ability to receive it and other moving parts that are moving in and out.

>> we will have the decision when we have it. >> deep you have a proven record of demanding accountability. is one of the roles of this review to determine if, in fact, there was any kind of negligence and in turn would you demand accountability? >> part of what the army, as i indicated, the army is going into this particular at fort hood in great depth. i would assume that if there are questions of accountability that the army would address those internally. i think we will have to wait and see what their review says before we go down that road. .

we are not going to go through a situation where we have a fair amount of dissatisfaction now. of this problem being solved in two weeks or months on the basis of a single speech. but personal view is that you do have to exercise what leverage you out, but the question is whether that is on a province-

province level, district by district, and this, i expect, will be a continuing dialogue between ourselves and the afghans. we are here to help them. but corruption is an impediment to the success of the afghan government and to our own efforts. so they clearly aren't an important element, as you have been reading -- they are an important element, as you have been reading from secretary clinton's comments and others. >> senator mccain says that disclosure should be required for retired generals. do you agree with that? >> this rippers, obviously, to the story that came a couple of days ago, and i read the story

and subsequent reports. the services are the purview for this, combat commanders who actually do this. this is a group of individuals providing incredibly valuable seasons wise advice. at the same time, we have been terrific stewards of taxpayer money and we have to be aware of any conflict of interest or perception of them. as we look at this, we will come to an understanding of what we are doing with the future. >> thank you, all.

[captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2009] >> on the same day that secretary gates made his announcement, fort hood shootings were the subject of the hearing. witnesses include a retired army's chief of staff and friend townsend, former bush national security adviser. this is 2.5 hours. >> the hearing will come to order. this morning our committee begins an >> this morning, our committee begins a serious and consequential meeting. an american soldier, nidal hasan, has been charged with

killing 12 fellow soldiers and bonds to billion on an american military base in a military base in texas, on what i believe based on evidence was a terrorist attack. the purpose of this committee's investigation is to determine whether that attack would be prevented. whether the federal agencies missed signals or failed to connect dots that enabled hasan to carry out his deadly attack. if we find such negligent or errors, we will make recommendations to ensure they don't happen again. that's our purpose. we are conducting this investigation because we believe it's our responsibility to do so could -- according to law and senate rules. we are both the homeland security committee, and over the long-term, the governmental

affairs rules committee that has a special responsibility to conduct oversight, executive branch actions, particularly in this case there are questions about those actions. we know it will be difficult to fulfill our committees responsibilities. yesterday we talked to secretary gates and holder, and asked for staff for investigation of this of the murders at fort hood. both said they reported our authority and wanted to work out an understanding in which they could cooperate, as long

as our investigation did not hamper or compromise the issue of hasan. i assured them that their criminal investigation which is to bring accused to justice. our congressional investigation is to learn whether the federal government or any of his employees could have acted in a way that would have prevented these murders from occurring. their investigation in one sense looked backwards and is punitive, and our looks forward and is preventive. i am optimistic we will work out a way for both investigations to proceed without compromising either. our staff will meet with the

department of justice and defense to try to work out ground rules for both investigations without interfering with each other. i can say that our top staff has received one classified briefing on the hasan case and given access to some relevant and classified documents relating to this matter. we are off to a good cooperative start and we will be insistant about this matter. we will issue a report and recommendations. i want to make clear this morning, that we intend to carry out this investigation with respect for the thousands of muslim americans that are serving in the american military with honor. and the millions of other

patriotic law abiding muslims that live in our country. but we do no favor to all of our americans that are muslim, that a small number of their community have become violent, islamics and extremists. it seems to me here at the outset and based on what we know now, that there are three basic areas of importance. in which our committee in this investigation will want to gather facts and draw conclusions. first, if it seems to be the case, there were colleagues of nidal hasan in the u.s. army that heard him say thing or watch him do things that raised concerns in their minds about his mental stability or extremism.

the question is were those concerns conveyed up the chain of command, and were they recorded anywhere in hasan's personnel files, and did the army do anything in response to those concerns. ion did the joint terrorism task forces headed by the f.b.i. have about hasan. including transcripts of e-mails which he had with a subject of investigation that the f.b.i. acknowledged publicly it had in its possession. the acknowledgment came last week, what judgments were made about those e-mails? were any attempts made to investigate hasan further after the e-mail traffic of the

ongoing terrorist task force intercepted. and third, was the information that the joint terrorism task force had on hasan, shared with anyone in the u.s. army, the department of defense or anyone else in our government. those to me are three central questions, though by no means all the questions we will pursue painstakeingly and answer as completely as we can, before we reach conclusions and make recommendations. this morning we are grateful to have with us, to help us consider those questions and others, a very experienced and thoughtful panel of witnesses. with experience in terrorism, counter-terrorism, law enforcement and the military. we have asked our witnesses to

give us their first reactions to what we know of the murders at fort hood. and to what we know of the accused murderer, nidal hasan, based on the publicly available evidence. and i also hope they will provide their advice on what investigations should raise, on the focus of our inquiry, that is part of the department of justice or defense or any other federal agency or department. i want to thank the witnesses for being here. and look forward to your testimony which i am confident will get this committee's investigation off to exactly the right start. senator collins.

>> thank you for your courage and proceeding of this investigation and hearings. i can think of no more important task for this committee to undertake. in investigations the september 11, 2001 terrorism attacks, the commission discovered vital information scattered through the government through silos that may have prevented the death and destruction of that terrible day, if only the dots had been connected.m6x in the wake of the mass murder at fort hood, we once again must confront a troubling question. was this another failure to

connect the dots. much has been done since 9/11, 2001, to respond to the failures. we created the national center and joint task forces and fusion centers. we revised information sharing policies and promoted greater cooperation among intelligence agencies and law enforcement. and the results have been significant. terrorist plots at home and abroad have been dwarted. the rece

nt arrest highlight the tremendous efforts law enforcement. but shootings at fort hood may indicate communication failures and court judgment calls can defeat the system intended to insure that vital information is shared to protect our country and its citizens. this case also raises questions about whether or not restrictive rules have a chilling effect on the legitimate dissemination of the information, making it too difficult to connect the dots that would have allowed a clear picture of the threat to merge. these are overarching questions that we will explore. our investigation also seek

answers to questions specific to the case. law enforcement agencies handle intercepted communications between major hasan and a radical cleric, that was a known al-qaeda associate. did they contact anyone in major hasan's command to relay concerns. did they seek to interview major hasan himself? when major hasan began to question the oath he had taken to support and defend the constitution of the united states, did anyone in his military chain of command intervene? when major hasan in his presentation of walter reed in 2007 recommended that the department of defense allow

quote muslim soldiers the option of being released as conscientious objectors to increase moral and decrease adverse events end quote, did his colleagues view this statement as a red flag? were numerous warning signs ignored because the army faces a severe shortage of psychiatrists and because the army was concerned as the chief of staff put it, about a backlash against muslim soldiers. these are all troubling questions that we will seek to answer. for nearly four years this committee has been investigating the threat of home-grown terrorism. we have explored radicalization

