insurgency has lost the momentum. but the summer of 2011, it will be clear to the afghan people that the uncertainty will not win. from that point forward, while we begin to reduce u.s., levels, we will remain current with the afghan security forces in a supporting role to six holiday -- to consolidate the gains. results may come more quickly. we must misshape progress toward measurable objectives. there are no silver bullet. success will be the effect of sustained pressure across multiple lines of operation. increasing our capability has been about more than two increases. for the past six months, we have been implementing operational changes that are already showing improvement. . . already reflecting improvements in our effectiveness. but the additional forces announced by president obama are

a -- are significant. forces to increase our capacity to train the afghan national security forces and forces to partner with afghan army and police in expanding security zones in key areas will provide us the ability to reverse insurgent momentum and deny the taliban the access to the population they require to survive. our commitment is watched our commitment is watched intently and constantly judged allies and by our enemies. the commitment of 30,000 additional u.s. forces, along with additional coalition forces and growing afghan national security force numbers, will be a significant step toward expanding security in critical areas and in demonstrating resolve. the commitment of all coalition nations will be buttressed by a clear understanding of how we will mitigate risks. i'll briefly mention three. the first is the afghan government's credibility deficit which must be recognized by all to include afghan officials as a critical area of focus and

change. equally important is our ability to accelerate development of the afghan security forces. measures such as increased pay and incentives, literacy training, leader development, and expanded partnering are necessary for position the afghan national security force to assume responsibilities for long-term security. third, the hazard posed by extremists that operate on both sides of the border with pakistan with freedom of movement across that border must be mitigated by enhanced cross-border coordination and enns haensed pakistani engagements. looking ahead, i'm confident we have both the right strategy and the right resources. every trip around afghanistan reinforces my confidence in the coalition and afghan forces we stand alongside in this effort. but i also find confidence in those we are trying to help. that confidence is found where an afghan farmer chooses to harvest wheat rather than poppy or where a young adult casts his

or her vote or joins the police. or where a group of villagers resolves to reject the local insurgency. we face many challenges in afghanistan but our efforts are sustained by one unassailable reality. neither the afghan people nor the international community want afghanistan to remain a sanctuary for terror and violence. and if we are to be confident of our mission and our prospects, we must also be accurate in our assessments of progress. we owe ourselves, our leaders, and the american people transparency and candor because the price to be paid is high and the stakes are even higher. in closing, my team and i would like to thank you and your colleagues for your support to the american men and women currently serving in afghanistan and to tell you a bit about them. we risk letting numbers like 30 k roll off our tongues without remembering that those are fathers, mothers, sons and daughters serving far from home, selfless in their sacrifices for each of us. the other day i asked a young

but combat-experienced sergeant where he was on 9/11 and his answer, getting my braces removed reminded me it's been more than eight years since 9/11. many of our service members and families have experienced and sacrificed much. but, as i see them in action at remote bases on patrol partnering with afghan forces, recovering in combat hospitals, they don't talk about all they've given up. they talk about all they're accomplishing and their determination in this endeavor. this is not a force of rookies or dillitantes. the brigade commander in kos completing his fourth tour in afghanistan and experience and expertise is reflective of the force that represents you. all have felt fear and loneliness. most have lost comrades. none have lost heart. in their eyes, i see maturity beyond their years. in their actions, i see a commitment to succeed and a

commitment to each other. i'm confident that i share your pride in what these great americans are doing for our country in afghanistan and it will be my privilege to accept your questions on their behalf. thank you, mr. chairman. >> thank you both. and general mcchrystal, you're commander of the international security assistance force, as well as u.s. forces. would you be willing to introduce a few of our nato representatives who are here with us today? >> yes, sir. this is part of my personal staff, of course i've got colonel charlie flynn, who's a u.s. army officer, cristof my german aide. i have two aids, one american, one german. bill raferty is a planner a british officer, another allied officer from the u.s. navy greg smith runs our communications jake mcfaren is our political

adviser in the headquarters, casey welsh is my other aide, american aide. hi 27 months in iraq before he came to afghanistan with only five months off between those two deployments and then dave silverman works in my personal staff obviously another naval officer. >> great. thank you very much. we'll begin our questioning now and i'm first going to recognize the gentleman from texas, mr. green, for five minutes. >> thank you, mr. chairman and thank you for continuing the hearing and i want to thank both ambassador eikenberry and general mcchrystal for what you do and your leadership you're doing for our young men and women not only serving in the in military but obviously in the civilian side, having been the embassy in afghanistan a couple times and been hosted there, it's not the plush area anyone ever thinks but i appreciate what y'all do and i know members of congress do. general mcchrystal there, are currently 94,000 afghan soldiers

on the ground and current plans call for increasing the number to 134 by october of next year. there are currently bottom 91,000 afghan police officers on the ground and currently calling for boosting to 966,800 by next october make a total of the afghan security force around 230,000, police and military. during this strategic overview -- or review, you advocating for boosting the number of afghan security forces to 400,000. security forces in iraq, with a much easier terrain now total about 600,000. do we think 400,000 with tougher terrain in afghanistan is really -- it's a lot more than 230, the estimate. but, it still -- is it still within range of what we really need for the afghans? >> congressman, as you -- as everyone knows, afghanistan must ultimately secured by afghans. that's what they want and that is the right answer. we did a detailed analysis of

what it would take using basic coin doctrine to secure afghanistan and the number reaches up near 600,000 total, afghan -- or security forces of all kinds, police and army. but, the insurgency is not in the entire country, not all the country's threatened so, as we refined our focus, in fact, we were able to -- to reach what we believe is a better, longer term in-state. we came up with about 400,000 a combination of army and police as being the right number for afghanistan to have as a coalition forces drop down to a fairly small number of advisers, or for the long term. that would, of course, be adjusted or could be adjusted based upon whether there's an insurgency at that point and the size of that insurgency. a number of 400,000 divided between the army and the police of 240,000 ultimately in the army and 160,000 in the police would not be really out of range

for that part of the world for standing armies and police. but, i think we need to view that not as a hard number at this point but as a goal we work toward and adjust constantly. the president's decision is to grow those forces, like we're growing the army to 134,000 by next fall, and we'll clearly continue to grow the police but to re-look that every year will allow us to reflect what the state of the insurgency is and then, of course, what their ability to grow is, can they make those numbers? we're getting some very heartening feedback here recently there have been pay raises for both the army and the police implemented by the government of afghanistan, with our -- the international community's help and we're seeing a significant improvement. but, we've got to see whether that's sustainable long term. >> okay. and you recognize that our goal is to make it the afghans protecting their own neighborhood and that's -- you share that and the president i know shares it and i know congress does. general mcchrystal in your

testify you write additional forces will debin to deploy shortly and by this time next year new security games will be illuminated by specific indicators. it would be clear to us that the insurgency has lost momentum. other than generally saying conditions on the ground, knowing that security situation would never be perfect, what specific criteria can the american people look to that we're basing that decision on -- that decision on sometime next year? >> sir, we collect a tremendous number of metrics but try to pull those together into a number that is understandable both to us and then communicatable. the first and biggest will be the security situation by district across the country. within the 34 provinces. whether the district is, in fact, under solid government control, whether it might be contested, or whether it might be under insurgent control. so, we do a map that is fed by a tremendous amount of data that allows us to look at those districts. fe we are seeing progress in those, that will be one of a

major indicators. i believe that the other major indicator will be the growth and development of the afghan security forces or increasing capacity of afghanistan to secure itself. in addition to those two major indicators that i believe will be most illustrative we feed that with a tremendous amount of information from polling data of what the afghan people think which is key because ultimately this war will be won in the minds of the afghan people and indicators of their ability to go about their lives whether they can drive through secure areas to market, the cost of goods and things like that. >> okay. again, thank you. >> time of the gentleman has expired. the gentleman from arkansas mr. boozman and the five minutes allotted includes questions and answers. >> thank you, mr. chairman. we appreciate you being here ambassador eikenberry and general mcchrystal and we do appreciate the service to your country and then, also, your

families and i think that was so illustrated by your staffer when you mentioned, you know, that he was in iraq and now in afghanistan and the time away from home. general mcchrystal following the president's march speech to congress, the president developed a series of metrics to judge progress in afghanistan and pakistan. are those metrics still useful? did they have any influence on the strategy and assessment that you did in august? are these metrics still useful based on the president's new strategy? do the metrics have any influence on the july 2011 withdrawal and do the metrics need to be revised as a result of the new planning? >> congressman, i believe the metrics, they are still in place. they are useful. i do believe they will evolve over time because, as the conditions on the ground evolve and we collect even more data and look at it, i think it's important we keep being willing to evolve those to understand it so i expect those to be baseline

metrics but i expect to inform that with many others as well, sir. >> the -- i know that you all are very metric driven. we've had many come and testify before congress that president karzai is going to be held accountable. do the metrics that you've developed, do they specifically include assessment for president karzai? >> congress dz mman, our -- our assessments, yes, they include the effectiveness of the government of afghan at the national level and as general mcchrystal said, assessments that are at the subnational level, as well. but, we have a robust plan of assessments at all levels. >> i know that prime minister brown has reportedly given president karzai a list of milestones and metrics that he will judge him by. have you seen the list?

do you -- does it have -- are we trying to replicate and work with them in that regard? >> congressman, i have not seen the specific list but i'm roughly familiar with the intent of it. >> good. >> said the other guys were here and testified. in my district, i find it is a tour of the country, there is a great concern of the four guys that are under indictment, or whatever you call that in the military, and i think the concern is that somehow we are being caught up in political correctness. i wanted to tell secretary dates -- arkansas played texas earlier in the year and beat them. in the heat of that battle, if somebody hit somebody in the mouth, they would be suspended

for a game. i know it is different, the situation, but is not that different. what i would like from you is your reassurance. through the years, people have stood up for me, your reassurance that you are looking into that. i know you cannot get involved directly to the point it is at now, but the admiral indicated he had confidence in the people that were taking care of it. i know that he had confidence in the people at fort hood, and yet a third grader could have told that there was something going on there that was not right. the american people are concerned that is due to political correctness. >> congressmen, i am not familiar of the incident that happened in iraq with the

specifics of that case, but we stress to all of our people, the importance of how they act. there's also an absolute loyalty to people, as well so i think the balance is about right. i feel very good, particularly we've learned a lot over these years as we go through this. >> and i know that is -- you know, is an iraqi situation but it does make a difference in the sense your guys now, when they're, you know, deciding whether or not to do an action or this or that, the easiest thing to do is to not do it, okay. it does make a difference, as far as decision making and things. and so, i would hope that you would work with your cohorts. i know that you've got tremendous influence in various areas but that really is an important thing. it's an important thing with the american people and their support of the military. thank you, mr. chairman. >> time of the gentleman has expired. the gentleman from georgia, mr. scott, is recognized for five minutes. >> thank you, mr. chairman and welcome general and ambassador. let me start off with the

mission as it was articulated by general gates and secretary clinton and last week was this. that our mission is is to go in, destroy, dismantle, defeat al qaeda in both afghanistan and pakistan and see to it that they do not return. that being the case, what about pakistan? pakistan is where the crux of the problem is. but yet, it is the least emphasis where we've seen our strategy. that's where al qaeda is. that's where the real apex of this situation is is. will our troops be able to go into pakistan and do exactly what the mission says, destroy, dismantle and see that doesn't return to pakistan? >> sir, the importance of the mission against al qaeda is absolutely clear. as commander of isaf, my responsibility or my authorities stop at the border of

afghanistan and pakistan. we do, however, work very is hard and i personally spend a lot of time with general kiani developing a strategic partnership to enable them to meet their strategic objectives. >> let me just ask you because i only have just a few minutes and i have a number of questions. to your knowledge, of your involvement with the joint strategy with pakistan, to your knowledge, will our troops be able to go into pakistan? >> sir, i'm -- i'm really out of my lane to discuss that. >> okay. let me ask you about nato and our troops. nato has said they are sending around 7,000, 6,000, 7,000 troops. those troops come with caveats. can you comment here briefly on what that presents to you, where a nation may send soldiers but tell them you can go, you can see, but you can't conquer, you can't get in the battle, you

must sit on the bench, what does that do to our strategy? >> sir, many of the 43 nation forces come with no caveats and they operate just like ours. >> one sentence of that. >> sir. >> you said 40%. >> no, sir. i don't know the percentage. i'd like to get that back to you for the record. the caveats are something i work with all our nato partners and ask them to reduce to increase our flexibility and i think it's important we continue to reduce those so they can prosecute operations particularly counterinsurgency effectively. >> going back to you for a moment, ambassador, you mentioned some things, there's been a hesitancy to stay away from the world "nation building," but as i listen to you, as you talked about setting up the afghan government, as you talked about your three corners, which were security, which was governance, which was building up the economy, if that isn't nation building, i don't know what is. is not that nation building? >> congressman --

