recover. it will take hard work and it will take shared sacrifice. we will need to remember to believe in ourselves and never forget to believe in each other. as i said in the beginning of this address, how we respond to these tough times is a test of us as a people. let our response in these extraordinary times be as extraordinary as our people. may god bless us all and thank you and god bless. [applause] . . (applause.)ó;

we have nancy silly, chair of the white house council of environmental quality. we have a freelance writer and editor, in the morris, executive editor for federal news radio. thank you. [applause] our speaker today, admiral fad allen has served as commandant of the largest component of the homeland security, the u.s. coast guard. he reports directly to the president, the secretary of homeland security and a secretary of defense. now completing his for your appointment as the 23rd, not, he has led the coast guard to a challenging time of -- the u.s.

coast guard agreed to extend to 1789 when the u.s. lighthouse service was established by the treasury department. the continental navy was abolished after the revolution, so in the 1790 alexander hamilton crated it to enforce our nation's custom loss. -- customs laws. it is the oldest seagoing service of the united states. today, it is a major source of rescue and assistance in times of disaster and emergency. from the 1980 boat lift to the 1991 haitian exodus of 40,000 refugees and the indian ocean tsunami, the u.s. coast guard played a vital role in hurricane katrina. a rescued nearly 25,000 people and medically evacuated close to 10,000. the coast guard is assisting in

the haiti earthquake aftermath as we speak. its duties include law enforcement, search and rescue, and our mental protection, polar ice operations and national security. i think all of us in washington can relate to the polar ice apart. today he is speaking on the state of the coast guard and his view of the future. let us extend a warm press club welcome. >> thank you very much for that kind introduction. if i could add a couple of comments, i had to very good friends who have joined us today. on my right is nancy sulley. we met last august where we

traveled to alaska together to witness firsthand the implications of an ice dimensions -- diminished arctic and the summer. some of the environmental challenges we face in the coast guard operating up there. she has been a great friend and has lead a task force by the president on ocean policy and we will be putting out an ocean policy for the country, a governance structure, at a background on a concept for marine spatial planning. it will take a look abuses in the water and that is very important to the coast guard. thank you for being with us today. thank you, nancy. to my left is the chief of staff to secretary of -- we're both from arizona. we both work for our governor. she has thei] unfortu'te

backgroundç ofi] having goneço tucson high school. we did not let that spoil things between us. she will be headed back to tucson at the end of this month to resume her duties. we do not have a better friend than the department of homeland security. thank you for being here. [applause] let me thank the national press club. we have changed the format of this event over the years to coincide with the national press club luncheon series. this allows us access afforded by c-span and we think the national press club for their partnership. -- we thank you the national press club for their partnership. i would like to acknowledge some other special guests today. we have the and it's here today that responded to the haitian crisis, early search and rescue recovery, surveillance, situational awareness rendering

aid as the first folks on scene. we have folks from key west, florida. [applause] we have crewmen from aerostation clear water -- from station clearwater. please stand. this is what makes my job worth it, folks. we continue to grieve and support of those families.

we keep them and their thought here today as well. if i could set the scene for my remarks, let me take you to be for 52 on the top of january when the earthquake devastated port-au-prince. the news spread quickly to capitals of the world. while most were gathering information and trying to understand the event, your coast guard was active. within the hour, we received orders to proceed to port-au- prince. they delivered medical supplies, and mostç important, hope. hope for the haitian people and the promise that the world had not forgotten them.i] our helicopters evacuated the first american citizens, made arrangements to transport the directorçxdçfá, the united sts çsinceç -- unitedççç natioç

miamiç to port-au-prince. the treated theç art of the çpossible were none seem to exist. çhundreds of injured patients were thinking our people for providing life-saving first aid. ymçcrews create a makeshiftw3 ç -- created a makeshift clinic. they broke off tree branches to use force plants. there were screams, wailing, crying, and desperate cries for help. i knew i was walking into a bad situation, but nothing could have prepared me for what i saw at that clinic. her guardians pushed forward and there were countless stories of were lost. there was also a story about new life been brought in thexdxdç d and it's the utter devastation. ç-- the mets the utter devastation. -- amidst the utter devastation.