in our prisons and how the internet can act as a terrorist training camp. we have warned that individuals within the united states can be inspired by al-qaeda's violent idealogy, to execute attacks even if they do not receive direct orders to do so. and we have learned of the difficulty of detecting lone wolf terrorists. to prevent future home-grown terrorist attacks, we must better understand why law enforcement, intelligence agencies and our military personnel system may have failed in this case. major hasan's attack targeted innocent civilians and soldiers regardless of their religious

faith. the patriotic soldiers and citizens of all faiths who were injured and killed, not on a foreign battleground, but rather on what should have been safe and secure american territory deserve a thorough investigation. with so many questions still swirling around this heinous attack, it's important for our nation to understand what happened so that we may work to prevent future incidents. we owe that to our troops, to their families and communities, and to all the american people. >> thank you very much, senator collins for that excellent opening statement. and now go to the witnesses and begin with retired general of

the army, and former chief of staff, and we are delighted to have you here as a decorated american soldier, and a relevant experience that general keane will testify to, at fort brag when a soldier with white extremist views was involved in the murder of an african-american couple. that experience informs his view of this incident, and we welcome his reflections on that and the broader view of extremism in the military, and how we hope that the army has handled this situation. general keane, it's a greater honor for you to be here. >> thank you, i truly appreciate you inviting me to testify this morning on a subject of national importance

that directly affects the american people, and equally important our soldiers and their families. how pagemu÷ painful and ironic that our soldiers were gunned down at fort hood. as we are rapidly become aware. the preliminary reports suggest that major hasan himself is an extremist, and as he cried out the refrain. and it appears that likely major hasan's targets and radical beliefs are directly related as we chose to kill those who were "destination -- destined to fight. we welcome the agencies of government and this congress are conducting to determine who

was major hasan, what were the patterns of his behavior and attitude, what did he know about what appears to be his extremist beliefs. what did we know about what appears to be his extremist beliefs, how did we share that information and what actions did we take or fail to result as a result. and most definitely, what must we do to prevent such incidents in the future. the department of defense has a long standing policy of intolerance, for organizations and practices and activities that are discriminatory or extremist in nature. this policy was updated in 1996 for extremist act ivities and again in 1996 after two army soldiers committed two murders at fort brag, north carolina,

resulting in a death of two african-americans and with a subsequent revision in 1996. in fact the army issued a pamphlet entitled extremist activities as a result of that incident. i took command in fort brag weeks after that incident occurred, and there was much we learned. first and foremost we were tolerating racially skin heads in our units in fort brag. when extremism occurs in a unit, there is a natural tendency to withdraw, and as such it can polarize a unit and

affect its moral to perform at a high standard. what we found at fort brag is that our policies were not clear in identifying what extremist behavior was. in this case tattoos, specific dress and racial rhetoric and nazi symbols, etc. as a result racial extremists were allowed to exist in our units, 21 soldiers were removed from the service for exhibiting this behavior, but unfortunately after the murders were committed. two soldiers were tried and convicted for these murders. the army determined that we need to update our policy and educate army soldiers and leaders on the patterns of behavior and those policies

that require soldiers and leaders to identify such behavior and report it. so that commanders can take appropriate action. commanders options are numerous from counseling, efficiency reporting, ucmj actions and involuntary separation. our commanders then and now, have full authority by army policy to quote prohibit military personnel from engaging in or participating in activities that the commander determines will adversely affect good order and discipline, end quote. i expect strongly after we conduct these investigations, we will find that our policies will need revision again to account for the specific behavior and attitudes by

radical islamics. it should not be lack of courage for a soldier to identify a fellow soldier who is exhibiting extremist behavior. it should be an obligation. and as such commanders need the guidelines of what this behavior is and use the tools to rehabilitate the soldiers if possible or to take legal or separation action. because jehagist are linked to security operations that affect the united states, it's important that we share information about such individuals. what is in the media these last days about major hasan and his behavior, is determined to be true is very

disturbing. such allegations as justifying internet bombing on the internet, warning about adverse events if muslims were not allowed to leave military service. immediately seeking counsel from anwar al-awlaki with well known ties to al-qaeda. and able to affect his patients to his distorted views. and finally was the army sharing what they knew about hasan and anwar al-awlaki and if they shared what they knew about hasan to the f.b.i. while the patterns are preliminary, it's similar to

what we experienced at fort brag in the late 90's, where we were wrongfully tolerating an extremist in our organization. who had displayed a pattern of behavior that put them at odds with the value of the character of the army. let me conclude by saying that the incident and major hasan's behavior is not about muslims, and their religion who are a part of the fabric of the american life and assimilated in every aspect of the society. nor is it about the 10,000 muslims in the military who are not seen as muslims, but as soldiers, sailors, air men and marines, their contribution and commitment and sacrifice is not only appreciated, it's honored. this is fundamentally about

jehagist extremism, that is at odds for the military and threatens the safety of the american people. i was at the pentagon on 9/11 and felt the horror of this extremism, as the army lost more soldiers that day. i know that our soldiers and families at fort hood were stung by this tragedy, because their loved ones were killed for what they stood for. radical islam is the most transformational issue i have dealt with in my military service. .

we are a society that espouses tolerance and values diversity, and our military reflects those values. at the same time, we must know what it but it looks like and we must know what to do about it. thank you, and i look forward to your questions. >> thank you for the statement. i appreciate it very much. we have the former assistant to the president or, at security with us -- for homeland security with us. we are grateful to have you with us to put this case into the context of your experience in the field of counter-terrorism generally. please proceed.

>> thank you, mr. chairman, a ranking member. the one thing i think we know for sure is that things always look clearer looking back then when you are in the heat of battle. i caution the american people to remember that imperfect knowledge in the heat of the battle and investigation often result in less than perfect judgments and knowledge, and i applaud the efforts of the committee to understand, how can we make that knowledge better? conducted many such reviews in my time in government. probably the most well-known

was the katrina lessons learned. in the wake of a national strategy, wally typically look for single point of failure, the failures tend to be systemic weaknesses and failures. the importance of your work and i define these so we can fix them. -- and identifying these so we can fix them. when we look at this incident, without knowing all of the facts, we come away with many questions. i break them down into three distinct areas. first, a collection, law- enforcement, and the investigation -- and third, the military. let me start with collection. wally must rely on public report, -- while we must rely on a public report, lawfully intercepted investigations --

the intelligence community identified less than two dozen communications pulled from this unrelated investigation that had more than 20,000 communications. i'm a say to you that that is an extraordinary accomplishment on behalf of the fbi and when not have occurred prior to 9/11. suggest a more capable fbi determined to protect us. that is to be commended. i look at the law enforcement investigations. to evaluate that, and it is difficult without understanding several things first, the content of the communications. they remain classified in the ongoing investigation. second, when the investigators looked at the communications, what did they look at them

against? what information did they have access to at the time they evaluated the communications? third, once they had the information and made a judgment whether we agree or not, what did they do to share that information with individuals who could have taken action outside of a law enforcement context? let me start with content. while i cannot speak to the specific content of his communications, here is what we do now from the 9/11 commission report. he was in san diego. at that same moscow word to of the 9/11 hijackers. in 2001, he went to the mosque in northern virginia. it is the same mosque with the same two hijackers from 9/11.