>> can we not be successful unless we do that? >> i think our goals are clear, ther decide narrowed. what we're seeking to achieve in partnership with our afghan allies is a government that has the capability of providing for the security of its own people. >> let me just ask you, though, because i only have a little bit of time. are we in nation building in afghanistan? >> i think that what we've established are clearer goals that are narrow that have to do with establishing sufficient security -- >> but i'm asking you, yes or no, are we in nation building in afghanistan. >> no, i would not characterize what we are doing. we are providing assistance to the state of a of a fwan stan. no, i would not characterize it as open-ended nation building, clearly not. >> all right. let me go back to you, general mcchrystal. you mentioned and you spoke eloquently and i agree with you the sacrifice and the great job that our soldiers are doing. but, here's what concerns me. there's a terrible strain on our

military. many of our young men and women are going on their third and fourth tours of duty. there's been an ugly side to this. every time i've gone over there for four times i've been to afghanistan, i go back to lanstall air base, i care about our military. the situation in ft. hood was just the tip of the iceberg in terms of the stress, the mental strain, the suicide, the divorce rates. tell me how deep is the strain on our military, and what are we doing about it? >> congressman, the strain is significant but the force is holding up extraordinarily well. i think the things we are doing to take care of families back in the states, the things we are doing to look after service members while they're there to get leave, to all those things to take care of wounded warriors, to me all of those come together to give the force much more resiliency than it would otherwise have and

historically would have. >> time the gentleman has expired. >> thank you both. >> the gentleman from south carolina, mr. wilson, is recognized for five minutes. >> general, ambassador, thank you very much for being here today. i have a special appreciation of your commitment as a member of congress i'm grateful to be the co-chair of the afghan caucus, i appreciate your hospitality, the briefings that i've had with both of you. i just have great faith in your service. also, i'm very happy that we share that our army careers began together in the 1970s and so i appreciate, as a veteran, your service but more particularly, as a parent i've got four sons serving in the military of the united states today. i'm very grateful for their service and military service means a lot to our family. and that's why i want military families to know that i have faith in your integrity, i have faith in your ability. you truly are looking out for the troops as i believe you're

going to be victorious in this second surge, where we will be defeating the terrorists to protect american families at home. on tuesday, i was honored to be at the armed services committee meeting ambassador and was pleasantly surprised when you said that there has been progress in afghanistan and sometimes i have to read about progress in unusual places, like rotrary magazine and they were giving indications of rotrary projects around the world and one they are backing up are schools, the number of schools have increased from 650 to 9,a 500. can you tell us what you see as progress and then what is the role of a provincial reconstruction team? >> thanks, congressman. there's been remarkable progress since the very dark days of taliban of 2001. you mentioned one, education. in 2001, there was one million children going to school. they were almost all boys.

they were receiving a certain persuasion of education. today, there are 6.5 million afghan children who are going to school. about 35% of those are girls. in 2001, very little of the afghan population had access to any health care. now, 80% of the population has access to primary, albeit rudimentary but access to health care. i could go on with the development of roads, i could go on with now 10 mill afghans have cell phone -- have cell phones and there's been profound changes. against that, we know where the challenges are. general mcchrystal and i both share our views of where those challenges are. but, there is room to -- there is room to have great hope, as we move forward. there is much to build upon. the provincial reconstruction teams, the provincial reconstruction teams have a very important role both as civilian military combined effort in many of the provinces of afghanistan under nato isaf command and

their roles are to assist the local government in strengthening their government to help them develop capacity in order to improve their distribution of basic services to the people in the area. >> and something to be very helpful i served with congresswoman sheila jackson lee in the afghan caucus. if you could provide to us, say a bullet type of presentation that we could distribute to our colleagues on items of progress that you see, that would be very helpful. and general mcchrystal, i have had the opportunity to visit the police training academy in jalalabad, my former national guard unit the 218th helped train the police units across the country and i saw really dedicate persons but i'm very concerned about their pay. the pay is so low that it certainly would call into question loyalty and then lead to some level of bribery.

what's the status of pay, training, who is paying? >> congressman, well timed. we just, the government of afghanistan just increased the pay of afghan national army and police. didn't quite double it, but brought it almost to twice. it's still -- the design is to get to a living reasonable wage so we don't have people who are forced to resort to corruption or family support to go forward. and it's paid -- it's foreign money that helps. the afghan government is required to pay 34% of their budget according to the london compact 1996 towards their afghan security forces, but that clearly does not -- does not cover the major part of the costs. >> and the costs largely are covered, you say, by foreign contributions. it's my understanding that japan has been a major contributor and should be given credit. again, people do not know the extraordinary efforts and

support from around the world, as unlikely as japan supporting the police of afghanistan. thank you, again, for your service. >> time of the gentleman has expired. the gentleman from arkansas mr. ross, recognized for five minutes. >> thank you, mr. chairman. general mcchrystal, the arkansas national guard, like those in other states, plays an important role in responding to natural disasters and other domestic emergencies in arkansas. it's not uncommon for them to respond in other states, as well such as louisiana after hurricane katrina. in addition to these domestic roles, the arkansas national guard's 39th infrant ree brigade combat team has twice been deployed to iraq and while this team has to date not served in afghanistan, there is a significant national guard presence in afghanistan.

in fact, the 39th's been to iraq not once but twice. i think most of them have a pretty good idea of what may be in their future. i'm grateful for the service the men and women of the national guard provide our country. their continued deployment leaves the national guard fewer troops and equipment needed to respond to domestic issues. how many of the 30,000 additional troops do you envision coming from the national guard, and how soon will national guardsmen and guardswomen return after the planned drawdown begins in 2011. >> sir i'll have to take the number of the 30,000 and get back to you that look like national guards. the services will determine that. i would like to take a second, though, to talk about national guardsmen in service because they were extraordinary across all of the different discipline, engineers, infantry, trainers, a

significant number of people training the afghan national security is forces are national guardsmen then the agricultural development teams that are there, as well, from many states, they provide a linkage to practical agriculture, expertise that we can provide and they also develop a sense of partnership with the afghan people that is a combat multiplier not just developmental assistance it actually helps security, as well. so, i can't say enough about what national guardsmen do or the sacrifices they've made. >> in my >> in my time remaining, approximately three-quarters of the food, fuel, and provisions passes through pakistan in the face of increased attacks on the supply routes. the pakistan government has been unable to increase security.

since september 2008, the attacks have forced closures of nato supply routes. as a result of these attacks, nato was forced to seek alternative supply routes into afghanistan. they've raised concern over the deployment of additional u.s. troops to afghanistan, which will require a significant increase in supplies. while some of the supplies will be transported via other ways, much of the additional supplies will have to pass obviously through pakistan. what will be done to ensure american forces receive these supplies necessary during their deployment in light of this? of this? >> congressman, that's a -- that's an important point we look at very hard. what we call the ground lines of communication that go through pakistan are essential to our effectiveness there and so we work with is our strategic

partnership with the government of pakistan to continue to secure those. we actually have a very good track record of amount of equipment that makes it through without any issues. it's a very, very high percentage. it's been -- it's been a very strong, predictable flow. that said we always understand instability could threaten that that's why the northern distribution network was dofld, not because we absolutely had to have it but we wanted to have alternate means so that if one means was threatened or one line of communication was threatened, we would have the additional. >> and mr. chairman, my goal in life remains keeping you happy and with that i'll yield back my remaining 40 seconds. >> wow! lauftz. >> i hope it's contagious. the gentleman from south carolina, mr. english, is recognized for five minutes. >> thank you, mr. chairman. and general, you lead an awesome group of folks and we thank you for your service and for their service.

you mentioned that our commitment as a nation is being watched intently and you called it a significant step to commit 30,000 troops. is is it sufficient? >> koong gresman, i am confident that it is. >> and if, in the commitment being watched intently, what do we signal by a timeline for transfer? is that -- does that undermine the signal of commitment, or does it -- what's the impact of talking about a date certain for transfer? >> there are several points i'd like to make on that. there is first a vulnerability in any date that's set. the enemy can take that date and use it for propaganda purposes. but, i believe we can combat that. but, there are a number of positives in where we are right now and i'd like to stress those. the first is that the date does

serve as somewhat of a forcing function for the government of afghanistan and the afghan people to understand that their responsibility for security is absolute and we need to move toward that and i think we've already begun to see some of the effect on that, so that's positive. but, i'd also step back and talk about the more important part, to me, at the security standpoint. the president has outlined his commitment to a strategic partnership over time, long term, which provides assurance to the people of afghanistan and the government that we are partnering with them. were i an insurgent and i saw that solid assurance from the united states, then i would understand that a date doesn't change anything. in the near term, the 30,000 additional american forces combined with coalition forces is going to allow my force to turn this momentum and very seriously push back on the insurgency and i think very effectively and i think that will be clear to everyone. at the same time, the growth of

afghan national security forces will be rising during that period so that at any point whatever pace the president decides to draw down our combat forces i think that's met with growing afghan national security force and government capacity. so, i really think we don't leave much of a window of opportunity for the insurgency, particularly when they see the long-term commitment. >> thank you. ambassador, you also lead an impressive group of folks and we thank you for their service and your service and the general mentioned that the wonderful decision by a farmer to harvest wheat rather than poppy. do you have any idea what the per-acre profit margin is, comparing those two crops? i mean, what's -- what can a farmer make on wheat as opposed to poppies? >> it changes from year to year. it changes from region to region. i'll submit for the record, congressman, the most current

data, the fluctuation of the price of wheat, the -- one of the main staple crops of afghanistan, has an extraordinary amount to do with decisions by farmers, but i'd also emphasize there is a direct correlation, a known direct correlation between areas of insecurity in afghanistan, where there is no legitimate government of afghanistan presence and high poppy yields. we see that very clearly in southern afghanistan. in one province of southern afghanistan, helmand, over 50% of poppy production for the entire country occurs there. that's exactly the area where general mcchrystal's forces right now and the afghan national security forces have part of their main effort. part of of that success that we'll have there will have to do with pushing the taliban back and securing the afghan population. part of the success will, also, yield reductions in poppy production and narco trafficking and there is a clear nexus between the two. >> yeah, it seems to be a clear

nexus between the security -- the imsition, our ability to project force so that we stop that poppy production because, otherwise, the unpopular, as the general said, the unpopular taliban becomes more popular by comparison if you can feed your family selling an illegal crop as opposed to slaving away on a low-profit-margin crop that maybe isn't going to feed your family. so, it's crucial, i suppose, to have these things go together, that we have to push to say that, you know, you can't grow this anymore but, also, provide some hope that other crops will work and you can make a living. >> one of our key -- one of the key first principles of our developmental strategy is in the area of agriculture and i think congressman, it gets exactly at what you're talking about. >> yeah. >> the time of the gentleman has expired. the gentleman from new york mr.

crowley is recognized for five minutes. >> i thank the chairman and both you gentlemen for being here before us today. like many of my colleagues i have some very serious reservations about additional troop build-up in afghanistan. especially in the midst of a tough economic cycle we're under right now here. our first and foremost responsibilities i believe is to the american people. in addition to the cost the geopolitical realities of afghanistan and pakistan the greater region all raise questions about the u.s. efforts in afghanistan. i'm also concerned about the well-being, certainly of our troops. i had the opportunity it travel to both afghanistan and to iraq last year. probably the sharpest distinction that i could draw after coming back was that the different assets that appear upon landing in afghanistan and i want to thank i don't know if it has been done already i noticed behind you, general, representation of the coalition forces that are engaged in

afghanistan and i want to thank them for their participation and for the sacrifices they've made, as well. i know it's not just an american cause. but, having said that, we will be sending many, many more american troops than coalition forces from abroad. with that in mind, i just want to ask and just to follow up on the last questions that were brought up to both general mcchrystal and you to, ambassador, in terms of your initial report to secretary gates, you said that the narco profits were a major earner for the insurgency. if we were to displace that as a profit mode for the rebels and for al qaeda, do you believe there are other alternative resources that they would be able to use to supplant that? and would they be enough to -- to carry out the work they're doing right now? >> congressman, we calculate

that the taliban get about a third of their funding from the narco trafficking but that they could operate without it. they essentially tax the narco trade. they could tax licit crops, as well. we don't think that would cripple them. the greatest threat from that trade is the corrosive corruption it brings into governance. what we need to do first is get security and bring all of those down together. >> i thought it wows important to make that point and i appreciate you doing that that init, will not end the problems we have. yes, ambassador. >> briefly, congressman, another source of revenue, of course from the taliban comes from outside of afghanistan, funds that come from the gulf, funds that come from different elements in pakistan and there is a full-out combined intelligence, military and law enforcement effort to try to choke that off. >> thank you. just i have limited time so i just want to get to another point they testimonies by numerous government witnesses

pointed out the u.s. is going to increase the number of trainers working to expand the afghan army. over time if the plan works, the size of the afghan army will grow substantially. going forward, how will the afghan army sustain itself financially, financially and does your plan include a measure of self-sustainability so that american taxpayers are not footing the entire bill for decades to come? >> sir, in the near term it's clear that afghanistan will not have the funds to pay for security forces of the size that they need. as their economy grows, that would be the hope but in the foe seeable future. that does not appear possible. >> the -- also, congressman, important to note that when we talk about the afghan national security forces, the army and the police, i don't think we can tell you precisely what's the ratio of cost of having a u.s. army soldier or marine deployed to afghanistan versus the cost of sustaining an afghan national army soldier or

policeman but it's probably on the order of 30 or 40 to one. so, obviously, the way forward of developing afghan national army and police that can provide for the security of their own people, it makes good sense for a lot of reasons. >> i appreciate it. looking at my clock i have less than a minute so, mr. chairman, your work has been incredibly important in terms of the level of witnesses we've had before this committee and i, too want to stay in your good graces and will yield back the balance of my time. >> well, that's nice. thank you. the time of the gentleman has been relinquished. the gentleman from texas, mr. poe, recognized for five minutes. >> thank you, mr. chairman. thank you both for being here. i am from southeast texas. i represent a guy by the name of charlie wilson's old district. and so, i have a few questions, i just got back from afghanistan on tuesday and met with our

generals, german, canadian and british nato allies and our troops down on the pakistan/afghanistan border. i was pleasantly really sprilsed to learn that the afghan people appear, to me, to be very supportive of our presence in afghanistan. that they fear the taliban, they fear the reprisals that they have lived under under the taliban and they supply us a lot of information about the taliban, good intelligence. the question -- several questions -- we've heard about the president's position on more troops. i call it the surge and retreat policy. but now, that has been hedged a little bit in the summer of 2011. general mcchrystal, what is our policy now?