what is station clearwater please stand again? [applause] an officer is also with us today. he treated over 300 critically wounded patients. we are indebted to you andç yor will you please stand? q[applause] bacby january 25, we had five cs in the immediate area. we have evacuated nearly 1200

american citizens, connected to under 50 medical evacuations -- evaluations. it is pretty amazing. it should also be clear that the haitian response included superior team play by all of our homeland security partners. ççwe worked as a team, one thi am proud to be part of it. we also work closely withw3i] ur the same team work is being displayed in their joint effort with our canadian partners during the winter olympics, which begin today. as i deliver my final state of the coast guard address, i would like to narrow my focus a bit and i would be glad to expand on

topics and questions as you desire. çthere are our budget request r fiscal year 2011. the significant process that has been made in modernizing theqq coast guard and the condition oç our aging fleet are of concern to me. these forces in combination create challenges and opportunities to ensure that we optimize the resources available to us and create the conditions for future success. we'd be very clear understanding of our priorities. we will talk about that today. what is the state of the coast guard? ready and resilience. çwe are ready and resilience. t(we were there first because their operation forces are agile and flexible. authority to move forcesç delicate outside their headquarters so our food -- are field commanders can act immediately.

our forces are working hard to sustain current operations. let me turn to the first for shaping our future for our budget request. i have communicated openly with their personnel regarding the details and intent of our 2011 budget. as president obama remarks in the state of the union speech, it is important to understand that we are in a constrained budget environment. families across the country are tightening their belts, the federal government should do the same. çç-- the request before congrs does reduce personnel in the coast guard by 773, but most importantly, it allows us to move aircraft from service that our aging and in need of replacement. some of these are being replaced. the good news is that the budget contains nearly $1.4 billion to allow us to replace aging

assets. the budget contained $538 million to continue our replacement cover agent -- aging cutters. $40 million is there for maritime control aircraft and we are especially appreciative for the president and first lady support to our families and for the 13 more $9 million for improvement of our acquisition of housing to support our families. $13.9 million. i supported this budget as it is provided me the flexibility and the coast are the flexibility to continue our capitalization needs. collectively, the personnel reduction reflect hard choices, choices that best position at the coast guard to optimize our performance and protect of the nation within the funding provided and still replace aging cutters and aircraft.

our intent is to manage current operations as funded in order to sustain our recapitalization programs. the president's budget does this. this represents the best way forward. it is the coast guard's responsibility to manage current operations with the foresight and structure provided in the budget. we can and we will do this. we could use some help as well. we would appreciate acknowledgment by all of our partners of the following attributes of our service. we are multi mission, service agency that has the capability to respond to all of our coast and offshore to an incident related to national interest. we support every specialized agency of our government. we are federal first responders for the nation. we're prepared to do our job

with the resources provided in the budget under operating principles that have served us well for two centuries. we must seek to balance our operations across all of our missions. we should resist the urge to parts our mission set and as an example, some have asked, what do our safety missions have to do it, and security? the answer is provided in the homeland security review. it is available on-line. protection of critical infrastructure, effective emergency response, and continuity of central function. all of those relate to post card emissions. -- coast guard mission. we're prepared to support these budgets and managed operations. we would ask that consideration be given to creating a multi- year estimates that allow us to

plan our acquisitions against a predictable funding stream. we've gone to extraordinary lengths to build an acquisition organization and to program management standards. our baseline lacks credibility when they are not supported by a five-year capital investment plan provided to congress in a timely manner. to our congressional partners, we are working to change that. we understand and support the budget and we are prepared to execute it. let me turn now to the second force impacting our service and that is coast guard modernization. it is important to take stock in what we have accomplished and what remains to be done. there were three things that a coast guard must do to position the service for future success. modernization enables all three. here is what i said. first we need to understand our