his phone number is discovered in an apartment he has been the sick -- apartment. he has been the subject of investigation in 2002. he is well known to the international counter-terrorism community. the defense criminal investigative service was a part of that review. they looked at major hassan's person now file. what was in that file? were they there? were they considered? based on the judgment that was

made on it, it raises some question of whether not that information made it into the personnel file that the jttf had access to. if it was not there, we must ask ourselves why. what information was shared? i can tell you from my experience, it will dictate what rules apply in terms of information sharing. there are two sets of rules that apply. this seems to be complicated. if the information in this communications were pursuant to the foreign intelligence surveillance, it typically.

cannot recall thinking back on a time when the court did not grant such permission. that is a legal restriction on the sharing. the second set of rules is a memorandum of understanding that the fbi is into. it is not to be shared with their home agencies without the permission of the jttf. that process can be gotten. there is not a reason not to have it.

did the dod as for that to be shared? -- asked for that to be shared? we need to know the answer. there is something that offends me as suggesting it was on the part of the department of defense. if they felt they did not have the authority, another federal agency could whether it lives on personnel or other reasons. in the end, why was major hassan -- in the wake of the review, did they interviewed him? if they did not lead him to be a threat, then why did they go and

interview him? if you did not want to interview him, why did you interview his colleagues where the information that was not in the file it discovered? there are three typical responses to those questions. first is the protection of sources. they would not want to reveal where they got this. i would suggest to the committee that there are ways around that concern to mass the method by which you did that collection. second, i worry about a sense of political correctness. we very much respect and rely on the vast majority of law- abiding muslims. we have done tremendous cultural training and said the federal government law enforcement agencies -- inside the federal government law enforcement agencies.

there is the fbi domestic and asian opera -- domestic investigation operational guidelines. they are updated annually. it has been suggested they would not have interviewed him because they are discouraged. when we did get the military, we must look at this important aspect. we have to know whether or not if there is a method by which the derogatory information made its way into a major hasan's personnel file.

even if the military got the information's, they have the process and procedures in place to assure that it not fall through the cracks. the mets have adequate resources and training with in the military -- they must have adequate resources and training with in the military to address this issue. they need resources to root out the potential criminal, spies, and terrorists. it is important that we assure ourselves and we address these issues, because it is at the core of our obligation to protect our service members and their families. we ask much of them. we owe them an honest look. it is easy to offer questions and opinions will we are unburdened by the fact. i'm not here to second-guess

the public servant who investigated this case but to offer how we might improve the system and better protect our men and women in uniform. >> i really appreciate the spirit and content of your testimony, which i think will be both informative and helpful as we go forward. thank you for bringing your experience. -- the next witness is with the intelligence division of new york city's police department. he has testified before the committee before about a seminal report that he co-authored for the nypd. the nypd has a remarkable look

at a focus on home from terrorism. we are very grateful that you have returned to the committee and we welcome your testimony at this time. >> in october of 2007, i testified before this committee about the findings of a recent study titled along " radicalization in the west, a homegrown threat." this threat has not materialized in the night states. for the past comments, we did for the past 12 months, they have uncovered a cost -- in the past 12 months, they have uncovered a host of radicals.

it indicates that radicalization of violence are taking place in the united states. one year ago, the department of homeland security issued a warning lead to an al qaeda plot against a railroad and commuter network. it linked to a new yorker who radicalized the violence around new york city before travelling to pakistan to seek out an opportunity to court is a paid in violent issue had -- violent jihad. four men were outside a community center in riverdale. they were radicalized in the united states. july 2009, seven men were arrested by authorities in north

carolina. they possess weapons and 27,000 they possess weapons and 27,000 rounds of planning to attack the marine base in virginia. they were radicalized in the united states. najibullah zazi was arrested as part of a conspiracy to attack targets in new york city with hydrogen peroxide-based explosives. it was one of the most serious plot since 9/11. he lived in queens during his formative years, ages 14-23, but before departing to pakistan. later, a 21-year-old from brooklyn was indicted for conspiracy to commit murder abroad and support for foreign terrorists. arrested in towson vote, he saw to join foreign fighters from

overseas and take up arms against perceived enemies of islam, american troops in iraq or afghanistan. he was also radicalized in the united states. graduate of a massachusetts college of pharmacy was arrested last month. he was charged with conspiring to attack civilians at a shopping mall in the night state as well as to members of the executive branch of the federal government. he was radicalized in the united states. at least 15 men have radicalized in minneapolis. they have left the united states to fight in somalia. they joined a terrorist group associated with al qaeda based in somalia. our fear is what happens when they return tb united states -- to the united states.

this pass september, -- this past of timbeseptember, an offie building was targeted. in springfield, at a federal building was targeted. finally, there was a recent arrest of two chicagoans would direct links to a group that was responsible for the november 2008 mumbai terrorist attacks. they seem to be plotting against targets. they appear to have been radicalized in the united states. given the evidence, one must conclude the radicalization of violence is occurring in the united states. given what seems to be a pattern of individuals, the nypd has

invested a substantial effort in order to assess the quantity of a process that warrants the radicalization traject tree -- trajectory. it is consistent with the model from the 2007 nypd report that suggested four phases. driving this process is the proliferation of al qaeda ideology intertwined with real political grievances in a war against islam and provides justification to young men with an remarkable background to pursue violent extremists and. -- extremism. phase one, pre-radicalization. it is the point of origin for individuals before they progress.

based on the cases, individuals are vulnerable to ratification and tend to be male muslims between the age of 15 and 35 from varied backgrounds. cigna begin proportions come from middle-class backgrounds. -- significant proportions come from middle-class backgrounds. the vast majority of individuals do not start out as religiously observant or knowledgeable. phase two, but dedication. it is the phase where individuals begin to explore the more literal interpretation of islam, gradually gravitating away from their old identity and beginning to explore ideology. the trigger for the religion is a catalyst of crisis.

it challenges the individuals beliefs and forces them to reconsider their previous outlook and world view. phase three, indoctrination. it is the phase where individuals intensified the believe, adopt the extremist ideology, and concludes without question that they must further the case. that action is violence. it justifies, legitimizes, and encourages violence against anything un-islamic including the west and its allies. the signatures associated with this phase including becoming an active participant in the group, becoming increasingly isolated from one's life. gradually coming individuals begin to isolate themselves from

secular society. they believe the world is divided between believers and infidels, everyone else. phase four, do have is asian -- @@@@@@@ @ @ @ @ @ @ chechnya, somalia, or iraq. we redirect to do something for the cause. frequently, group members go to cities, rafting, camping, paint ball, for the purpose of bonding and training. preparation has occurred. surveillance and reconnaissance begin, and the crew recognize is readily available components.