is it to re-evaluate our troops, our position in 2011, the summer of 2011, is that what it is, as you understand it? >> congressman, my understanding is is in july of 2011, we will begin the reduction of u.s. forces. the pace of that and the scope of that will be based on conditions on the ground at that time. >> so, we will start bringing troops home but we won't necessarily bring them all home then, is that what you understand? >> exactly, congressman, there will be some slope, some pace that is determined by conditions. >> and if the conditions are worse, what happens then? >> sir, the president can always make decisions based upon conditions on the ground but it is my expectation that, on -- beginning july 2011, we'll start a reduction. >> you can -- you believe that you can accomplish the mission you have when you receive the troops, which is in several weeks or even months maybe just a year, year time that you have

to do that? >> congressman, i do. >> all right. >> i think that with the forces we have the additional forces in that time i'm comfortable that we'll be able to do that. >> well, i think it's obvious to anybody that goes to afghanistan and iraq to our troops are just the best. there's no comparison to the quality of our troops. how many members of the taliban are there? i think it's -- we'd like to know how many of the enemy we're trying to defeat. how many of them are there, general? >> congressman, it varies, based upon their popularity. we assess between 24 and 27,000 members of the taliban. but, i believe, as momentum has turned, that affects their ability to retain their force. so, i think it -- it's not people with long-term enlistments. i think it's >> talking to just regular

troops, my opinion is that the pakistan government is not doing enough to ratchet up protecting their side of the border, that the taliban come over to afghanistan and woe be to them if they do because the military is going to find them, but they've run back over to pakistan and had sanctuary. pakistan gives lip service to doing something about it. i am not convinced that pakistan is engaged in helping defeat the taliban. the duke -- can you give me some insight on that? >> sir, i believe our long-term way ahead is with a strategic partnership with pakistan. they are absolutely focused against the ttp, or pakistani taliban internal to pakistan. they have not focused on the

afghan taliban that use sanctuaries. interestingly and i have a very close relationship with the pakistani military and building this relationship -- >> excuse me, general for interrupting. >> yes, sir. >> i just have 30 seconds. they take care of business -- but people running back and forth into afghanistan, they don't consider that their problem. >> conditioning gresman, that may overcism fi it but i wish they would do. >> i'm sorry, ambassador, we can't go into it but i, too am concerned about the rules of engagement oop the navy s.e.a.l.s capturing one of the worst guys in history and it seems they ought to be getting medals rather than being court-martialed but we don't have any time to talk about that. thank you, mr. chairman. >> the gentleman's time has expired. the gentleman from minnesota, mr. ellis, is recognized for five minutes. >> let me welcome you and say good morning to both you,

ambassador and general, it is good to see you again. were we with you only a few weeks ago. we've talked a lot about 307,000 extra but what about the civilian surge side of this? you could elaborate that on -- that, ambassador, eikenberry? what is our projected number, what are we hoping to arrive at and how is that process going on? >> thanks, congressman. good to see you again. >> absolutely. >> we've made very significant progress over the last 12 months in increasing our civilian numbers and our civilian capabilities in afghanistan. by january of next year, here in about -- here in about a seven-week time frame if you look back over the last month, we will have had a three-fold increase o our civilian presence in afghanistan, very importantly, in support of general mcchrystal's efforts, a six-fold increase in the field. numbers roughly then that we're

talking about, early next year, january/february time frame we'll be looking at about 1,000 civilians overall in afghanistan, about 400 of those we project to be out in the field. it's a very deverse group of civilians. these are civilians not only from the department of state, as you know, but usaid, development specialists, department of agriculture specialists around the country, members of the federal bureau of investigation mentoring and helping establish an afghan fbi. we have brave members of the drug enforcement administration, members of the federal aviation administration, a really impressive array. we've had innovations over the course of the past six months in which the way that we organize our civilian efforts and multiply the effects of wherever they are through hiring afghans and then, through those afghan organizations, amplifying the effects. we have very close collaboration

with general mcchrystal in the integration of these efforts. projecting ahead, congressman, we are set to build to 1,000. right now, we're in discussions with the -- with the department about what additional capabilities and numbers will we need on the ground. that's also in collaboration with general mcchrystal, understanding his campaign so we can support that. i don't have an exact number for what we'll grow to, but it might be on the order of needing several hundred more over the course of the next six to nine months beyond what we've projected currently. >> well, i guess my question is, i mean, that is very impressive. and i thank you for that. the movement, education, girls's education. there are a lot of good stories to tell, is and i thank both of you for that. but as i look at what we're trying to arrive at at a civilian number and a military number is like 100 to one. is that the right ratio?

shouldn't we have a greater -- if we're trying to help stabilize the country, harden the country so it's more impervious to these forces that would overthrow the government and hurt the country, shouldn't the proportion be a lot greater when it comes to civilian representation? >> representative, numbers are important at one level, but you have to look at the effects that they are going to be achieving. when we talk about the military, we talk about mobilizing platoons, companies, battalions of 600 to achieve effects. remember when we're talking about civilians, we're talking individuals. three good department of agriculture specialists working in a ministry of agriculture of afghanistan can help transform that ministry and its delivery of services of agricultural services throughout the country. so, yes, numbers matter, but at the end of the day it's how do you organize them and what effects are you trying to achieve. if you wish, for the record, i can give many more examples.

>> and i would like that. but i've got one more question for you. you know, when i was in afghanistan, and only a few weeks ago, our mission is part of the house democratic partnership commission, was to interact with our counterparts, other legislators there. and i was really impressed with many people i met, including several women ledge slaftors. one was from hell man province. she reported that without the intervention of the u.s. marines, she probably couldn't even be a member of the parliament. and i guess my question to you is, you know, how is security related to women's rights in afghanistan, in your view? >> security is a very critical dimension of the advancement of women's rights in afghanistan. certainly there's many other factors. but security is fundamental.

>> the time the gentleman has has expired. the gentleman from illinois. >> thank you, chairman. during the last three months, the personal prosecutor for the international criminal court has been making public statements that he has jurisdiction over alleged war crimes and crimes against humanity in afghanistan and, quote, perimeter investigation into operations by u.s. and other nato forces. this could lead to icc prosecutions of american soldiers even though the united states has never ratified their own statute. among other things, he's declined to rule out icc prosecutions based upon unmanned u.s. drone strikes against leaders there in afghanistan. however, this administration has been moving the united states closer to the international criminal court. the secretary of state has expressed great regret we're not a signatory to the statute.

last month, for the first time since the statute entered into force, the administration september a delegation to participate in a meeting of the icc seam my of parties. it's my understanding that the u.s. ambassador at large for war crimes was at the meeting, said nothing to protest or dispute the icc's pros cue toral jurisdictional claims. we understand that there is an article 98 agreement with afghanistan that exempts afghanistan to their own agreement from turning our troops over to the international criminal court. however, the soldiers, if they're in member states such as japan, germany, and even the uk, may be subject to jurisdiction. i'd like your opinions on

whether you agree or disagree with the icc's pros cue toral claim, to prosecute u.s. and nato troops over actions taken in afghanistan. >> gongman, let me speak for a minute from a united states perspective. we do have a bilateral agreement, article 98, as we do with certain other states party to the icc. and this precludes the afghan government from surrendering troops to the icc. the important bottom line is our troops are protected from being turned over to the icc. >> while they're in afghanistan. what if they're in other countries that are not signatories to an article 98 agreement but the countries themselves are signatories to their own agreement. >> let me get back for the record on that important question. congressman, i know it's a

complicated legal issue. >> general, do you have an opinion on that? i think we need a definitive answer because young men and women are being asked to go overseas to afghanistan to engage in combat. they need to know whether or not they could be arrested in countries that are signatories to the rome agreement. >> congressman, i absolutely agree we need clarity. i would like to, along with the ambassador, take this for the record to ensure we get you the accurate answer. >> well, i -- i'd hope we would have it today. we're concerned about the prosecution of the three navy s.e.a.l.s. a lot of people contacted us. they don't think the military is standing behind the young men and women in uniform. they don't think because some terrorist got punched out they should be subjected to a court-martial taking place in this country. i would like the assurance of both of you that if there's no clarity on this we will have clarity, especially in light of

the fact that the secretary of state is expressing regret that we're not a party to the rome agreement. ambassador, both of you, are you on record as saying that you're absolutely opposed under any circumstances to men and women in uniform being arrested anywhere in the world and tried before the icc court as a result of their actions in either iraq or afghanistan? congressman, yes. and we will get back with you on the -- we'll get back with you for the record on the very specifics you're talking about. >> general, your answer would be yes also? >> same position, congressman. >> thank you. i yield back. >> time for the gentleman has expired. mr. klein is recognized. >> thank you very much. how are you? thank you for being with us today and thank you for your service to our country. difficult challenges, and we appreciate you taking these challenges on. general mcchrystal, this week when you testified before the armed services committee, explained that the taliban may

react to the arrival of reinforcements with a shift of a symmetrical tactics, suicide bombers, increased use of improvised security devices. can you share with us, what are we doing to prepare our troops who are already there to confront these types of asymmetrical threats and what are we doing to get the afghan military to prevent these as well? >> congressman, on the direct tactical end, we are doing extensive training on combatting improvised explosive devices. we're using a number of technical means from engineering technical, reconnaissance, drones and whatnot. we're using human intelligence as well. so we're doing the tactical things to try to combat the problem as it already arises. i think more widely, the real way to get rid of things like ieds is to secure an area. when you secure an area, it's like reducing crime in a

neighborhood. rather than trying to stop each crime, you can increase overall security. what that does is the population becomes intolerant of ieds because we suffer the most casualties from ieds, civilians do. so we're working in that way to improve. our partnership with the afghans is the same. we're trying to provide equipment and training as well so they have the same expertise. again, suicide bombers, it's mostly intelligence, sir. >> okay. as a follow-up, i think that one of the discussion points that many people are raising about the whole effort and the tactic and strategy is whether there's a different way to do this, which would be to continue with success to train the afghan military. we know the police continues to be a more complicated and a lot more effort. but continue to build the quantities of players there. and then use our military in a tactical way, special force, tactical way to go after al

qaeda where they are in those areas. and of course this lends itself to the question of, these organizations do not respect national boundaries. we understand that. and the discussion has been pakistan, afghanistan. but also they can also be more nimble and they can pick up from one area and go to another area. yemen, somalia, other weak states, if you will. what's to stop them? and what are we doing tactically to prevent them from going to other areas and how do you assess the threats of the other areas as being hospitable if we have success and eliminating them from afghanistan? >> terrorists do best in the uncovered areas. they do not survive in areas that have an effective rule of law or governance. what we are trying to do is create areas of security into which we can fill that vacuum

with governance and hopefully afghan people so it becomes more durable. when you talk about outside afghanistan, the same thing applies. the we see people moving with there is less effective governance. our best way forward is to partner with those nations to try to increase in government. we need to complement that with precision strikes so you can't allow leaders or sanctuaries to emerge. you have to keep them under pressure as you do these other things. there is no simple answer. it is security, governance, development, a decision striking. >> and i agree with that the people questioning about the effectiveness of the strategy in afghanistan also recognize the threat from the taliban and the nuclear issue, which is extremely important.