dramatically changed and operating environment. we must change to sustain and improve mission execution. we must be more responsive to the needs of the nation. our challenge going forward would beçç to adapt our force, command a control structure and manned a mission -- in response ççto specific incidents, searh operations, an increasedç thret levels. while sustaining our performance in our traditional missions. that was the cause for action. it is no less valid today than three years ago and you can make the case that the cause for action is more compelling giving what we have experienced. what about todayç that is a fair question. qççwe have replaced a multilad maintenance and logistic organization with a simplified contract that focuses on the operationalç unitsç and a prot manager.

we haveç establishedç logistic centers for an aviation facilitiesç. any unit in the coast guard with a support issue has a single point of contact for our mission support system. for the uninitiated in the room, this is tantamount to a logistical treaty. we're talking heavy culture here, folks. we have created service centers to accomplish the same functions for personal support, medical care, and legal services. we have completely revamped our support structure for reserve component and have reallocated positions. we have review under way to

reaffirm the role and structure of our reserve component, looking ahead to future missio w3?e$e deployable operations grp meet operational demands for instant response, search operations, and increased threat levels. we are reducing the number of deployable units, let there be no mistake that the -- the value that this brings for the coast guard to the home -- to the department of homeland security into the entire nation. the coast guard force readiness command has been established under the leadership up tim sullivan -- leadership of tim sullivan. çi]this organization has takenç some perplexing problems and our service. ç--ç in our service. we have implementedççç every possible.

ççthe first remaining challens the integration of support across our new logistic. ççóthe challenge is to replacen isolated support command. thatxd sounds complex and it is but the solution and complex -- the solution is simple. çit allows small boat product line manager to synchronize his support responsibilities with the product line manager for the communication and sensor. the second is a financial audit. this is a cold eye set at the outset of my term that i will not see accomplished. that system is under development

and it did not make sense to procure a new accounting system for the coast guard only to have to replace it several years later. in the meantime, there are numerous areas where we can address material weaknesses and improve our representation to the auditors. we're doing just that. the third step in modernization involves congress. there are for actions that i cannot take absent congressional authorization. the first is the change in the title of the command of the coast guard operations command, the proposed world wide synchronize -- synchronization. the key man responsible for training, equipment, providing forces. the third is the upgrade of our deputy commandant for operations. the fourth is the upgrade is a vice admiral to admiral.

my request to allow implementation of coast guard modernization is the passage of operas -- authorizing legislation so that we may move forward. finally, i want to talk about cover readiness. -- cover readiness. -- cutter readiness. the current conditionxd is of serious concern to me. çfollowing the extensive repais required, we continue to experience increasing casualty's -- casualty's -- casualties. this tension between current support levels and the need to bring new ones on line was critical in our decision to decommission high endurance cutters which is supported in the president's budget.

as we support the existing fleet as they are relieved by new cutters, we have transition that support to our new logistics organization. the new product line support structure allows us to provide better suppor at. this will become more critical. this will begin in the 2012-2013 timeframe. we're also facing new challenges this winter. çour recent experience in suppt of haiti response operations is instructive here. the coast guard operates one of the oldest fleets in the world. no amount of maintenance can outpace the ravages of age. of the 12 major cutters assigned to haiti, 10 or 83% suffered casualties. we also had to divert scarce

resources away from evacuation efforts to deliver repair parts. this process was courted flawlessly to run a logistic structure. the response was a triumph for our new mission support organization and underscores the condition of our fleet. i would like to tell you that we overextended because of the compelling nature of our mission. we will always defer to and respond. we will take every resource we have enrolled at the problem. the condition of the cutters that responded is the -- is indicative of the overall readiness of the fleet. the condition of our fleet continues to deteriorate putting air crews at risk. that is why we must address future readiness as we have in the president's budget. it will be logical for the person on the street to say, how you do this? we play to our strengths.