new analysis, the 2007 radicalization study is applicable for the last 12 months. new findings. the most important is the internet is becoming even more of a valuable than you support the drive to radicalization. this was highlighted by the 2008 report this committee produced, noted accurately that the use of the internet by al qaeda and other violent islamic extremist groups expand the terrorist threat to our homeland. the threat is increasingly from within, from homegrown terrorists inspired by violent ideology and executed attacks were the 11th. -- where they live. individuals can joined the cause without ever affiliating with a terrorist organization.

an individual who provides religious justification for pilot extremism. in the last six months, we have a dignified and catalyst -- identified a new catalyst. extremist ties in yemen, with the ability to translate literature promoting violence in english, have enabled widespread radicalizing attacks. makeshift training camps were held north of toronto and the winter of 2005.

ammonium nitrate was found in toronto in 2006. in recent years, authorities have uncovered significant and increasing numbers of radicalized groups connected to violent jihad in the united states or abroad. these confirm that radicalization is taking place today. there is also in know where the element that in the past year there have been a half-dozen cases of individuals who instead of traveling abroad carry out violence here in the united states. this is different than what we have seen in the past. the threat to the u.s. homeland is no longer limited to al qaeda. it now consists of three elements. the core, allies, like islamic

jihad union and others who target the west, and most recently the homegrown threat with no operational relationship with al qaeda, consist during of radicalized individuals using al qaeda ideology as the inspiration for action. thank you. >> we are in an unconventional war, and that has increasingly come within our borders. it started here officially, even though it was coming at us before, but this pattern of home:radicalization is a

significant front, one that want force but is obviously dealing with effectively, since most of these plots, except for the ones that were lone wolves, the little rock case and presumably hasan and the others. the second thing is that in the question and answer, i will ask you to relate this schematic from work you have of the faces of radicalization to hasan based on what you know about him from sources now. our next witness is a form of reformer deputy assistant and national sturdy advisor for, and terrorism, and before that, the assistant secretary of the treasury for terrorist financing, here today at the

center for strategic and international studies. >> thank you for the effort to testify today. continued threats to the military and the united states, the challenges of dealing with the lone wolf threat, and increasing problems of radicalization and the threat of violent extremism. the her ticket that at fort hood was shocking not only for its brutality, but because an attack occurred on a major military base in our own country by an army officer whose job was to care with a mental well-being of our soldiers. it has raised questions about

why such an event happened and whether authorities could have prevented such an attack and the national security implications of this incident moving forward. unlike any event since 9/11, it has filled discussion about violent extremist ideology in our midst. it is premature to answer these questions completely or make judgments without more information about the events and the alleged perpetrator. there may have been a failure to connect the dots or a failure to adopt a late what the document. there may have been a mixture of motives or factors that play in the alleged perpetrators mind. what makes it a case to appears to a been harder, is that major hasan allegedly acted alone and may have used medical research

to hide his own medical turmoil. this and then follows a line of attacks against military personnel in separate instances, including a murder at a recruitment center in little rock, an act of fratricide in little rock, and one in kuwait. they occurred in the wake of several destructive terrorist plots in the u.s.. are we facing a new wave of terrorism driven apart by self- radicalization? the fbi recently disrupted a series of plot and arrested potential terrorists. some of the plots were homegrown and more local in nature. at least two of them appeared to at least two of them appeared to have some plots, like the attack on

quantico, the attempt to shoot down a transport plane in newburg, and the failed attacks on fort dix in 2000, were aimed at the military here at home. we must be careful not to draw final conclusions about how the fort hood fits into these incidents, going to a recognizable pattern tying this event to all the others. that said, i think it is important to recognize the constant threat to our military by terrorist attacks. from the attacks and a rout in 1983 to the destruction of the towers in 1986, the attack on the uss coal in 2000, and they

are justifying that actions by tying their attacks to perceived attacks by muslims on the u.s. military. attacks will grow more likely over time. military presence in iraq will remain visible targets. . radicals will see the military as an of this -- obvious and legitimate target. the problem in this case of ford could seems not to have come from the outside but from within. based on publicly available information, seems likely that the perpetrator acted alone. unlike a lone wolf, he used his privilege role as an insider, officer, dr., to attack the

military and murder his fellow searchers. the lone wolf is the most challenging and difficult for the law and forcing communities. the more a terrorist is interacting capabilities, the more likely that the plot can be prevented. the u.s. government foreign partners have uncovered a variety of cell since 9/11 and prevented numerous attacks. if there is no expression of violent tendencies, it is difficult not only for authorities, but four friends, colleagues, in neighborhoods to determine that a violent threat is looming. law enforcement is limited in the ability to follow up without indications of directly suspicious or criminal behavior. they do in one murder at the -- the murder in little rock was a reminder of this.

it may be that we will not see a smoking gun that revealed his true motivations and signaled an intent to resort to violence by other violent -- violence. there will likely be clues that will appear to point to a pack of violence. a key question is whether those points were seen and evaluate it properly. the most troubling revealed today involves suspicious communications between major hasan andal-awlaki. he is a cleric with ties to the 9/11 hijackers. al-awlaki is well known to the u.s. government. what may have made these

communications more difficult to diagnose is that the alleged perpetrators own doubts and complex about serving in the military may have been masked by the own medical research about the mind of muslims searchers. the threat of an american lone wolf crews to be the most of the full problem for u.s. law enforcement. even more so when they are acting from the inside. there has become a heightened debate posed by the extremism. the west is at war with islam and the muslims must unite to fight the united states in defense of fellow muslims has widespread appeal. this is a simple narrative that helps explain world events and local grievances. it is widely believed in many

corridors of the world. it acts as a siren song for troubled individuals. al qaeda takes full advantage of this ideology. bin laden has a gimmick crafted message is attractive to american audiences -- have directly crafted messages attractive to american audiences. though this is inherently violent, it is not illegal to believe in or the spouse is. many views throughout the world, given our first amendment protection, cannot be considered illegal. causality [unintelligible] advocacy of violence is not prosecutable under u.s. law.

there are many radical laws like -- people like al-awlaki he incited violence under u.s. law. the u.s. has largely been immune from the larger economic problems of muslin citizen integration and the intended problems of radicalization. much of this can be contributed to the integration into society as americans and to the common ideals of the american dream. the danger of this ideology is that more individuals will fall prey to radicalization. this is why i think american citizens and the muslims have a special responsibility not to play into the hands of the violent extremists and their ideology. there cannot be a divide in our society.