. strategy. is this question about you don't necessarily need a whole nation state for al qaeda to operate in the notion it's all about afghanistan or iraq, they need territory but it could be square miles to train and to do some things. they could very easily move to another place even if we're 100% successful in afghanistan. how do we respond to that notion, other than the nuclear issue, which is important, how do we respond to the notion of them picking up and going to other places and stopping them other places and stopping them from doing that. >> like following a criminal gang around. >> do you have any other thought on that? >> no. i share general mcchrystal's assessment on that. it's a comprehensive diplomatic intelligence approach that is needed in this network. >> the time of the gentleman has expired. the gentleman from new jersey, mr. smith. >> thank you very much, mr. chairman. thank you both for your extraordinary leadership and for

your extraordinary service. let me just ask a few questions. number one, the iraq surge of 2007 deployed as we know 20,000 combat troops, extended the tour 4,000 marines already in iraq and constituted intervention to help iraqis clear and secure neighborhoods to help them protect the local population and to help ensure iraqi forces left behind were capable of providing security. notwithstanding secretary -- or senator re ide's infamous statement that the war was lost and the surge is not accomplishing anything, stated back in '07, it did provide reconciliation. did the success inspire the afghan surge? what lessons, pro and con, were incorporated to the new beefed-up troop deployment? secondly, i agree we need an exit strategy but shouldn't it have been kept secret? why announce it to the taliban so they can craft and employ

strategies especially after redeployment begins 18 months from now. and did either of you recommend that it be kept secret or go public? third what's iran's role in afghanistan today, including efps? is it increasing, diminishing or staying the same and what are we doing about it? fourth, is it true that the primary source of funding for the taliban is not longer the opium trade by foreign donations from the persian gulf countries and others? what is your counter threat finance strategy for afghanistan? >> i will start on those, starting with the last first. i think -- we think that the funding for the taliban is probably evenly split between external donations, narco-related, and then money they can raise from kidnapping and other things inside both pakistan and afghanistan. neither the loss of one of hose

three would not stop them from operating. we do have an extensive counterfinance task force that focuses on this. i think we are focused pretty hard on it. back on the first one, the surge, iraq , we were experiencd by iraq and i spent so much time there in the situation of afghanistan. what i learned in iraq that i think is applicable is that you must have an approach in counter insurgery and including counterterrorist capacity in it and it has been to be holistic. the team has to be shoulder to shoulder with us as we go forward. we were late doing it in iraq. i think that we are doing that now here. and i think it postures us well. and just last point on the

timeline on july 2011, the key point for me is the president and the secretary's very public pronouncement of long-term strategic partnership with afghanistan. i think that changes everything. i think that gives the afghans and the insurgents the afghans hope and the insurgents lack of hope because there's not going to be daytime in the long term. and i turn it over to karl. >> thanks, congressman. first of all, on the threat financing, we have a very integrated robust effort within afghanistan and outside afghanistan an integrated effort which includes our intelligence agencies, department of treasury, our military, diplomatic efforts. i also want to highlight that within afghanistan itself, our department of treasury agents on the ground are actually building within the afghan ministry of finance and within their central bank, their own independent

threat finance xapabilities. we're mentoring with them and they're starting to get some impressive results. secondly, with regard to the emphasis that you place on the date, july 2011, the transition date, i'm absolutely in line with general mcchrystal and how we look at this. afghanistan, they've -- they have a lot of insecurity based on their people. their people are insecure people based on their history, based on other nations withdrawing their support over time. they live in a very uncertain neighborhood. so they have an ambivalence about the long-term presence of the united states. they want us here because of that insecurity. but increasingly, they want to stand up and take charge of their own security. that was reflect indeed president karzai's speech. his own aspirations were to stand up and be in charge of its own security with army and police. so 2011, i agree with general

mcchrystal, it's a good date to get the afghans moving forward and president karzai has shown that publicly. >> the time has expired. the gentleman from north carolina, mr. miller. >> thank you, mr. chairman. we have set am bashs goals for training and equipping afghan saerm and police forces. but it remains a weak government. you said earlier much of afghanistan is ungoverned still. having a weak government and strong military frequently leads to unhappy results in many parts of the world. we've also had at best mixed success in trying to build a military as a unifying national institution in nations that don't have a strong national identity. we try to do that in iraq. and it appeared that we effectively armed and equipped every side in the sectarian

civil war. the video, the cell phone video, the execution of saddam hussein and the taunting by the shia militia did us great damage, created the impression that was a sectarian revenge killing, not the execution of justice in a society with a legitimate rule of law. what is the desertion rate now? where are those folks going? how are we going to make sure that the military we build is not going to dominate the government and how are we making sure we're not training and ee equipmenting the forces provided for war lords in a short time? >> i think it's important that i start with the fact that one of the things afghans fear most is militias and war lords.

there will be security forces that form in afghanistan whether we form them or not. they will form in their own defense. and i think that it's important we form a national army and national police capacity, a recognized legitimate defense security apparatus or the vacuum will be filled by exactly what the afghans fear, which is a return to strong militias that in many cases are ethnic cally based. they don't expect the same things from their central government that many western nations do. they expect less. but they do have an absolute sense of being afghans before they are any other ethnic or local identity. they take huge pride in the afghan national army. even though it is still a developing entity, they would like to be secured. when i talk to afghan elders, they thank us for being there and say, we'd like to be secured by the afghan national army.

we're proud of them. but we will welcome you just until they're strong enough to do it. so i think rather than being a threat to the government of afghanistan, i think it's a major source of credibility as they go forward. now, clearly it has to stay under civilian control. and i've seen no indications that that is not likely to be the situation. i'd ask the ambassador do jump in. >> thanks, congressman. my views are the same as general mcchrystal on this. the afghan national army was first all ethnic and all national, and indeed it is. it is a symbol of pride for the afghan people. it's a sign of hope that this country, after 30 years of warfare, and fighting, can come together. the afghan national army is a manifestation of that. secondly, the principles were good principles inspired by us.

and that was that this military would be under civilian control and it would respect the rule of law, respect the people. i believe very much that those principles are still in place. >> what is the desertion rate? i've heard it is 25%. what is the desertion rate? >> congressman, i'll get you that for the record. it's not that high. one of the things about desertion, many of the young afghans who enlisted in the army go home because there's not yet a good leave policy established. we're still working through issues of how they are paid. electronic is clearly the wave of the future. in many cases they go home to take pay or see family. great sense of family there. and a significant percentage come back. so it is a significant problem. i don't want you to believe that it's not, but it is something that is less clear than it might be in another army. >> i'll take the cue from my colleagues and yield back with the chairman. >> i thank the gentleman.

we've had a little misunderstanding. my intention always was every member gets to ask questions, alternating between democrat and republican. we're now at the point where we're treating these two hearings as one where every member of the republican conference on the committee who is here has had a chance to ask a question. a number of democrats have not yet had to. it was my intention to proceed so everyone gets to ask -- have time before we go back to alternating. but we did not make that clear with the minority. so the compromise i would propose is we alternate but those ask the question get one minute for statement and we go back to the others. in the future it would be the

intent that these rights are individual more than group and that every member should get a chance to question before we go back to the alternating. and at this point i will recognize the ranking member for a minute. >> thank you so much, mr. chairman. i would like to yield my minute and he can add his own minute to mr. burton of indiana. thank you, mr. chairman. >> there was a question asked a while ago about the international court and both witnesses said they would get back to us on that. there was a story that they wrote a book about. have you heard of, let's see, petty officer marcus lieu troe. he was on a mission. he was supposed to kill an al qaeda leader. he ran into two people and a boy. they couldn't decide whether they should kill them or not because they were afraid it would alert the taliban to their

mission and they would all be killed. they decide after an argument, lieu trel said we trust them they won't say anything. 15 minutes later, 200 of the taliban and the al qaeda came across, killed him, killed his partners and left him for dead. 16 navy s.e.a.l.s came in the helicopter. they killed all 16. we have three navy s.e.a.l.s on trial right now. how do you say to these troops sent on a mission to kill an al qaeda leader? should they have killed the three people? should they have killed them on the spot so they wouldn't alert the enemy they were going over the hill? would they have been court-martialed by the united states? here we are court-martialing three guys who in operation amber they said they smacked him in the mouth and hit him in the

stomach and they are court- martialing him. it makes no sense. you are the general in charge and you are the ambassador. i just do not understand why somebody does not say this is baloney. >> the generagentle lady from california. >> i want to thank our to witnesses for their service to their country and the image that you serve to fuel a broad. i want to thank you for your experience and wish you well. my question goes to the afrikanns. in the eight years we have been involved in war, what is it that is lacking in their government and their experience in their commitment to their own where they could not train their

people to stand up and be -- and defend their own country. let me start with the ambassador first. >> first, there has been extraordinary progress that has been made. >> how many years has it been and how many years will it take to train them? years will it take to train them? you see, i'm looking ahead, too. that's why i asked this question. and i'm looking at our financial commitment to be there at a time of growing deficit. you know, how long do we have to commit for them to bring their defense force up where they can protect their own country? >> congressman, i'll turn to general mcchrystal. the president's strategy is very clear in that regard. >> i want you to tell me in your

experience what is with the afghans where they don't seem to be able to succeed on their own. >> congresswoman, we are succeeding. they've had great success. >> then why do we have to have additional forces? >> well, the context over the last eight years, congresswoman, is this mission over the last eight years, until ream, has never received the adequate resources needed. >> i'm not talking about our resources. i'm talking about their own. >> congresswoman, starting where they were in 2001 and 2002, we're talking about a country that had been at war for 30 years, two generations of afghans without education. >> let me stop you there because i'm watching my time. general mcchrystal, you've asked for additional forces to go in. we're giving a great deal, the

lives of our military, our finances to a country that operates based on war and they can't seem to bring their people to a point where they can defend their own nation. we're shedding blood, limbs, and building a tremendous deficit that will probably never be closed in my lifetime. what is the element that is missing among their own people? >> congressman, i agree with ambassador eikenberry. that is a society literally torn apart for 30 years, the governance. they die the a higher rate than coalition forces now. >> i would hope. you know, why do we have to be the international police? and that's what i don't get. with iraq and now with

afghanistan, maybe papakistan, maybe iran. but there's something in their psyche. and what i think is happening is that we are fighting an ideology rather than at the end of a gun kind of thing. and i don't know if we knock out every taliban village and kill them all if that ideology doesn't continue among the taliban and spreads in the area. i don't know how we identify as they go over their boundary lines into other areas. are we having to maintain a force there in perpetuity? general? >> i don't think we will. i think we need a strategic partnership to reassure the afghan people. but they want to defend themselves. what they want is time and space and opportunity to build their nation. >> well, and i'm going to give

you back my time, mr. chairman. i don't see any end to it. if we're going to put our people on the front line and put the resources behind, why would they put up? you know? i just think there's a lack somewhere in their ideology that, you know, we need you to help us defend ourselves. and so i'd rather invest the money elsewhere than there. i yield back. >> the time of the gentleman has expired. the gentleman from california is recognized for one minute. >> thank you. mr. chairman, let me just note for the record that i am very disturbed with a policy that has ended up with giving me one minute to express my opinions and to ask questions in this very important hearing considering my background on afghanistan. so i'm sorry. i apologize to the two witnesses. i'm going to say some things and i have to say it quickly. number one, 30,000 troops, more

troops in afghanistan means $30 billion more a year. my experience in afghanistan tells me for a small portion of that we could buy the allegiance. we could earn the goodwill through payments to tribal leaders and village leaders throughout that country without putting anybody at risk. number one, i'd like your reaction to that? number two, general, your statements about afghans fearing militias is disturbing to me, dramatically disturbing. militias are nothing more than all the male children in their villages. >> the time of the gentleman has expired. the gentleman from virginia is recognized for five minutes. >> i thank the chairman. and want to welcome both the ambassador and the general to this committee. and indicate that at least speaking for this democrat, i am generally supportive of the policy that is emerging from the

white house. after your deliberations, having been to afghanistan, i believe that there are large spots in the country that are not sufficiently secure and the introduction of additional troops could make a dispositive difference. i don't think this is like vietn vietnam. and i think the president, our new president, deserves the benefit of the doubt, at least at this time in history. having said that, the policy deliberations were a little unusual. general mcchrystal, the paper you wrote got leaked in advance of the president convening formal review in deliberations. and ambassador eikenberry, your memo, or in the old days we would call it a telegram, got leaked. they represented seem ily very different points of view. what do you think about developing foreign policy by leaking and counterleaking and

what you think we should learn from that experience. >> thanks. congressman, i'll go first. the review that the president led was an extraordinary review. it was very open. it was a deliberative process. everyone that participated was encouraged freely to provide their analysis and best advice. we did that through video teleconferences, face-to-face meetings and in writing. the leaks that occurred are absolutely regrettable. now, against that, my own views, during this process i wanted to emphasize, congressman, at no time did i ever oppose additional troops being sent to afghanistan. indeed, i fully shared and share general mcchrystal's assessment, as he had written, security in

certain parts of the country was deteriorating. against that, the only way then to move forward with regard to troops is additional troops who need to deal with the security issues. >> i'm going to come back to you on part two of governance. i take your point. general mcchrystal, would you like to respond? >> the leaks made our job harder. the differences between our views were not very large at all. but selected leaks made it look like they were. we were shoulder to shoulder on this thing throughout. and i absolutely regret the leaks. >> good. okay. thank you. let me go back, then, i think where you were headed, ambassador, you talked about the desire of afghanis to have some kind of government that functions in a particular way that protects the security. mr. ambassador, you express some skepticism about the current

circumstances to be able to meet that kind of threshold. i want to give you both an opportunity to talk about it. some of the skepticism is we're back on a government that is seen as frankly organize thuggery. it's corrupt. frankly, the taliban, unfortunately, is an effective alternative. i'd like your comments. >> we both share the importance of the need for a legitimate government respected by its people, credible. we have two challenges on this side. the afghans have two challenges. we do have a lot to build upon. there's good functioning ministries. programs moving forward are well focused. our greater challenge is at the local level. the area where general mcchrystal's force sxmts afghan national army are dealing with areas with insecurity in the

east and the south. we're working closely with the afghan government and military to try to develop the right kind of combinations of service, delivery and governance that as security is brought to a provincial area or district, that's shortly behind that, government can start to take hold. service delivery can take hold. i don't want to underestimate the challenge we're facing in this category. president karzai's inauguration address that he gave several weeks ago, it does show some promise. of course we're waiting for action now. >> germ, 12 seconds. >> i agree with ambassador eikenberry and i yield back. >> the time of the gentleman has been expired. the gentleman from california has been recognized for one minute. >> thank you, general. i want to second my colleague's concern about the treatment of the three navy s.e.a.l.s facing a court-martial for actions taken while apprehending four

security guards. court-martial is very serious business. i don't think it had to be this way. what alternative actions might still be taken in formal councils, nonpunitive, letter of reprimand? the point i want to make is there's ways to deal with this issue, assuming there is an issue at all, far short of court-martial. >> and secondly, will they be given the opportunity to be restored to full fitness and duty, will they be sfard a black mark which has a harmful effect on morale? >> that incident happened in iraq, so appropriately i don't have the details, nor do i have any responsibility. it would be inappropriate for me to talk about that case. i do believe, however, that the chain of command and the process has been extraordinarily good across the services in providing fair hearings for people. >> the time of the general has

expired. >> they their krr their future hope also, education, health care, roads and sewer systems. and terrorism thrives in areas where the citizens believe that they are being occupied by outside forces. i'm concerned about the lack of focus on the civilian surge in this regard because i think that is the balance to what being an occupier requires. in his speech at west point, the president dedicated most of his time to military might. and he just only once mentioned

the civilian side of the equation. you both have said and other leaders in the military and throughout the dramatic core really agree one major way to secure stability is through smart security where we win the hearts and the minds of the civil yansz. and we're talking about afghanistan right now, of course. so i ask you, what resources are currently being dedicated. you said a little bit about that to smart security. in the years to come, what additional resources do you need and how will the administration approach this smart approach over a military solution, and will a smart approach ever be able to win over military. i'll start with you, mr. ambassador. ambassador. >> congre

ultimately the need for good governance to be established in afghanistan for economy that allows afghanistan to be a sustainable -- to have a sustainable country is all important. i believe that the president's strategy and the implementation does address the essential government services that are needed, the essential pieces of the economy. again, i will just quickly mention agriculture. we see the absolute need for agriculture to help improve security. >> i really respect it, but tell us where our civilian surge will come. of course we want the civilian afghanis to do all this, and we need to help them, but how will our civilians help? how many? >> the civilian surge has been ongoing. we are soon to triple our

presence of the crown in the past year. ongoing. we're soon to triple our presence over the world in the past over the past year. the surge is not something we're ready to launch. we're going to add to our capabilities on the ground. our areas of emphasis are focused on what's necessary in the economy, in the areas of agriculture. we're focused in the key areas of government developing further rule of law, helping the afghans for more revenue collection. >> let me interrupt one more minute because we only get a little bit of time. we know we're spending 30,000 troops. are we talking a tripling of the surge from one to three people or 100 to 300?