as we continue to adapt and change in response to changing mission demand or fiscal challenges, there remain certain aspects of our service that are timeless. our core values and are operating principles. they got the men and women of the coast guard. it is theseç people remain undaunted spirit they create the art of the possible when none exist. i]they do not need direction frm higher authority to act. after the first day in haiti, an officer said this -- today was the first day that i think i have surely been more thankful to be an american. not because of our infrastructure are the freedoms given to us, but because of the country, we will be there when the country of less fortune is in need. haiti has no oil or major cash crop to use. as a country, we will stand together and put aside our different opinions on health care or economy and help out

those in need. these are remarkable words written by somebody so jr. in such a concise and meaningful way that it tells me that the state of the coast guard is reflected in our people and it is reflected in their resiliency. the coast guard today remains true to our model. we have made significant cultural changes and structural enhances in the face of ever increasing demandç for services and a high performance expectations of the american public will the state of the coast guard remains strong today, to remain strong, to remain true to ourçfá motto, ts supported in the president's budget. we're up to the challenge. i would be glad to take any questions that you have. [applause]

>> thank you, an admiral. there is no shortage of questions that have come in today. many are from service members that e-mail to the national press club. our first question is, as a veteran of disaster response, please compare the challenges of the situation in haiti with the situation inç louisiana and mississippi after hurricane katrina. >> that is a terrific question. let me start with thew3 response model for haiti. we're dealing with a foreign sovereign government that the entire international community is trying to support. we accomplish this through our çchief and faster on the groun. most embassies are not staffed to handle search operations such as what had been going on in haiti. usaid dispatched a senior official to assist the ambassador. that is the person who focuses

the response by the american government for the government of haiti in support of that effort. çthere was a joint task force r haiti. there was a team of folks who were sent down by the department of homeland security to support the ambassadorç who was the hed representative. inç katrina, the people we were supporting or the local and state governments, the mayor, governor. in the united states, there are some federal prohibitions regarding what theç federal government can or should do.ç this was all support of the mayor and the governor. my role was to work with joint task force katrina commanderç s we put together a response packages to support the mayor and the governor. there are similarities, but the overall governance structure is a little different. >> president obama has vowed no cuts to defense and the department of defense is seeing

a small budget increases for other agencies are also adding jobs. as chronically under resources as the coast guard is, how is it that it is taking a 3% budget cut and losing nearly 800 jobs in contrast to other drop -- agencies that are gaining. >> let me reinforce what i said. what is important about the president's budget is that it has allowed me the flexibility to focus on asrecapitalization and manage currentç operations with the fundingç provided. we can argue about funding levels. everybody always wants more. the real issue for me is can we continue to recapitalize the coast guard? if we do not do that, you wle create a hollow force and the future. -- in the future. >> this message came from a parent of a recent coast guard recruit. how can you justify standard recruiting systems?

myçóççççwhy spend the time o t(?m!continuezwcttd recruits the nowhere toç go and place their lives on hold with a potentially empty promise of enlistment? >> that is a good question as well. we need to understand what the budget is right now and how we get to an appropriation. the budget request is on the hill. that has to be acted on by appropriations committees in the house and senate and then reconciled. we do not know till very close to the very beginning of the fiscal year we are funding level will be. -- what are funding level will be. okwhile we have people waiting o enlist in the coast part right now -- coast are right now, until we know what is appropriate, we cannot take the final steps.

as i told my work force, we will manage the personal impacts associated with this and we will pass information as soon as we know it and we will be totally transparent. we are going to have to manage the workforce that is larger now than we will be able toç suppot in 2011. we will do that in a transparent manner. >> another question. as the needq for budgetary cuts grows, has any consideration been given to cutting costs the officer bills and replacing them with less to costlyçç counterparts? >> always a question of interest to the field. actually, in the personal changes for the budget, there is a reduction over 1000 military personnel. that is mostly related to the taken offline that will allow us to recapitalize the fleet.