reaction to the horrors of fort hood has been measured and civil. muslim americans have a special responsibility. regardless of the motivations of the perpetrator, said the attack at fort hood is an important time for muslim americans to stand up against this ideology that is so deadly and destructive. this involves more than just condemnation but an active participation in the debate about how to isolate and displace the allure of this fall's ideology, especially in the united states. i applaud the executive director of the muslim public affairs council has issued a call to a fellow muslim americans. the call the fort hood attacked a defining moment for muslim americans. he concluded the following. we as muslim americans are the answer to this frightening phenomenon. we own our own destiny.

it is fundamentally intertwined with our nation's destiny. terrorism will be defeated with our work on the front@@@@@@r@ @s as a review of this unfelleds i think it will be critical to ensure information was evaluated properly. it will also be nessry to preserve the tools that will allow them to uncover data points related to domestic extremist terrorism. in this regard i think the two provisions set to sunset this year to include the roving wiretap provisions should be

renewed. importantly the provision from the intelligence reform and terrorism protection act commonly referred to as the lone wolf provision should also be renewed. these i think should be renewed without unnecessary or burdensome requirements.

>> let me conclude with a couple key questions that i think not only build on the questions that have been raised but also point to some forward looking dimensions. obviously, the key and core question is whether or not there are any restrictions in terms of information sharing both horizontally and vertically that affected both the ability to see the collective body of information about the suspect. are there existing ties with radical idea logs abroad that should be reviewed again for the threat imposed. are there common warning signs in the fort hood case and the camp pennsylvania attack that can be used to prevent such future attacks. are there realistic expectations about preventing lone wolf attacks? and in that regard are there relevant laws and authorities in place to allow authorities to get in front of such threats.

should there be a more formal and should there be a more formal yoism to allow federal, state, local and tribal authorities to more actively address communal concerns. i would be happy to answer any questions. >> our last witness today is brian jenkins who is senior adviser at the rand corporation. mr. jenkins was involved in the study of terrorism before most people focused on the concept and a long time before we much to our dismay and surprise ended up in a war with one group of terrorists as we are now. so he was last before the committee if january, testifying on the mum buy attacks of last november. we welcome you back and look

forward to your testimony now. >> thank you. thank you for inviting me to talk about this event. >> this small given to me in memory of those who were killed on 9/11. i am wearing it out of respect for those who were killed and wounded at fort hood. when i testified before this committee last the january in mumbai, you may recall that in response to the question could a mumbai style attack have been in the united states -- i said, it could. the difference lies in the scale of events. the recruiting and training of 10 suicide attackers was beyond anything that we had seen in any of the conspiracies and covered

thus far since 9/11. we had seen lone gunman, shooters who motivated -- who were motivated by political cause and run aamok. there were attackers armed with a readily available weapons. i mention that now because the threat we face is not so much one of organizations penetrating the united states as it is the spread of ideology and models of behavior pitta that is what we are talking about here, models -- models of behavior. that is what we are talking about here.

at a glance, major hasan's rampage looks a lot like what used to be called "going postal." it is a deepening sense of personal grief culminating in a homicidal rampaged directed against co-workers and fellow soldiers. for hasan, going "jihad" shows problems going into a deadly fanaticism. we must wait for a full inquiry to understand his motives, preparation, objectives, but on the basis of what has been reported in the news media, we clearly have a troubled man who engaged himself with extremist

ideology by way of the )g( @ @ @ @ @ @ @ @ @ @ @ @ @ @r notably the excellent study by the new york police department. if some of the sign posts are missing it's because except for his reported correspondance with others, his journey may have been largely an interior one. i mention sign posts. what are the sign posts? clearly, there seemed to have been some. mass killings like the one at fort hood invariably prompt the question, could it have been prevented? i'm going to join the other members of the panel here and say that it's premature for me

on the basis of what we know now to make that judgment. i do have to say that experience has taught me to be exceptionally cautious in this do main. i know that seen through a rear view mirror a lot of these clues seem tantalizing obvious if only we had been able to connect the dots. able to connect the dots. sometimes the over estimate what is notable, especially in the realm of human behavior. we are not good at predicting human violence. we do not have an extra for a man's soul. -- x-ray for a man's soul. this is an issue of self fragile position -- self radicalization. mutt derives from -- much to

rise from groups. it lies at the edge of our knowledge. it implies the capabilities of psychology and radicalization very. it to be useful to explore what we should be looking for. the nature of the conflicts we confront today creates exceptional challenges to member of our armed forces. it is showing up in a form of breakdowns, suicide, and sometimes homicide's but a this is by no mind -- stood rigid, size. this by no means is uses his

axe. -- acts. it is growing every year since 9/11. there is a declining quality of these a some analysts as i say we have

greatly reduced their capabilities. and outside of pakistan and afghanistan, its leaders can do little other than caport others to violence. what leaderless resistance does offer is the opportunity for terrorist leaders to assert ownership of just about every homicidal maniac on the planet. and, therefore, it's not surprising that his internet imam was quick to praise the fort hood slayings as another jihad success. since 9/11, authorities in the u.s. have uncovered nearly 30 plots or attacks to carry out attacks here in the united

states or abroad or provide support for terrorist organizations. not all of these would have resultd in successful terrorist attacks but i do remind you that very little separates the ambitions of terrorist wanna bes from deadly terrorist atsaults. the essential ingredient is intent. and that's what we're talking about here. there appears to be common inspiration. there's no evidence of organizational connection between these events. these are individual responses to jihaddist propaganda in the context of our policy decisions

that portray what we do as an assault on islam. six of the plots since 9/11 have been directed against american soldiers or military facilities in t united states and again this reflects jihaddist caportation as well as the plotters own perceptions that attacking military targets is more legitimate than attacking civilians. although i hasten to point out that the majority of the plots were aimed simply at causing mass civilian casualties, especially in public transportation venues. what does this case tell us about the radicalization? and here, i join you, senator, saying twofe be careful about overreaction here. in all of e these plots, we have about 100 individuals that are were arrested for terrorism related crimes.