>> at the start of this year, before the president announced his strategy in march, reflecting the underresourcing of afghanistan, we had 300 in afghanistan. we will have 1,000 and we're continuing to grow. it's an all-government effort. department of treasury is on the ground. department of agriculture. drug enforcement administration. federal aviation administration. department of state. usaid. this is truly an impressivest. >> okay. general? >> the one point i would make, when you talk about military it may not look like what you traditionally think. we have military partnered with his. we're doing agricultural development, enabling civilian expertise. i think it's key we understand we're trying trying to do this with every part of our capacity that we have. >> thank you very much.

>> the time of the general has expired. >> thank you, gentlemen, for appearing today. mr. ambassador, appreciate your emphasis on agricultural development. i think that's noteworthy. before my question, i want you all to succeed. the down side, gravity of the down side to not succeeding is very apparent. with that said, mr. ambassador, and this was touched upon a moment ago, your key to president obama as well as the potential for success of our military efforts. what changed? >> i wouldn't decide my views as pessimistic. concerns expressed. with the president's decision, we have a refined mission.

resources matched against that and a properly combination of ways, ends and means, i'm confident as we move forward, congressman. >> the gentlelady from california -- from texas is recognized. >> thank you, mr. chairman. thank you for convening this hearing in the way you've done it. you've been true to your word. i thank you for your leadership. let me thank both distinguished public servants. i had a chance to greet them and i want to thank them again for their service. it was good to see both of you in uniform today, ambassador. it was good to see you, general, in iraq. of course you know that i visited afghanistan. today the president received the nobel peace prize. and i salute him and believe anymore that he is a man of peace. he defined for those esteemed audience members a question of a just war.

but let me quickly say to you that i believe that we have a major dilemma, and i would call for as i speak right now an immediate beginning of negotiations to end this conflict. and that would be the only way that i could concede the possibility of any troops being added to afghanistan. and i'll tell you why. i'd like to submit it to the record very quickly an article by jonathan gadoney, lessons from the soviet occupation in the united states. do i have concept? let me indicate what came out of that article, which is so true. the afghan government urgedly needed to establish legitimacy. ethnic tensions were unestimated. afghans were intolerant of foreign troop occupation and a military solution was proven not sufficient. the vietnam war in 1966 saw 200,000 troops committed to vietn

vietnam. at the peak of the war, 543,of our treasure lost. general, the cia has indicated that afghanistan is 4,000 feet versus up in the air versus iraq that is flat. you asked for 40,000 troops. we've got 30,000. what is your commitment to protect troops as they travel up into those mountains and to save lives? >> my commitment is absolute. our rules of engagement provide them every responsibility and right to defend themselves. we believe that the equipment we're providing them is as good as we can and we will continue to do that better. i will push for every asset we need to protect there will be. >> i thank you for that. i think the terrain is so difficult. it brings to mind the pat tillman story that opportunities for friendly fire and loss of life are heightened. there is a theory of clear, whole, build and transfer. president karzai today said this week with secretary gates that

it will be 15 years before he can maintain a military with his own resources. ambassador, why are we engaged with a country of which we have great appreciation and want to see helped with political help and social help and economic help and constitutional help and helping to make sure they treat their women right and keep their schools open. how are we going to in essence fight against this concept that afghans do not want foreigners on their soil and have a government that says it will take 15 to 20 years before they can maintain their own military? that's 15 to 20 years that the united states will have to be there guarding them. why can't we go the political and social and economic route. ambassador? >> congresscoupwoman, afghans f and foremost do want to take control of their own sovereignty. we have to appreciate the baseline they begin at, and you

have already articulated that. the afghans, though they need security right now to help them get the time and space so they can fully take charge, i think we're on a good path forward as we see our articulation of this july 2011 timeline where the afghans will start to move and take responsibility for security. president karzai clear in his inauguration speech about his own goals. but we have to be clear. the afghans beyond that period of time, they are going to need our assistance. >> let me have a quick intervention, please, if you don't mind this. article says by the time the soviets realize only a political solution could end the conflict they have lost the ability to negotiate. ambassador, what is the strategy for going in now and getting the parties to sit down and be engaged with karzai, war lords, taliban, this government and nato, where are we now sitting down and beginning the negotiation to hanover the

responsibility stot to the afgh government. are we doing that as we speak. >> we have a very clear way ahead right now as afghans develop national security force capability. we have a clear plan politically. president karzai has made clear in his inauguration speech he would like to move forward with reconciliation with taliban leaders, with taliban fighters. and we're working in support right now to help achieve those. >> he needs to do that now. thank you, mr. chairman. >> the gentleman from texas is recognized for one minute. >> thank you, mr. chairman. pakistan has always been the epicenter of this war on terror, al qaeda's safe haven. khalid shaikh mohammed. the isi has not been a good one. they tend to side with the extremists and help us with high-valued targets. has this improved?

what do you plan to work better with the pakistan intelligence service? >> congressman, my official responsibility ends at the borders of afghanistan. we do, however, have a close relationship with the pakistani military so we build up with a partnership against problems on both sides of the border. it still has a long way to go. i'm absolutely committee to improve in that so our shared strategic goals are met. >> thank you. and what is the influence of iran in afghanistan right now? >> it's both positive and negative. there are a number of positive things they do economically and culturally. there's always a threat they may bring illicit or inappropriate influence in, and we watch for that. >> thank you, general. >> translator: time of the gentleman has expired. the gentleman from california is recognized for five minutes. >> thank you very much, mr. chairman. good hearing. it's timely. i thank both of you for your

service to the country. mr. ambassador, a lot has been discussed about metrics and milestones. and on the ledger of our milestones and the afghan, the karzai government's milestones as we try to achieve these metrics, one of the early, i think, determinations as to whether or not they're achieving them is in the name of his cabin cabinet. the defense minister is leaving and another minister is leaving as well, i've heard. and whether or not president karzai is able to turn the page, it seems to me it's going to be evident in these early appointments. when will they be completed and what's your sense of that process? i mean, will we be able to determine, for example, by the end of january when he finishes that process how that milestone has been achieved? >> congressman, the president

karzai in his inauguration speech that was attended bisect clinton, he made a commitment to the appointment of qualified, responsible individuals in his administration. >> and the proof is in the pudding. >> it is. it was interesting, congressman, when he said that he got a spontaneous round of applause from the afghans in attendance. it's the afghans who have high expectations. well to, answer your specific question, we expect cabinet announcements to be soon in the next several days before the parliament goes on recess. >> so we should get a good judgment here very soon as it relates to the cabinet? >> yes. >> and how does that follow through to the governors, some that have been closely associated, we believe, with this trade? >> we believe, congressman, that

after the initial announcements of cabinet members, subsequently there will be changes to the cabinet members. i would like to emphasize that the cabinet of afghanistan, president karzai's cabinet has a lot of very well-qualified people, finance, commerce, agriculture, education, health. these are world-class ministers. they're challenged because they don't have the human capital right now -- >> we're working on that? because of my time, i want to shift over. general mcchrystal, we talk about the army and the police force and the training that's taking place there. and i don't want to get into a discussion of semantics. but i think part of this whole effort is akin to nation building because you're not going to be able to have a solid military or a police force unless you've got the credibility and you're relatively corrupt free.

what are the -- since we're now taking over the training and especially of the police force, and i've been there several times and i've heard all sorts of anecdotal stories that talks about the dismay of our ability to do so, we're taking over complete training of the police force right now, is that correct? >> nato training in afghanistan is part of that. the whole coalition is doing that, sir. >> okay. but are these people with police backgrounds training the police or military training the police? are we going to end up with a paramilitary police force? >> it's a combination. policemen have been hired, european partners, and some military as well. we saw about the investment of the housing that got involved in corruption and $8 million, other anecdotal stories where money has been wasted, what efforts are we pursuing to correct those

kinds of investments and infrastructure? >> we have many, let me highlight two. in terms of how we are contrasting, we are doing contracts in a much better wake read in terms of modern oversight, i want to emphasize we think the most important with the united states congress, you have a special investigator that provides oversight for the 0 d efforts. we think that is -- >> are you familiar with the hospital in kabul? it is a success story that we have not participated in, but americans have made it happen. >> the time of the gentleman has expired. the gentleman from florida is recognized for one minute.

red. the gentleman from florida is recognized. >> thank you, mr. chairman. thank you, gentlemen, for our extraordinary service to our nation. general mcchrystal, in response to senator mccain's question the other day about the inability to defeat al qaeda unless bin laden is captured, did you mean there will be u.s. presence until bin laden is captured and can your plan ever fully succeed if bin laden is not captured? >> congressman, thanks for the opportunity to expand on that. it was a very short quinn in a long hearing. i believe al qaeda can be defeated overall but i believe it's an ideology and he is an iconic leader. so i think to complete the destruction of that organization it does mean he needs to be brought to justice. it will be another of the steps. however, i don't believe that simply getting him ends that organization either. i think it's one step in it. >> thank you. thank you, mr. chairman. >> the time of the gentleman has

expired. >> let me -- thank you for this hearing. also, let me just say i do remember very clearly those who didn't have the opportunity to speak would be in that order of priority. so thank you again very much. i want to welcome and thank our witnesses. and just say to you that i have to say as the daughter of a military veteran, 25 years, served in world war ii and in korea, i strongly support our troops. i want to thank all of who are here with us today for your sacrifices and your service. and my belief that the sacrifices made by our men and women in uniform should always be acknowledged and honored. let me just say from the get-go i think many of you may know that i opposed the war in afghanistan from day one for

many reasons. but now moving ahead, many of our military national security experts agree that the presence of our troops continue to full the insurgency in afghanistan and give resonance to al qaeda recruiters around the globe. i also happen to believe that and disagree respectfully disagree with this overall prior eight-year strategy and the strategy today. i was glad to hear you respond because i was going to ask you about osama bin laden if, in fact, his capture is part of the strategy and a benchmark in terms of the success or failure of this effort. but let me ask you, how does it increasingly expand for united states troops in afghanistan serve united states national security interests in combatting al qaeda if it feels anti-american sentiment among populations sympathetic to extremists, insurgents in

afghanistan and pakistan, somalia, yemen and elsewhere in the world? let me also say many have said, and you probably disagree but i would like to hear your response to this, to complete this mission will require about 400,000 to $500,000, possibly 8 to 10 years, possibly a trillion dollars. do you believe that to be the case or not or why do we hear that so often now? finally let me just say i'm extremely concerned about the strain on our military members and their families. in the face of this expanded indeficit commitment in afghanistan, the physical, psychological and logistical strain in the u.s. armed forces under the stress of two wars to me seems to be untenable. so just know that we're going to do everything here to support our troops and to help them transition back hopefully soon to life with their families.

but i'm very concerned about the stress and strain it's taken. >> congresswoman, thanks for the support of the troops and know how much it's ap slated, particularly this time of year. to step back, in terms of our national interests, the veent destruction of al qaeda is critical not just for the u.s. but for the world in that region as well t. role in afghanistan is denial for al qaeda to return which i believe they would. i also believe that the taliban have an absolute link and to al queda. for them to resume power even over significant areas of afghanistan would create instability in the region, opportunities for al qaeda but also wider instability that would cause significant problems for the world. it would not be localized at that point. i believe that it's important that afghans secure afghanistan. your point about the concern about foreigners, there's an almost antibody-like response in many cultures to foreign forces

there. that's understandable. zen phobia is a natural part of any society, even greater in that area. i think it's, therefore, important that we work as hard as we can to enable the afghans to secure themselves. they want to secure themselves. they don't want the taliban there and they want us there only long enough and in large enough numbers to enable them to get there. i wouldn't ask for a single force more than we have to have simply to give time and space to get the afghan national -- >> the anti-american sentiment that is spurred by this in pakistan and yemen and somalia and other parts of the world, you try to nip it in the bud here, it pops up somewhere else. >> it's a danger. one of the greatest resentments is their perception that we deserted them in 1989 when the russians pulled out, we ended our involvement with them. and they believe that we walked away from them.