in addition to that, there are over 300 civilian positions being added on. there is a conversion ofç some positions from military to civilian. this will help usy;ç meet the s of the department. ças far as the officer to enlistedç ratio, i willw3 haver for the outcomeç of this budget and i will put that out in may a blog for people to read. >> is a possibility in future years that cuts could come to in time programs such as health w3care, acted did pay, retiremet pay, allowances, etc.? >> i did not believe snow -- i did not believe so. the commit to our men and women strong. itç is strong with secretayñ

staff. we want to make sure that we fund full entitlement. similar entitlements for dod. they will not be diminished. >> how will the lack of funding for naisç impact coast guard operations? >> that is a way for us to receive transponder locating information from commercial vessels. ççwe think this is a critical piece of what we called -- call maritime domain awareness. it is competing with other items in our agenda right now. ças we move forward, we will he

to revisit what we think about maritime security in this country as it relates to the integrated operation centers and how we want to conduct operations at the port level. we have not had any viable threat to our ports since 9/11. that does not mean that there will not be one in the future. >> given the budget and personnel situations, do you foresee any expanded opportunities for the coast guard auxiliary to deploy and assist the active duty coast guard in foreign crises? >> we love the coast guard auxiliary. they are a great benefit to the nation. qthgy@=5%uáz the local communities where we operate. their paycheck is thank you. the work force psychic income. we do this -- we do give them a stipend to pay for gas.

most of the time, this is a labor for love for them. that is why we love them so much. employ them. most recently, we have createdç a link list program to provide translation capabilities. we will take them and their skills wherever we can match them up. >> given that you lovev: them ad want to use them more, how extensively can use them to make sure they still love you? >> it is kind of a dance. i spent a lot of time talking with than, telling them how much we appreciate their services. i will tell you this. when they found out what our modernization plans were, since they are not constrained by changes in the senior leadership positions, the auxiliary is already modernized brit they have already gone to the structure they have -- we

are proposing to congress. i think it is a great partnership. >> web 2.0 is gainingçç more can you explainç how the coast guardçç uses it? doesq it help the u.s. coast guard carry out its mission more effectively? >> i said this and many venues and i will say it here today. i believe that the convergence of computation and internet data transmission has produced an equivalent in our social environment that is equivalent to climate change. there are three ways to adapt to climate change. you can suffer, adapt, or manage.

xdi would tell you that this isa fundamental change in our social atmosphere. you can suffer, adapt, or manage. i tried tou! move the coast guad into the managedç category aftr a few months of suffering. we have facebook, twitter, flicker, youtube, the libraries and so forth. this is the new way we learn. we have to understand that. they are part of our workforce and we have to adapt to meet them. >> i would be interested to hear more of your thoughts on the suffering part of your adjusting to social media. what sort of impact are using negatively when you have done it and what are some of the positive impact you have had from having? >> i am giving away a strategy here. the responsibility for the fidelity, truth, accuracy of any

thing you see on the internet rests with the reader. there are no barriers to entry. that space could be populated by anybody in the found out that it is being populated by people who do not like us very much. if information out there is not correct, you have a couple of choices. you can let it stand and suffered. you can adapt and that is not always productive. or you can manage. we chose to still the information. you cannot control their entry and what they put out there, but you can control what you do and you can fill the space. >> you also made reference to climate change. what are specific steps the coast guard is taking to become more green? >> we have been representing the secretary on the interagency task force on ocean policy. beyond that, we are doing a lot

of work with the international maritime organization. we lead the u.s. delegation on behalf of the state department. recently, in london, kind of change and air emissions were the no. 2 issue. the way we'd use the maritime environment is really impacted by the types of fuel. we have issues with in basic species. we're working very hard to invoke international standards. -- we have issues with invasive species. climate change has the potential to change our operating environment. if you looked at the north slope of alaska, there's water where there used to not be and i'm responsible for it.