almost all of them recruited locally. it does show that radicalization and recruitment of terrorism is occurring in the united states and is -- it has, hour, yielded very few recruits. indeed, the pausety of significant terrorist attacks since 9/11 suggest not only intelligence and investigative success but an american muslim community that remains overwhelmlingly unsympathetic to jihaddist appeals. so what authorities are going to confront going forward behind the conspiracy or the actions of individuals which in a free society are always going to be hard to predict. >> thank you very much. excellent background, excellent context. and you're right, the number show that it's quite small. obviously what's unsettling is

that a small number of people can do terrible harm. but it's very important to put that small number in the context of the larger muslim american community, which obviously is not any part of this. we're going to have seven-minute rounds of questions. i want to quickly focus on something in your testimony. after the murders at fort hood, information began to come out about dr. hasian. there was some commentary that this was obviously an unstable person, a person under stress. and to some extent, going from that to a willingness to conclude that this was not a jihaddist act or a terrorist attack, and you comment on that in your prepared testimony. and i just want to draw you out on it. my conclusion from your testimony is that the existence of mental stress or instability does not mean that the act

carried out is not jihaddist or terrorist act. is that correct? >> absolutely. these are not mutually exclusive categories. in many cases, we have individuals who are terrorists who were attracted to these extremist ideologies because of their own personal difficulties and discontenlt. terrorism doesn't attract the well adjusted. and so often what happens in these cases is you do have individuals who are angry at something and reach out towards some ideology that as i say resonates with and reinforces that and channels them down a path towards a particular action. so if we say, for example, if we find, for example, that

there are many aspects of major hasan's personality that are troublesomes that this was a man in some type of personal crisis, that clearly does not exclude his act from being properly labeled an act of terrorism. >> thank you. general, i believe he talked quite correctly about are the premium we put in our country on free speech and where one draws the line, even if they're extremist and actionable behavior of any kind. but i think in this case we have to view that, don't we, in the context of what it means to be in the united states military? and i wonder if you can help us understand that a bit, particularly in light of the concerns that ms. townsend expressed and others, that we've been concerned about whether some fear of being

politically incorrect inhibitted earlier action against dr. has an by those who had heard him. so does a soldier have the right to say anything he wants to say without any consequences? >> absolutely not. certainly free speech is an integral part of the rights of americans, but in the united states military not too surprising the mission comes first. and to be able to perform that mission, you need in a team cohesion, morale, discipline, and good order. and anyone who is contributing to breaking that cohesion and that more ral and good discipline and order with rhetoric, with speech, with actions, with behavior can be held accountable by the chain of command for that speech, for that behavior. and, therefore, be counseled for it, be rehabilitated for it. and if it's such an

unwillingness to change or such a commitment to those beliefs, then be separated for it. all of this short of any criminal behavior, as some of the panelists discussed. military unit cannot function and perform its mission under considerable stress without the necessary cohesion and morale and good order and discipline it has. confidence in each other. when this speech starts to occur, this inflammatory speech that agvates other members of the team, it polar rises the unit. it differentiates people in the unit. it forces them to choose sides. and that is where the commanders and the supervisors have to step in and start to address this issue. regardless of people's sensibilities, the order and discipline and more ral of the unit takes priority over those sensibilities. that is the reality of the military and its mission and

what the american people are holding us accountable for. >> agreed. what then is the responsibility of an individual soldier who hears a fellow soldier express political views that he deems are extremist? in the case in which you were involved at fort bragg, they were white spremmist views. what we're worried about here is islamist extremist views. but what's the responsibility of a soldier to report up the chain of command such observations? >> the members of the team have an obligation to identify and report to the chain of command any of this type of extremist behavior, rhetoric, et cetera. that was clearly one of the problems we had at fort bragg inside our units. it was being tolerated by the soldiers and also being tolerated by the immediate chain of command to a certain

degree. it's unclear in my mind that we have in the military today and in our army units clear specific guidelines as to what is jihaddist extremist behavior. how do you identify this behavior? how does it manifest itself? i think that's one of the things that this investigation will probably determine, as i said in my remarks, and i believe that the department of defense will more than liningly have to issue some very specific guidelines as we had to do after the racially motivated murders and the skin head extremism we had in our midst in the 90s. so we will definitely pursue that. and that may be an area of recommendation for us. but to the best of your knowledge now, existing army policy about extremism is general prohibitting extremist activity, or is it more focused based on the fort bragg case on

white supremist activity? >> the army pamphlet that was published in owe that's entitled extremist activities as a result driven by the fort bragg incident deals with racial extremism. period. that's its focus. it's under the general cap stone of an army policy that has a much broader focus than that. but i think the pamphlet was designed to give the commanders and the chain of command some specifics in terms of how to deal with this problem given that particular incident. so what we are dealing with here now in my view denal with jihaddist extremist potentially, certainly preliminary evidence would suggest that, that those kind of guidelines in terms of defining that and how to deal with that as a specific case and that behavior and that attitude and that rhetoric are not in the hands of our

commanders. attack the american military on bases, not just abroad. my time is up. thank you, general. >> general, let me pick up where the chairman left off. i have the pamphlet on extremist activity that you just mentioned, and i commend you for taking strong action after the racially motivated murder at fort bragg. as i read through this

pamphlet, however, the types of conduct prohibited in the policy manual really don't apply to major hasan. would you agree with that? >> i absolutely agree. a t pamphlet, as pamphlets are in the hierarchy of information provided to our leaders in our units normally deals with something that's very specific as a result of a particular action. under the umbrella of a general policy. that's what that was designed to do. we do not have anything like that dealing with the hasan incident and his behavior and his attitudes. and what should be the actions that guide the leaders and also guide our soldiers. >> that is my conclusion as well. the prohibited activities that are listed in this manual are all geared toward organized

activity. they really don't apply to the kind of lone wolf conduct that we saw with major hasan. and i agree with the chairman that this is an area that we need to pursue. ms. tounds townsend, there's also been discussion this morning and priestly about major hasan about first amendment rights. both the foreign intelligence surveillance act and the attorney general's guidelines prohibit collection based solely, and that's the important word in my view, solely on activities protected by the first amendment. and these restrictions were adopted to prevent abuses that occurred in the mast where foreign -- where federal intelligence and law enforcement agencies targeted

individuals based solely on their political activities. and no one wants to see that. i'm concerned, however, by reports that are federal law enforcement and counter intelligence age agents may have backed off from further inquiries into major hasan's activities based on concerns about his first amendment rights. do the restrictions in fisa or in the attorney general's guidelines in any way prohibit investigations if there are other reasons to do so? in other words, to give you a specific, wouldn't the fact that major hasan had been in repeated contact with a radical extremist islamic cleric who is a known associate of al qaeda terrorists be a reason to

pursue an investigation? >> senator, i agree with you completely. to the extent that there would have been concern of infringing on major hasan's right to free speech or practice his religion, there were other factors to which you could point beyond that having nothing to do with his religion or his speech that could have caused concern. the repeated, while it's not public the content of those communications, certainly those communications and now what we're hearing from his other colleagues up at walter reed, any combination of those factors as long as it was not based solely on his exercise of his constitutional freedom, could have formed the basis of further inyiry and investigation by the f.b.i. so if we're being told that one reason this was not aggressively pursued was concerns that it would violate

the fisa restrictions or the attorney general's guidelines, you would disagree with that decision based on what you know? >> based on what i know now, yes, i would disagree with that. a and, frankly, this is why i mention my concern about political correctness. i think we have to ensure that our investigators feel sufficiently backed up, full, to follow the facts wrr they lead them. and if the facts lead them to an investigation of a senior member of the uniformed military who happens to be a muslim doctor, then that's where they lead them. but they have to feel confident that they pursue the facts against whoever the target may be. >> and the other very important point that you made in your testimony is while the members of the jttf are prohibited from sharing information with their home agency, without permission