i think it is a balance. i think we need to give as much help as they need to get on their feet and i think we need to help them stand by themselves. >> the time for the gentle lady has expired. the gentleman from california has graciously agreed to one minute. >> thank you very much, mr. chairman -- >> no, no, elton is son for five minutes. >> i have one minute. i have like 52 seconds left. i would like to say general and ambassador, thank you for your service. i know you face challenges that are in some people's views very difficult, if not more so from alexander the great to the soviet union. i appreciate the job you're doing. and we want to try to give you all the support that we can here. as a member of the intelligence

committee, i have little insight about some of the challenges that you have that maybe others don't know. but i would like to take my remaining time and yield to the gentleman from california, row backer. >> ten seconds. >> mr. chairman, it is my understanding that those who did not get a chance to ask questions would get five minutes. >> time for the gentleman has expired. the gentleman from tennessee. >> point of parliamentary inquiry. >> state your point. >> is that point that i just made not correct? >> the point -- mr. gallagher was entitled to five minutes. -- just listen for a second. i was told that he sought one minute. i am now recognizing -- i now recognize the only person left in this committee who, unlike you, has not had a chance to speak at the gentleman from tennessee, mr. -- gentleman from

tennessee -- >> point of parliamentary inquiry. point of parliamentary inquiry. >> thank you, mr. chairman. >> point of parliamentary inquiry. >> yes, sir. >> do you think this has turned out fair? >> i think because of ju it hasn't. >> the gentleman from tennessee, five minutes. >> thank you, thank you very much, mr. chairman. general ike enberg, it's awfully good to see you again and i remember many of our visits to brussels with nato parliamently assembly. general mcchrystal, i appreciate your conversation with me on the phone at the last nato pa meeting. i see and am very encouraged by the reaction of the nato parliamentarian members at the last meeting a couple, three weeks ago in edinburough, there's a new spirit and cooperation, i think for the first time in several years.

it's my impression, to use a football analogy, that they realize and have no problem with the united states being the quarterback of nato, they'd just like to be in the huddle when the play is called. you, and i think the administration, have done a good job of including them in the muddle. it makes a tremendous amount of difference, let me say, in the attitude and the atmosphere where all of these parliamentarians from member nations gather. as a president of that organization for the next year, i want to thank you both for doing that. i would encourage you every way you can to always speak of this as a coalition led by and not us going it alone. i think -- i was on active duty during the vietnam days and i saw the critical mass of public support necessary for a prolonged overseas deployment sort of just fritter away, and

i've been worried that that would be the case in europe. and we have, of course, some people here with our situation in terms of our own economics. but it's important in my judgment to maintain this critical mass of public support for the coalition. so anything you all can do, including reiterate from time to time that we're not there to westernize anybody. we got off the beam in iraq talking about we're going to create this western style democracy. it won't work. we're not there to westernize afghanistan in my view, and i think that appeals to the european allies and nato. we're there to enable the afghani people and their institutions to say no to taliban and al qaeda. that's why we're there. if they can do that and we can limit the sphere of influence that this poisonous philosophy has and hopefully limit it to an

area where we can monitor and contain it, hopefully it will wither and die like a plant without water. two questions real quick. on the civilian surge, talking with some of my colleagues and people who have been there, there seems to be a bottleneck on the civilian side with respect to getting projects actually on the ground. you get people there, but they can't get through the maze of okays. i know we were stolen blind in iraq sometimes because we didn't have some protections. if you could really take a close look, both of you, at the coordination of the commanders, the serb money and how that can be streamlined with the civilian money and coordinated, i would encourage you to do that, because i think that is -- both

of you have said, is a critical part of our success. the other thing i would like to talk about is the reintegrati reintegration -- i think general petraeus talked about it yesterday. i knew him when he was at ft. campbell in our district. i think that is down the line maybe a part of it. i would be encouraged to have your insight into what you think the chances of that are. the state of play in pakistan, of course, is a large, large part of this, particularly if we're going to try to contain on the border in some fiscal manner, physical manner, these bad guys so that we can monitor and contain their sphere of influence if that's possible. and then finally, is there any thinking about what will happen if we pull back into the more

populated areas in terms of our concentration of troops? how do we maintain in the rural areas the security that necessarily brings up? i know i've talked about a lot. it's really great to see you again, general eikenberry. >> i will try to answer that in the three seconds here -- >> i think important questions to be unfortunately answered at some other point because our time has expired, and we only -- we have zero time remaining on the clock on the floor. gentleman from arizona around two months ago general jones ever rosy assessment of the situation, stating there were fewer than 100 al qaeda members in afghanistan at present, that there was a diminished capability of the taliban to destabilize the government. the question i have is, 18 months from now, will we be in a

better position than that? or maybe you disagree with the assessment in the first place. >> i outlined in my initial assessment my view of the situation, and i think that it has improved slightly since that was published. i think will be in a much better place 18 months from now. >> ambassador eikenberry, any comment from you? >> a share general mcchrystal's assessment. >> the time of the gentleman has expired. o our prayers are with you for your success, ambassador. >> i wonder if you would give me one minute, not in response, just 1 point i want to make. >> i think we owe it to you. this is not an effort to keep us from voting on the floor.

. . >> no, it's not. chairman, a lot has been said over the course of the morning about the great sacrifice of our men and women in uniform and our allies. i also wanted to say for the record just to emphasize the sacrifice that our great civilian team is making on the ground. on the 13th of october we had two civilians, one from usaid, travis gardner, 38 years old from nebraska, and jim green from the department of agriculture, 55 years old from oklahoma, they were in a convoy with the united states military in a striker unit, their convoy was hit by ieds. i always make a point when i i always make a point when i learn of that kind of that our civilians are facing, giving them a kauchlt i gave them a call both that night and asked how they were doing. they said they're doing great and they said that, very humbly,

and with great sincerity, we're just doing what we were sent over here to be doing. and we couldn't be more proud of our civilian force on the ground, too. >> yes. thank you, gentlemen. mr. chairman, thank you so much. some of our members would like to submit some questions to our great panelists. >> we thank you both very much. our prayers really are with you for the success solve these efforts. with that the hearing is

>> house democratic leaders had to quell a potential revolt. what are their concerns? >> it was the new democratic coalition. they are business friendly democrats. they were concerned that they would not get a chance to offer their amendments. they were concerned about that. they said they were going to try to delay the bill if they did not get a chance parent of the leadership, treasuries, other officials met with them and they reached a compromise. >> we will see a lot of amendment considerations. what about the underlying bill. what does this propose to do? >> this is a sweeping regulatory overhaul. this is the biggest since the new deal. it creates a new council to deal with the largest financial firms. streamlines banking regulations. changes derivatives regulations.

it changes everything we know about regulation and oversight of the financial markets. it creates a really new system to deal with the problems of seen. >> as we see amendments come out, point out some that we should watch for. >> the big question, the house financial services chairman and little while ago was telling reporters in the house speaker's lobby that there is an amendment that would do away with the consumer protection agency. that is the big test that he sees. he is concerned about that. he thinks that democrats can defeat it. he think that that is the test. that has been a center point for the obama administration. >> why has the consumer protection agency been a key point? >> the banking industry is quite content and the financial- services industry is quite content with the way things have been currently where regulation

of consumer protection is done through the safety and soundness regulators. it has been an afterthought in recent years. the banking industry would like to keep it that way. they're trying to do whatever they can to maybe slow down or we can this agency. >> are all democrats on board for this? what about republicans? >> we do not expect too many republicans to vote on this. basically every issue coming up, they are opposed to legislation. democrats are on board. there has been some disruptions but in the end he will get most -- and he will get most of them voting. >> the black caucus was concerned. >> yes, they're concerned about not enough money going to families for foreclosure relief to the unemployed. some money is going to those

issues. to redevelop houses that have gone through foreclosure. to help those that have felt the brunt of the crisis. >> will they finish work today? >> it will come up for a final vote tomorrow afternoon. >> what is the companion legislation looking like to >>? >> for the broad themes in improving regulation and tightening, they're pretty much the same thing. we expect christopher dodd to present this next year. >> that is an update. thank you for joining us. >> happy to. >> you can watch the house tomorrow as members continue to work on the regulation bill. live coverage at 9:00 a.m. eastern here on c-span.

coming up tonight on c-span, treasury secretary timothy geithner speaks about tarp program. then nancy pelosi's weekly briefing. democrats on the house energy committee to discuss the controversy surrounding leaked emails from british climate researchers. then an update on the swine flu. on tomorrow's "washington journal" we will discuss health care with allison shorts. we will discuss about the future of iraq with general robert caslen. >> this weekend, a look at

climate change with former and vice president al gore. then a discussion about those that deny the existence of a global warming. and then we will discuss a book about antonin scalia. afterwards, a book on google. >> timothy geithner told a panel overseeing the tarp that the government had to beware of declaring victory too soon in the financial crisis and the field,'s administration ' extendtar-- and the administratn policy to extend tarp and to teluntil 2010 was needed. welcome mr. secretary to

your third appearance before the congressional oversight panel. we appreciate your being here and appreciate your commitment to coming every quarter. yesterday this panel released its monthly oversight report for december. it was a comprehensive assessment of t.a.r.p.'s accomplishments and an exploration of the place where t.a.r.p. has fallen short. you made it a busy news day by announcing at the same time that res ri will extend -- treasury will extend t.a.r.p. until october of next year. thus it seems between the two of us we have intensified a vigorous debate in congress about what direction the program should take going forward. as the starting place for our conversation, i want to note the conclusion of our report. t.a.r.p. was an important part of the government's rescue strategy. and it helped rescue the financial system from imminent collapse.

the apocalyptic fears that we were all suffering 14 months ago have not come to pass. and for that we owe a great debt of gratitude to the public servants who tiled through the darkest -- toiled through the darkest days of this crisis but as the report also highlights t.a.r.p. has been far from an unmitigated success credit for consumers and small businesses remains scarce. the foreclosure crisis continues unabated and treasury's mitigation programs have not achieved the scope the scale or the permanence necessary to stabilize 2 housing market. large banks survive the crisis with the help of government support but smaller banks don't fail at nearly unprecedented rates and the fdic is in the red for the first time in 17 years. perhaps most disturbing of all t.a.r.p. create an implicit government guarantee for major financial institutions.

a guarantee that has not shared by their smaller counterparts. the unprecedented government actions taken to stabilize the system have created a huge more hall -- moral hazard that makes our system riskier and that affects the pricing of assets. we welcome you here today mr. secretary to engage in the constructive process of evaluateing the t.a.r.p. and assessing whether it is serving taxpayers in the manner that was intended. i look forward to your testimony and a productive discussion. and with that i call on mr. atkins for two minutes of remarks. >> all right. okay. thanks. thank you madam chairman. welcome secretary geithner. milton friedman once said that nothing is so permanent as the temporary government program. yesterday we learned what most of us had already suspected that t.a.r.p. will not die at the end of this year. the program is no longer, no longer can be considered a

hastefully arranged effort to arrest the financial freefall. i can understand why a treasury secretary, any treasury secretary really would want to extend t.a.r.p.. why not. it's a free option at taxpayer expense and essentially a blank check to finance any macroeconomic stimulus initiative that the executive branch can imagine to the tune of hundreds of billions of dollars. by -- but now that last year's emergency has abated the rationale behind t.a.r.p. as a safl for financial markets in distress no longer supports treasury choice i believe to extend it. the previous congress reluctantly authorized t.a.r.p. in response to extraordinary financial panic. would kong today approve snarp i cannot imagine it. that was why it was extended i believe. but toex tend t.a.r.p. borders i think on recklessness and irresponsibility in treasury's role as a stewart of the nation's financial system. t.a.r.p. continues to inflict great economic costs

both directly to the taxpayer in the form of actual and potential tens of billions of dollars of losses and indirectly as chairwoman said of moral hazard distorted insentives created by implicit government guarantees and inefficient government interference in the operation of private firms. moreover the administration's legislative proposals will not solve these problems i believe but only institutional them. now that unbridleed financial panic that was krilted as the original -- crime cited as the original justification for t.a.r.p. disappeared why deepen and prond these cost. i'm not convinced we kev p yet credit the program itself for staffing a panic in the markets the united states government basically cru $8 -- through 8 trillion in the form of guarantees sqloens direct out lays at the financial markets something had to happen out of all of that liquidity and in fact i think this chart

here shows how t.a.r.p. rates as but a small portion of the total government out lays. this little red triangle here compared to everything else guarantees, out lays and loans that the federal government did last year. so the lack of political accountability the lack of accountability might be the biggest problem. we have many overside concerns. first, treasury takes the position that the treasury is a revolving line of credit with a $700 million and at any given time. at the previous opinion, i asked about the legal opinion about the revolving fund and we have not received the opinion from treasury. this commission needs to be addressed as soon as possible. -- this omission needs to be

addressed as soon as possible. >> thank you, chairwoman. i wish to begin by saying, mr. secretary, i believe that the decision was the only responsible course of action that the administration could make. the economy is not fundamental stable. the market crisis is accelerating. the risk of a systemic problem in the coming months is significant. i believe a tough resolution authority such as proposed by the obama administration and being acted on hopefully in the house in coming hours would be far superior to tarp as a means of dealing with a future crisis. and the moment, congress has not passed such authority. this was the only responsible