it carries with it the same responsibilities and authorities that the coast guard has. we cannot abdicate that responsibility and that is a huge change in the mission set. i have been told by some folks that it isç not our responsibility. that is not true. it is something that we have to have a serious policy discussion about. >> with each answer, there are a couple more questions. it is fun to keep shuffling cards up here. here is a question. given the importance on merger and commerce to our nation, why do international seafarers have difficulty gaining access? >> that is a great question. a couple ofç things are complicating this. first of all, homeland security have been working for several years on rules that would implementvç and identification

card. anybody that has access to secure space is has to carry one of those cards. what we have found out as we have implemented this that somehow -- in some cases, there has been an obstruction. i have issued orders to my captains to take a look at this in connection with approving facilities security plans and the operators need to demonstrate u.s. that they had a plan to provide access to the shore. i made it clear to my commanding officers that these people need to have access to shore. we support that. we will make the changes necessary to make sure they have that. w3>> why cannot the internationl committee put an end to piracy?

>> to have an act of piracy, it takes a ship and a pirate. the only control one part of that right now. frankly, there are not a lot of consequences attached to the behavior of pirates. on the ship's side, we take an extraordinary measures over the last 24 months on how to harden defenses of ships that are low and slow. they're more vulnerable to attack. regarding u.s. shipping, i have issued a maritime security directive that requires the ships to do it vulnerability assessment and senate plans to us as part of the vessel security plans -- and safety plans. this has been enormously successful. it only accounts for 1% of shipping. this is a significant problem.

i have met with him and it has to be a couple of things. it has to include a legal sanctions to hold these people accountable in a court of law someplace. we have a backlog. we need other countries to step forward and allow us to attach consequences to pirate actions. >> how will budget cuts impact coastguard operations aimed at drug smuggling? >> lumley allocate our resources, we did when we allocate our resources, it is always a risk evaluation process. we take a look at our intelligence and the threads that are out there and we allocate our resources. it is an important mission for

us. the most important border to the coast guard is the southern border of mexico. once they get there, they are much harder to intercept. we have to make evaluations on a day-to-day basis. this underscores my comments about the budget. the operational model is sometimes more important than the funding level. we have to move the ships when we need to. one of the opportunity cost from haiti is moving hamilton to the pacific -- from the pacific ocean to the panama canal. it is a potential vulnerability. those are the trade-offs we make

in the conducting current operations. it does not matter what the resource level is. we have to make those decisions. >> question from the audience. because of the way the military is organized, the coast guard adheres to the don't ask don't tell by agreement, not by direction. they are allowed to have gays serving openly. will you reverse don't ask don't tell? >> i cannot reverse don't ask don't tell. it would take a repeal of a lot to change that. -- it would take a repeal of the law to change that. regarding this, a review is under way over the next year to

take a look and build knowledge of how we might fill the guidance that was provided to us by the president. the coast guard will be part of that review. they will participate fully and our goal is decreed as much knowledge as we can about the implications of the implementation of the policy guidance provided by the president. >> despite -- the problems of discrimination toward hispanics in the coast guard possessed -- persist. >> i would be happy to take the information and follow up on the

complaint. we seek diversity in the coast guard. hispanic, african-american, all walks of life. all different viewpoints. all religions are important to us because they crete cognitive diversity. people that have different viewpoints -- it gives you a much more robust solution on what you are trying to do. we want a more diverse coast guard and we are working toward that in dark recruiting in every aspect of the service. it is not restricted to just one nationality, one ethnic group. we need diversity across the board and that is our goal. >> this question comes to a civilian naval architect working at the coast guard yard in baltimore. in your efforts to constrain government spending, i am concerned that it will in fact -- effect civilian employees.