of the f.b.i., not only can they ask permission, but presumably the f.b.i. could direct a referral to the army or the dcis. is that correct? it goes in both directions. >> that's right. and i think the best way to explain this to folks is by example. imagine if you had an intercept that was not of a federal crime. perhaps it was a rape, perhaps it was child abuse. suppose you have that information come over the jttf and the local police officer didn't say can i share it? presumably the good lord willing somebody paying attention on the jttf would say this needs to be shared with local authorities to either prosecute a crime or to protect a child in my example. and so absolutely my view of this is all members of the jttf have an obligation when they see information, the nypd has a

program called see it, say it. just because it's not in your jurisdiction, your particular agency doesn't relieve you of the fundamental law enforcement obligation to follow it up. >> thank you. >> thank you. it's, i just want to say very briefly. in connecticut some years ago we had a case just as you described unrelated to terrorism where a local official was being investigated for corruption and wiretaps picked up the fact that this local official was involved in basically sexual abuse of children. and it went right up to the attorney general at that time to determine whether the investigation -- whether he should be arrested for those acts of abusing the children. and of course the correct judgment was made, which was the corruption investigation was forgotten and he was arrested and as far as i know still in jail for those crimes. as is our custom on this

committee, we call on order of arrival. so the order is senator carper, mccain, ensign, levin. >> thank you. to our witnesses thank you very much for joining us today and for the time that you've invested in preparing for your testimony and responding to our question. mr. chairman, this testimony has been i think both ill luminating and i think both constructive. i want to return to the testimony that mr. zarate gave us. and near the end of your testimony, you quoted, i didn't catch it and i tried to find in your statement who actually said these words. but something to the effect, i believe it was a muslim who said to the effect, we, muslim americans, are the defining answer. do you remember that? >> that's right, sir. >> just go back and revisit with us that comment.

please. >> this comment comes from the executive director of a group called the muslim public affairs council. an important group. he's based in southern california. and soon after the fort hood attack, he posted on huffington post what is in essence an op ed. and as i described it. he called it a defining moment for american muslims, which was to in essence own our own destiny and fundamentally deal with terrorism in their midst. and what i found incredibly important was -- and this goes based on my experience both at treasury and the nsc having interacted and engaged with muslim american leaders and community members for some time on these issues of terrorism, the realization and the articulation o about the importance of the battlefield ant the frontlines in the mosques, community centers and youth associations. i think that's an incredible statement by salam, it's an

important realization that muslim americans have to take hold and find ways of isolating those who are radicalizing our youth and getting into the heads of american citizens. >> thank you. of all the comments that were given by witnesses that just jumps right off the page at me. and i want to ask each of our witnesses to respond to what you heard here. we're a legislative committee. we're not the f.b.i., we're not the justice department, we're not the judge, we're not the jury. one of you can give us pretty good advice on what we may want to do legislatively. but in terms of what the muslim community and this country, what responsibilities they have, what they can do to help the rest of us to make sure this doesn't happen again. we heard from one piece of advice here. i just want the other witnesses to respond to that and share your views, please.

>> well, my reaction to that is certainly one of encouragement. and i certainly praise him for making those remarks. you know, in the larger context of what we're dealing with in terms of the challenge inside islam between the radicals and the modern center tradition lists and very much who are all moderates themselves, it's hard to see defeating radical islam itself without the willing cooperation of the moderates to reject it. i mean, we're going to kill a lot of these radical islamists over these next couple years just as we have done over the last eight years. but as we all know who have been involved up close in this fight, the fact of the matter is that killing them will not defeat this movement. this movement will have to be defeated by moderate muslims who reject it. >> thank you. >> very quickly. most as you know, senator, most

muslim americans are patriotic law abiding citizens. and in fact, while very few actually speak publicly, many cooperate quietly with local law enforcement and federal law enforcement and we won't be successful without that continuing. and that's to be commended. oftentimes moderate muslims are reluctant to speak out because the radicals label them the word is called takferi, unislamic and it's very both discouraging to them and frightening to moderate muslims and intimid dates them from speaking out. and we have to understand that's the environment they live in. so there are few who have the sort of courage to speak publicly. but we don't want to discourage them from privately and quietly cooperating with federal and local officials. >> thank you. >> i think the question is in terms of what are the ways to combat extremism and what role does the muslim community play.

we're informed by our discussions with intelligence officials in the u.k., in denmark and the netsdzer hands who have haled to deal with this problem in a magnitude greater than we have to date in the united states. and clearly the response is along the line that at the end of the day, the members of the muslim community themselves have to deal with -- delegitimate mies this as an ideology and the challenges for those gotses and local entities to find wig willing interlocutors to help them deatlanta mies that ideology. >> thank you. >> i would just underscore what ms. townsend send. i think it's important to speak out publicly but also there is evidence of a greet deal of quiet activity going on within the community. i mean, we're talking about people attempting to ensure that their own family members, friends, colleagues do not go

down a self-destructive path. so there is a great deal of pressure in the community for this type of activity. >> the other question tonight ask is i said earlier we're not the f.b.i., justice department. we're a legislative committee. several of you suggested things that we should be doing legislatively to reduce the likelihood that this will happen again in our country or outside of our country. can you go back and revisit those, kind of reemphasize them for us, please. >> i had made the suggestion, senator, of making sure that law enforcement and intelligence authorities have the relevant legal authority to be able to investigate domestically. because, again, what we're talking about in this context and has been described by the panelists is a very difficult problem to ferret out, especially talking about a lone wolf scenario. so it becomes incredibly important for authorities to

have not only the legal backing and structures and procedures but also then the resources. one of the key questions i think for the f.b.i. will be to the extent that there are additional pressures to try to ferret out these types of actors and events, do they have the resources to cover these types of events, to follow up on the kinds of communications and leads that may exist? where there may be thousands of communications with a figure like al-aqui. >> senator, the two that i would focus on, one has to do with my pet issue with senator collins know, the snfings sharing and the rules. sometimes we make them too cumbersome that it's discouraging. the rules become so cumbersome that they're discouraging so people don't do it. and i think the committee has a real opportunity to look at things like the restrictions pursuant to fisa and the attorney general's guidelines

and the f.b.i.'s own internal guidelines. all taken together it may be that just discourages people from doing what they really need to do. and the second piece to that i really think is the u.s. military doesn't look like the army got the information that they could have acted within their system. i wouldn't stop there. e i think we've got to look at whether the u.s. military, if they had gotten the information, had the training, tactics, procedures, resources and business process to ensure that they identify and deal with these things effectively. >> thank you very much. >> thanks. good questions and very constructive answers. senator mccain, thanks for being here. >> thank you, mr. chairman. thank you for holding the hearing. i'd like to ask the witnesses, do you believe that the act on fort hood was an act of terror? >> in my mind, i do. based on the preliminary reports and what major hasan