ondecision to be made. in halting a runaway financial crisis in the fall of last year. i recognize this is hard to prove in the way a mathematician would prove something but i'm completely con individualsed this is true and the -- convinced this is true and the reason i think this is true and the reason my colleague mr. atkins has it wrong because there's a difference between liquidity and equity. now, nonetheless t.a.r.p. is wildly unpopular among the american public and this is not because the public does not understand what happened. it's because the public understands all too well what happened. this panel found in report after report t.a.r.p. transactions have been undertaken less than fair terms to the public issues in transparentty in key t.a.r.p. actions including the stress test the underlying weaknesses in the financial system have been inadequately addressed and finally and perhaps most importantly the key credit

markets that matter to the american public remain weak with real consequences for jobs. it did not have to be this way and it does not have to be this way in the future. this administration has taken significant steps to make t.a.r.p. a program that works in the interests of the american people and not simply in the interest of the financial firms we bailed out. including allocating significant moneys to foreclosure reliefs and managing to avoid putting more money into the large banks. but more must be done. t.a.r.p. in its second year must one, work for main street not just wall street. no, -- two, always transabout with private parties on terms that are fair to the american public and three, address the underlying weaknesses in large financial institutions by cleaning urp up firms that are broken rather than continuing to hope time will heal all wounds. this week president obama spoke powerfully about the need to help solve the main street credit crisis so businesses can kre jobs and he spoke about the role t.a.r.p. might play in that mission. i look forward today to hearing in more detail about

those plans and like the chair and mike, i'm very pleased to see you here today and thank you for your attention to the panel. >> thank you mr. silvers superintendent neiman? >> good morning mr. secretary. yesterday morning our panel issued a report analyzeing theñi overall effectiveness of t.a.r.p. in a comprehensive year end review. and while the report criticized several of t.a.r.p.'s shortcomings to date, it also gave a large share of credit to the treasury department and to congress and in my opinion to the fed and the fdic for the achievement of the primary objectives. t.a.r.p.'s primary objectives were to restore financial liquidity and this has largely been achieved as the report stated and i elaborated in my additional views. this this reflection is critically important so the american public can fully appreciate the depth of the crisis and how the treasury's multiprong response stabilize not only a

financial sector but also avoided a dramatic worsening if not collapse in the real economy. but congress also charged treasury with use t.a.r.p. funds in manner to preserve homeowner ship in addition to promoting jobs and economic growth and we are now entering perhaps most critical stage of treasury's foreclosure prevention program. hundreds of thousands of mortgage modifications in their trial phase are at risk of not converting to permanent modifications because servicers are not obtaining adequate supporting documentation from home owners. the majority of the home owners in these trials are in fact making their modified monthly payments but they will soon be in danger of elimination from the program and will again face foreclosure as their trial period expires with documentation still deemed unsift. -- insufficient. i'm sure you agree neither home owners nor our financial system can afford

a trip back to square one. i look forward to reviewing these and other issues with you this morning and again i thank you for your time with us this morning. thank you mr. neiman. i want to note that we are missing our fifth and newest panelist mark mcwaters that joined the panel by apointment last night. he can't be with us today because he has the flu. so we are sorry and we wish him well soon. as you can see mr. secretary we have kept our remarks brief so that we will be able to have the maximum amount of time for questions and answers. so i would ask that you keep your remarks to five minutes. mr. secretary? >> thank you. thank you chairman warren members of the committee of the atunyoteer sight committee -- oversight committee and thanks for the opportunity to testify about this important set of policy issues faceing the country. more than a year ago as you

noted we faced one of the most severe financial crises in the century a deep economic recession and we've begun to turn this around. confidence in the stability of the financial system in the security of american savings has improved dramatically. credit is flowing again. the economy is now growing. broerg costs have fallen. businesses have raised substantial capital from private markets housing prices have stopped falling in many parts of the country and job losses have slowed at a pace more consistent with stronger recove rer -- recoveries than weaker recoveries. however this is a very tough economy and households and businesses still face very significant challenges unemployment of course is veryer, very high commercial losses weigh heavily on small banks impairing their ability to extend new loans. credit is tight for many small businesses. foreclosure is driven now principally by unemployment are very high. today i want to outline our strategy to address these challenges going forward and how we're going to wind down and ultimately exit the

t.a.r.p.. there are four elements to this strategy. first we will terminate and wind down the emergency programs put in place at the peak of the crisis necessary to break back of this financial panic in september we shut down the money market guarantee program which earned taxpayers 1.2 billion we've etec fek tfly shut down now the capital purchase program under which the majority of t.a.r.p. investments in banks were made. second, we will limit new commitments under this program in 2010 to three areas. housing small banks and credit markets for consumers and small businesses. for housing we're going to continue to work to mitigate fore- -- foreclosures for responsible home owners as we take the steps necessary to continues to stabilize the housing market. for small businesses we recently launched initiatives to provide capital to small and community bans to increase lending to small businesses and reserving additional funds to facilitate small business lendsing and finally going

to continues to support the securities markets necessary for credit flows to consumers and small businesses. third beyond these limited new commitments e we will not use remaining e, s.a. these are starp funds unless necessary to re -- t.a.r.p. funds unless necessary to respond to immediate financial threat to our economy from financial stability. a determinationly only make after consult wgs the president and chairman of the federal reserve board and submitting written notification to congress. fourth we will continue to reduce our financial stake in banks and manage our down other investments we will keep the government out of the business decisions of these companies and we will exit from our investments as soon as is practical and return ownership to private hands. this strategy requires a limited temporary extension of the authority provided by the congress under the emergency economic stabilization act. it would be irresponsible to do otherwise. the expected cost of the t.a.r.p. have fallen dramatically. while we're extending the program we do not expect at

this point to deploy more than 550 billion in total. we also expect up to $175 billion in repayments from banks by the end of next year. substantial additional payments thereafter and as a result we know expect the ultimate cost of t.a.r.p. will be at least $200 billion less than was projected as recently as the august mid session review of the president's budget. we now expect to make not lose but to make money on the $245 billion of investments in bank. we estimate the t.a.r.p. programs for banks will yield a positive return of over $19 billion. indeed banks have already repaid more than $116 billion in investments the stress tests of the financial institutions helped accelerate repayments by providing markets with the transparency and confidence necessary for banks to be able to raise capital from private sources. these programs as you know have generated significant income roughly 15 billion which has been used already to help pay down our nation's

fiscal obligations. of course we do not expect all t.a.r.p. investments to generate positive returns unlikely we will be repaid for all over investments in aig. gm and chrysler even there the outlook too is improved and you'll see newest it mass in the report we're issuing today. we'll continue to manage t.a.r.p. in transparent and accountable manner. erier this morning treasury published or maybe sometime today not sure it is out yet. published first annual financial statements for this program. these statements discuss in great detail the operations and impact and expected cost of the program. gao provided unqualified opinion of those statements included no material weaknesses in internal controls and this is a notable achievement for the men and women who have helped put in place this very important program in a short period of time. let me just end by emphasizing as you did the importance we continue to work to reinforce the process of repair in our financial system. it is absolutely essential to make sure we establish a

strong recovery that have put americans back to work and it is very important because of the consequences kre -- kre yad by the actions necessary to put out this financial fire that congress move to adapt a strong and comprehensive package of financial reforms and i've -- and i'm encouraged by the progress we've seen to. a lot of channels ahead to getting a strong package in place. i know you played a helpful role to bring strong insight to those choices and i'm sure you'll continue to work with us to make sure we have a strong package in place as quickly as possible. thank you. >> thank you mr. secretary. let's start with your statement. you say as part of the extension that you want to focus any new spending on housing small banks and supporting credit to consumers. small businesses. let me focus on the small business initiative i understand the importance of the initiative this is the one part of t.a.r.p. that may have a direct effect on

unemployment or maybe the most easily traced effect on unemployment and that is if small businesses can borrow money then they'll be able to stay in business. they'll be able to keep their employees or hire more employees. so i understand the importance of this and applaud that approach. but my concern is that last spring treasury launched the program to stimulate small business lending. i think it was not a success. later treasury announced a program to purchase up to 15 billion dollars in securities backed by sba loans and i believe it's the case that so far treasury has not spent a single dollar under that program and two months ago treasury announced a third program to support small business lending by providing low cost capital to community banks and as i understand it so far nothing has happened. so it's not news to anyone that small business lending is important. small businesses are closing

every day. but treasury has now announced three plans and surely has not gotten the job done. what's going to be different now mr. secretary? >> let me start by saying the economy would not be growing today without t.a.r.p.. unemployment would be dramatically higher today without the action we took to help save lives of financial system and open up the markets so broken. let me walk through the specific programs you pointed out. to get small business lending going again. small business you know they depend on banks overwhelmingly for credit and small banks provide about half the credit small businesses get from the banking system as a whole. small banks are among the most affected still by the challenges facing the economy as a whole. many of them are going to need more capital. those that need more capital are cutting back on lending and commitments and as you said that's affecting small businesses in. our judgment to address this requires a set of different approaches. we've actually been quite successful in bringingly quitty back to the securities markets important for small business lendsing

the program has been very helpful. that's one reason why sba loans have increase sod much. the sba program providing higher guarantees lower fees is also helping although those programs are small in total mag my tuesday but for this to work we have to make it possible for banks to come get capital from the government so they can support more lending. banks have been very reluctant to come. they have been reluctant to come and do business with the government. they are concerned that they will be stigmatized and subject to the risk of conditions in the future that will make it harder for them to run their businesses. we have to find some way to mitigate of both the stigma of coming and the fear of changes

in the future rules of the game that will apply to them. that is something we cannot do on our own. it will require some help from congress. you are right to say that unless banks have access to capital, this will be a harder problem to solve. >> but me follow up, mr. secretary, because i am confused. you were talking about small banks as the most effective lenders businesseto small busin. i heard you just say you were talking about putting more capital into small banks. i'm confused. >> the emergency programs that were necessary to break the back of the panic and the capital programs for large banks, we are confident that we can walk into those down. the program be for small

community banks, we will preserve that. work, chairman, we need to make sure we need to make it more comfortable for banks to be willing to come. >> let me if i can pinpoint, how can it be that we can manage to put hundreds of billions of dollars into the hands of very large financial institutions and what was effectively a matter of days, at 14 months in t.a.r.p. we are still talking about trying to figure out how to put much, much smaller amounts of money into very small financial institutions. >> it is not complicated but let's go back a little bit. we actually did not give the large banks a choice because it was necessary for the country that they have capital put in right away. justice second, let me say, but small banks, and we meet the capital quite attractively priced as many of you have pointed out, but they are reluctant to come. they don't want to come because they think it is a sign of

weakness and not drink. even though capital is the best way they are reluctant. >> let me just-- >> as you said we have tried quite creatively many different ways to design these things to make them more attractive but we can't force them to come. >> so your statement here today is the reason why we have a problem with small business lending is you are making the money available to small banks and they just won't come? >> that is one of the problems and it is absolutely a central problem in this area. the basic credit crunch uc across many small businesses across the country today is partly as a result of banks pulling back a don't have capital to solve that. it is not the only thing you can do but to solve that-- >> thank you mr. secretary. mr. atkins. >> thank you madam chairwoman. i salute you very much for producing an audit of the t.a.r.p. program. i think that is great and that

is something we have been obviously expecting and that is super so i look forward to seeing that later today. again. i disagree with you as far as how important t.a.r.p. was for the situation today, basically this sine qua non of where we are with their meager recovery and anyway, and approbation of the program. but i want to focus on what all this talk from the white house and elsewhere, about job creation coming out of t.a.r.p. and things like this. what troubles me is what sort of parameters are you going to put a brown this. when you are talking about injecting money into small banks that are not really trouble but you are doing it for some of the reason i think you are very much drifting away from the intent of congress in passing fsob-- eesa i wonder how you will analyze this.

>> t.a.r.p. was essentially about credit, recognizing that there is no roof without credit. the banking system is critical to the provision of credit. what we have designed for small banks, for community banks, for small business lending in securitization markets opening up, housing more stable are central to the basic objections of t.a.r.p. and fully consistent with the authority congress provided us. >> i guess one thing and want to disagree with is eesa was enacted in a crisis atmosphere where people were afraid that banks are going to go under. were not afraid community banks are going to go under and obviously, i mean maybe we are, it depends on what is going to to happen in the future which is why i assumed you were keeping t.a.r.p. alive, to react, but your rationale of injecting money into it in order to spur lending is not a rationale of keeping them from going under.

>> i wouldn't say it quite that way. again, capital is critical for lending. without capital, lending will decline. lending is a viable business that has good demand for products and will not-- its oxygen will be deprived and it will risk failure and have to come back on-- >> you are talking about business, the lindy? you are talking about the bank. >> again banks are critical. they are not the only thing but they are critical to that. if you are a small business and you are unlucky in your choice of banking eurobank got exposed to a bunch of commercial real estate exposure that bank is fun to cut back in your credit and you'll have to cut back on payroll employment and it takes time to find another bank particularly in a system so traumatized by the crisis. >> part of that too is examiners and other people who through their scrutiny and this is a natural human reaction to over react to a crisis and questions

may be need to be asked but through that sort of process it then causes banks to recoil of bed and not be so ready to land. >> you are right about that. as commissioner neiman no's this is an important balance to get right. what happens in recessions after financial bums is banks may pull back more than is rational and supervisors may tend overreact so we have, these are independent of the treasury, but we have been encouraging supervisors to try to provide some more balance and the guidance to give to examiners across the country so they don't overdo it. they issued guidance to blanding ululation standards a few weeks ago. i think that is very helpful. they are looking at additional steps but you are right to emphasize the importance of trying to lean against overreaction by supervisors. >> so i want to go back-- gibbon netley you have all decided that it deserves some more funds.

>> g is part of the institution but to the stress test early in the spring. s4 manning we identify significant capital needs and for all those institutions we said if you do not raise capital from the private markets, if you are unable to be put to you because it is important to the stability of the system so the only thing committed to do back then and i think actually the ultimate will be lower than we anticipated back in june. >> apparently you have decided to inject more capital. >> no, somewhat less than the estimated in june. >> but the more recent round, where they have come back. >> no, in june when we released the estimates and the stress test, the estimated capital needs for the institutions we gave them a curative time to go out and raise capital from the private markets. overwhelmingly banks were able to do that. you see private investors willing to come in and increase

their stakes in banks across the country now allowing the taxpayer to get out of those. it was never going to be possible for g. all we are doing is committing to put the capital and recommitted at probably a slightly lower level than back in june. >> thank you. >> thank you. mr. silver's. >> mr. secretary, when t.a.r.p., wendy eesa was an active and t.a.r.p. began, my read of the statute was the purpose of t.a.r.p. was not to rescue a particular institution, even particular firms. it was to preserve the system. and, for the purpose in the statute was i think pretty clear about this. not because the system was a thing of beauty or because a particular concern for again

those businesses but because the role of the financial system played in providing the resources necessary for the real economy to function. in that regard, and stop me if i have got it wrong, in that regard it seems to me that you appear to be identifying, you when the president appeared to be identifying that aspects of the system continue not to be working adequately in continue to be needing more support. am i reading your words that you correctly? >> exactly. there has been a dramatic improvement in the overall stability in functioning of the u.s. financial system but parts of the system are still very damaged and broken. i will mention just three. housing markets are still overwhelmingly dependent on the temporary programs put in place by the government. commercial real estate finance is still very difficult as you

would expect with an economy coming through such a large basic adjustment, and there's a significant risk of credit crunch across small business in part because of the small things. they are still somewhat impose to the risk is that. i don't know anybody who could look assistant to the and say that they are not significantly impaired and did not a surprise given the scope of the damage caused by the crisis. this year there is on the economic case to use the authority provided and perfectly consistent with the objectives of the authority to continue work, but that is not the only reason we are extending dr. silvers. we still need to keep in reserve some the availability to respond if we are to face again a serious escalation of systemic concern. ag would be deeply irresponsible and prudent at this stage, only a year and to this recovery process, only three months after we first appeared, to stand back

and walk away from the challenges ahead. that would leave the taxpayer at much greater risk of future losses. ultimate casa the program would go up, not down. it would be prudent to put in place of limited qualified extension. >> now i may pick up on your expansion with the chair, there are under the t.a.r.p. 2 types of programs. you have programs where capital has been provided to firms who were then t.a.r.p. recipients and you have programs where t.a.r.p. fund said and injected into markets, in ways such as the talf in ways the various private parties that may touch those funds are not actually tower percipience. is that there characterization of one way of understanding the to come into range of programs you have? >> programs for individual institutions, t.a.r.p. percipience although they are

because of the importance for the system. programs about market wide support to the capital markets securities markets are designed differently. >> in light of the concern that you stated that small banks have been receiving t.a.r.p. money which i find between the issue of reputational risk which i find that understandable concern, i'm not sure how congressional action could change that. in light of that, and in light of your description of the small business problem as a market problem, not a firm, not a particular firm that is weak here that is the issue. in light of that, are you considering taking the market support approach? maina take the market support approach rather than the firm support approach? >> you have to work on both channels of credit. you have the bang channel and you have the capital markets and you need both. and fatigue make the capital market channel work better to

increase for banks to make pull the banks out of their uncertainty, but these are small business credit. they are very small loans. the capital markets were never going to provide, in the past would not be significant providers that you have to work on both. >> my time is running out so i want to be clear what i'm saying to you. i'm not saying to you yuca nevitt public markets solution here. i am suggesting that if you want to move this money to small business quickly, that both from the perspective of getting the banks involved without making them into t.a.r.p. recipients and from the perspective of tapping small business-- banking expertise that you should be looking at structures that move money, and thirdly to avoid the problem that has been present and t.a.r.p. from day one of handing money to banks and not knowing what use is made of it,

that the right way to do this is to do this with a conduit that most t.a.r.p. money more less directly to small firms with banks as a manager of the process rather than as intermediary. >> i generally agree with you and i think the most promising idea fly in that realm. banks still need to have risk on the table because we don't but budo this for businesses. >> over the last few weeks, there has been a focus on a 25% of those individuals who are in trialdstrails mods who are not

current. i would like to focus on those who are making payments in a timely fashion. january 1, 2001 not only bring in a new day but it will also be the day that the house we will have their modifications expire. many of them have at least three months of timely payments. less than half of these homeowners have submitted all of the acquired documentation. by some estimates and i've talked to some of the largest services directly, half of this group, the group that has submitted all of their documents, have yet to have their documentation validated by the servicer. given these numbers i have stated, it looks like over 75% of the homeowners who have demonstrated a willingness and ability to make timely payments on their modifications may be

eliminated from the program. foreclosure. now you have recognized the urgency of the situation by implementing swat teams at the largest institutions among other efforts to engage homeowners and servicers to facilitate both the submission of documents by borrowers and the validation of that documentation by the servicers. so, fundamentally my question is, does this expected loan conversion rate implied that the original documentation standards are not set correctly and are too onerous or do you think that the standards are correct and liberalization what impact the integrity of the program? >> said we are working on this and on many fronts a we have taken a careful look at whether we can streamline the document requirements. we try to mobilize resources to make sure services are processing these and converting to permanent as quickly as possible. they can help to a better job of helping people benefit from

current modification and i think we are going to make substantial progress in the area although there are lots of challenges. i just want to emphasize the what we have achieved so far. almost three-quarters of a million americans now are benefiting from modification programs that reduce their monthly payments dramatically. on average $550 a month, $6,000 a year. that is a meaningful amount of support for income for some of the people hurt most by this crisis. we want those mons to be permanent and banks will not get a dollar from the treasury unless they convert to permanent months and we are using a tremendous amount of persuasion to try to make sure we get those conversion rates up to a reasonable level. >> but, and i agree with you those reductions are significant but if at the end of the year, this first group cannot convert to permanent modifications they will lose those monthly payments

and now be faced with the same situation of being offered a maud buy the servers are which will likely increase those payments for foreclosure action to proceeding so are you considering extending again, the opportunity for the trial modifications so that our worst who have not had documentation validated-- >> we are going to work hard to avoid the outcome you love this guy. we will make sure it reaches this many homeowners as possible and benefitting in real economic terms from this program and we are not there yet. but i think we are going to make substantial progress. >> okay. we look forward to some of your performance numbers being issued today. >> one of the virtues of the numbers we lay out is you can see performance servicer by servicer and everybody can look and see how many eligible homeowners are they reteaching and a number of these need to get their numbers up.

they need to do a better job and they have the ability to do that. >> there certainly to the other big issues around both negative equity and unemployment. you mention unemployment in your opening remarks. i appreciate the response from mr. ellison and as a follow-up to our last testimony to reduce some of the proposals that i had been promoting for quite some time with regard to emergency mortgage assistance programs and i look forward and thank you all for agreeing to meet separately on those issues. >> were right, those are two areas where there's a lot of ideas out there and ways we can help modify this program and you are also right to emphasize this program was not designed and this is a conscious choice we made not to start with the principal reduction and we made that choice because we thought it would be dramatically more expensive for the american taxpayer, harder to justify,

create much greater risk of an fairness and our program was not designed to do that. our program is doing what it is designed to do which is reaching many, many people across this country with substantial reductions in monthly payments and we are always looking at ways to try to help make sure this program reaches people who can reasonably reach. >> thank you. >> if i could mr. secretary i will do is pick right up on that point and that is the deliberate decision not to deal with negative equity because it has created an irony against the backdrop of the sub-prime mortgage crisis that started with zero down loans and 100% financing. we now are creating modified loans supported by the united states government that have 110% loan-to-value ratios, 20% loan-to-value ratios, 125% loan-to-value ratios. we have no experience with

long-term payment of deeply under water mortgages, but the little bit of data that we do have available, about even modestly under water mortgages, suggests that over the long term, second only to the question of affordability of the payment, long term, being under water on mortgage means that people are unlikely to continue to make their mortgage payments, so i want to push back on this little bit. are we creating a program in which we are talking about potentially spending $75 billion to try to modify people into mortgages that will reduce the number of foreclosures in the short term but just kick the can on down the road so that we will be looking at an economy with elevated mortgage foreclosures not just for a year or two but for many years?

how do you deal with that problem mr. secretary? >> it reduces the basic overall obligation of mortgages. it does not increase and we a people in these programs with very high ltv's able to qualify and it does bring down the overall burden. >> i'm sorry, are you saying you are doing principle reductions? >> no but the change in payment structure does reduce the basic value of the obligation in the mortgage but i think it is more helpful for me to say it this way. i think your right to point out the huge problem, the amount of negative equity presents for us, the question is what to do about it because that is a hard thing. what is driving this now principally, the whole foreclosure rate across the country is driven by what has happened with unemployment and what is happening to income of americans, and i think our judgment is the best things we can do now to help mitigate that risk is to help get the economy

growing again, bring unemployment down has the can, put people back to work and make sure we are providing overall stability to the housing market and we have seen actually better results on prices and expectations about future prices than many of us expected. we brought it down to levels are houses are much more affordable now and housing demand is actually picking up a bit. the question is not what he described as a problem. you have been eloquent and persuasive but the question is in addition to those actions we should embark now on the program where we are what would be dramatic additional cost to the taxpayer, helping relieve people of that obligation, and the problem in doing it apart from its expense is the basic sense of fairness and what did this to incentives in the future. now, but you are asking the right question. the question is do we have a solution that is there? >> i really would like to push

back. you talk about relieving the homeowner. let's keep in mind this is about whether not the investor in these mortgages, some of them making substantial profits during the glory days, should be required to take the losses when the mortgages that the investor then turned out not to be worth nearly so much as they had promised. >> through what means? >> one means would be to bankruptcy which doesn't cause the american taxpayer any money. >> that would be one means. >> another i am deeply concerned about is the extent to which the current programs the treasury advances sends a signal to investors and mortgages in the signal is, sit on the sidelines. you know, there's no reason to come to the table and negotiate these mortgages. you can wait for the u.s. treasury to offer a bribe to get you to the table to do what should it been in your interest to begin with. we all understand that foreclosures don't just destroy the value for homeowners.

they destroy the value for investors themselves yet investors are hanging back. they are not engaging in rational write-downs that would keep a good stream of payments coming from these businesses. instead, holding out for larger streams of payments and holding out for help from your treasury department. >> i don't think i quite agree with that. you are right it is one option in you and eloquent advocate of those reforms and as you know the president did for posen was supportive of, but congress was unwilling to act, in part because of concerns it would make it harder for capital to come back into the banking system and help support improvement in housing markets with broader returns. that is a judgment congress considered and shows a different strategy. i don't agree that the programs in place are working against this process to repair that will support. i think they are actually helping in actually we are seeing quite a lot of new interest and willingness and

investors to renegotiate a write-down. we are seeing much more that than we saw before and that is encouraging. >> you know, i have to say mr. secretary i lived through a big housing boom and bust down in southwest during the late 1980's. in fact i lost money on the house we had to sell during the bus. but the government didn't step in and help in the same way. the lenders had to eat the losses for bad investments that they got involved in and so did the homeowners. this was not a question of the taxpayer support there. >> this crisis as you know and i think you understand is nothing like that crisis. is much more dramatic in scale and impact, much broader effects on people across the country and i don't think there's anything from that basic in the past it would been helpful. you could take the view that it was a mistake to try to give the americans the ability to see a

substantial reduction in their monthly payments and therefore improve the odds to get to keep their house. i don't agree with that and i don't think you do either. this is actually program that is doing quite well in delivering a meaningful improvement in the basic financial economic position. as i said almost three-quarters of a million americans now and it has been part of what has been a quite successful effort to bring some modicum of stability to the housing crisis much earlier than many people with thought. >> thank you mr. secretary. i apologize to my co-panelists for running over by two minutes and i'm going to skip my next round of questions. mr. atkins. >> thank you very much, and i actually think that is a good rationale there and with respect to negative at whti i think it would be a mistake to start dumping money into that. i don't think there's enough money around, once you start getting into the issues of

fairness and everything. i agree with that. wanted to turn, as far as t.a.r.p. goes to the access that we were talking about earlier that you alluded to. the reason capital option, i guess he can call that the success of some sort, i was wondering how you foresee this going forward in the future. are you still planning on engaging negotiating price by backs before establishing an option? what is the current view of treasury as to how you are going to unwind this? >> i think it is possible that we are going to still see a mix going forward in part because many small banks will not be realistic approach but in the auction is a good approach and that gives a way to let the market determine the best price. we think that will help maximize return to the taxpayer.

it was subscribed by a factor of 12 and close to the ultimate test of what these are worth as to be established by what people are willing to pay for them so i think it is an approach that is going to deliver better returns than the alternative in this case but it won't be probable for all of these institutions. >> so then as we go forward and you talk about putting money into all sorts of community banks and others, what is the decision process in terms of how money goes in and the treasury process? >> well, the program at its beginning. i was not the secretary of the treasury then but it was designed to makeit