was claiming at the time of the act and the -- and his behavior and attitude prior to that. just based on that preliminary report, certainly investigations will confirm what his motivation are. but what's in front of us right now, i do. >> senator, you know when you look at the just basic english definition of terror, which is the wruse of violence to instill fear and intimidation, it's hard to think this wasn't. but what remains to be seen is whether this was an individual or a part of a larger conconspiracyy. >> from the new york city police department perspective, this is an ongoing investigation, so we're not going to prejudge others' findings. >> well, i ask your opinion, not your findings. if you don't want to voice your opinions, fine with me. >> senator mccain, it certainly

looks like an act of terror to me. for the technical definition under u.s. law, the question of political motivation is going to be central obviously to determining whether or not you can legally classify it as such. but i think it looks like an act of terror to me. >> terrorism defining qualities is an act and certainly i think the act itself meets the category of an act of terrorism. under a legal definition, in terms of the law, major hasan is charged with 13 counts of murder. and that's appropriate. we don't need to reach into the criminal statutes to find the word terrorism to prosecute him. we've got him on an ordinary crime and that's good enough. >> thank you. let me just briefly review what we do know. we know that major hasan had communications with yemenie american ema'am.

we know that the f.b.i. had some knowledge of this and reviewed certain communications between major hasan and the subject of that investigation asserted that it was consistent with research being conducted in his position as a psychiatrist. there was communications. there are allegations of communications with other extremists, web posting advocating suicide bombing, possibly an individual named nadan wrote a website that favorably compared an american soldier jumping on the grenade to suicide bombers. extremist activities at walter reed. and that hasan antag niesed some students and faculty by espowsing extremist islamic views. and of course the most notable

is his act tits while working at walter reed was a medical presentation to fellow students where he included statements such as we love death more than you love life. fighting to establish an islamic state to please god even by force is condoned by islam. general, do you -- and obviously this speculation but the military is most sensitive of any organization i know to any taint or allegation or impression of being discriminatory. which is appropriate. do you think that political correctness may have played some role in the fact that these dots were not connected? >> yes. absolutely. and also, i think a factor here is his position as an officer and also his position as a psychiatrist contributed to

that, because of the special category i think someone who is operating as a clinician every day treating patients is in the military. it's an individual activity versus a group activity which provides considerably more supervision in squads, platoons, companies, and the like inside our units. so there is no doubt in my mind that that was operating here. but in fairness to many of the people who are associating with him, based on what preliminary research i've done, and i think what the committee is doing, i think we're going to find very clearly that we do not have specific guidelines on dealing with jihaddist extremism in terms of the obligations of the members of the military to identify and report and what actions to take and what constitutes jihaddist extremism itself. so you take some of this burden away from people from having those guidelines. and when you have guidelines in place you're clearly saying to the institution that this is

important to us. we are not going to tolerate this kind of behavior and we want to identify with. immediately to try to curb the behavior through counseling and rehabilitation, and if necessary separate that individual from the service if it cannot be curbed. >> i have talked to military officers who have stated that they at least up until now have had a significant reluctance to pursue what may be these indications because of this political correctness environment. have you heard the same? well, i know it exists. no doubt about it. and what i'm trying to say is that the way to deal with it, it shouldn't have to be an act of moral courage on behalf of a soldier to have to report behavior that we should not be tolerating inside our military

organizations. it should be an obligation. the way to make that an obligation is to provide very specific guidelines through the chain of command as to what their duties are. that takes this issue, begins to take this issue tauf table because the institution is speaking clearly in terms of what its expectations are and what lit tolerate and what it will not tolerate. >> and perhaps err on the side of caution instead of on the side of correctness. >> absolutely. >> as i mentioned in my testimony, i do, i have the same concern that you've articulated in the u.s. military and the law enforcement community. we've invested a lot of time and effort to make sure people understand we're going to provide first amendment protections. i do fear that because this was a senior member of the uniformed military that there was a reluctance to proceed. and i think this is an area that the committee should and

ought to investigate, and uncover, in terms of our law enforcement system that we can't allow them to be reluctant to follow the facts just because they're afraid that they're going to be criticized for not being politically correct. >> in the nypd, if we had a concern like that it would be forwarded up the chain of command as well as to the department of internal affairstor investigation. >> senator, i don't think there would have been sent the political correctness with respect to the ethnicity or religious beliefs of the individual. this is my assessment based on what i know. i think his status, the fact that he was a medical doctor, the fact that he was engaged in research with respect to potential conflicts in the minds of muslim soldiers, that may have affected the judgment of the f.b.i. in this context and much less a question of his ethnicity or beliefs.

>> well, if they believe that those kinds of e-mails, that they detected, were part of research, which advocates extreme muslim activity, i'd at least find out what kind of research is going on. frankly, i've never heard of such research. any way. so i kind of am skeptical about your answer. go ahead. >> i don't think religion is the basis for any group being stig matized but religion provides no shield against any legitimate inquiry. and, therefore, should not have inhibitted an appropriate inquiry. let me, however, underscore a point made by general keen which i think is important here. my military experience is in combat units. in a combat unit, actions like

this, attitudes like this would be picked up much faster than in the individual professional activity of a psychiatrist even though in military service. >> i thank you. i thank the witnesses. thank you, mr. chairman. >> thank you, senator mccain. an important exchange. i want to add just this after the fort hood massacre, i received a call from a friend of mine who is a high ranking officer in the army just to confirm what you said. and also, basically to go to your point that we have great respect for diversety of religion but it shouldn't be a zover for bad behavior. and this office said to me that if the army and the rest of the services make clear that islamist extremist behavior is not tolerated and you have an obligation to report it right away, you will be doing an enormous favor to all the other

muslim american soldiers who serve under me because without that this officer said to me, i worry that the nonmuslim soldiers are going to have hesitation to have what we have to have in combat, which is blind trust in one another. and i think it's a really important point that inso far as we focus on the extremists, we're actually going to be doing a favor to everybody else of that particular religion who is in the military and helping military cohesion. senator ensign. >> thank you, mr. chairman. i think this hearing has been important for a lot of different reasons and some of the issues you just articulated i think are definitely some of them. this whole idea of political correctness, whether that's political correctness due to an officer, whether that's political correctness of somebody's a particular religion. i'm curious, mr. sillber when

you talked about, we would refer up the chain of command. what if that chain of command, in other words, what if the officer was -- in other words, you had a high-ranking officer in the new york city police department you discovered that person happened to be of the islamic faith and was having contacts with somebody with one of these radical clerics, one of these ema'ams over in yemen. what would be done at that point in the new york city police department? >> if no action was taken, i would then take it up to the deputy commissioner level. >> ms. townsend, you talked about the obligation to share with the joint terrorism task force, and i think that's important. does that happen with the military today? in other words, would they share that information with the military? or is it just other law enforcement agencies? >> what happens is the