>> the reductions in the work force for 2011 are over 1000 for military positions. civilian positions are being added, so i did not see any negative impact. >> please update us on the internal review of ship inspection procedures. what is the status of that? >> i will take a stab at what they are talking about. we have a review going on right now of our ships operations and hal our engineering staff on ships handle -- hal our engineering -- how our interest -- howard engine hearing staff on ships handle this. i have dispatched our marine inspectors to actually go on board and inspect our cutters and make sure we're holding

ourselves to the same standards. >> the average navy ship is 14 years commission to and the coast guard is 41. with the cuts in place and the disparity in age of the coast guard and naval fleet, willie continue to have enough ships that can keep pace with the navy to be operationally effective? >> we will if they are properly maintained. that is one of the reasons we have to build the new ships. the old ships cannot produce a pate and continue -- cannot participate and continue in the future. we are seeing increasing levels of difficulty in trying to support them. our question is to migrate to the new fleet as fast as we can. >> the 2010 ice season has been detrimental to cutters. >> i'm assuming you're talking

about the great lakes ice season. we have had some problems with the reliability. that is a growing concern for us now. we're bringing our new logistics organization structure. we want to take a look to see if there is any system that some components or particular parts of the ship that may be pandemic across the fleet that we need to take a look at it. we will have to come up with a way forward. this is one of the conversations we will have as the start managing this portfolio and move forward. >> how important is the ratification of the international treaty of the law of the sea to maritime security? >> i think it is extremely support -- important. i support it here today. we do a lot of things out there

on the sea related to governing what is the last global commons. we do it out of practice. we have not ratified the law of the sea treaty. we need to in the next few years çócreate a traffic separation scheme in the bering straits so that we can separate north and southbound traffic to prevent collisions. traffic separation schemes in transit straits, connecting international bodies of water. it can only be done throughç te çimo. i think it is time we step forward and ratified the treaty and use it as a governance model for how we are going to operate in the future. >> other nations naval forces and coast guard have spent more

resources on the arctic than the united states. should the united states be paying more attention to the arctic? >> yes. we have a looming crisis. that is the condition of our polar icebreakers and how they fit intoç our future capitalization needs. we need to have a policy discussion about what the status of our icebreakers is going to be. what are our intentions? i have been told that we need a policy discussion and i believe that is true. before make a monumental decision, these vessels could cost us up to $1 billion apiece. we need to understand what it is we are trying to do in the arctic and how to move forward. that discussion cannot happen soon enough. >> given everything you have spoken about today, in five years, if there is another

katrina disaster that the coast guard needs to respond to, how would that response be different than it is today? >> there are some things that should change and some things that should not. what should not change its is or operational principle sprit the principle of a unified operations, how we work. that is a proven model. what will change our technologies. -- what will change is our technologies and how we apply it. çi would resist theçç urgeçs with our operational model. if you start parsing and i]missions and trying to do a litmus test on whether or not it is related to a homeland security, you break this down --

you break it down. we can always do the best job we have got withi] the resources we can under our current business model. i look for changes in technology. i look for changes in the maritime the main awareness. those things will change. our basic operation concept should not. >> we are nearly out of town. -- we're nearly at a time. let me remind our audience of future speakers. on february 26, we will have the director of the national institute of health. on march 5, the honorable mitt romney, former governor of

massachusetts, will discuss the case for american greatness. an announcement for our audience as well, members of the press that are here, please know that there will be a q &a for press only in the close blount. to would be complete without the traditional presentation of the national press club's beloved mug to our speaker today. [applause] as noted, this is the last of your state of the coast guard addresses. he will soon be sailing to other shores. i do not necessarily know where they are. they say the happiest days of the sailor's life is the day he dies first boat in the day that he sells it. as he prepared to leave the

coast guard, what are you looking forward to? what would you miss? would you consider other forms of government service some day? >> with all due deference to my future appears, the smartest admirals' that i ever met are retired. i hope to increase my intelligence quotient on the 26 of may and become one of those. it has been a great time for me in the coast guard. i'm a coast guard wrapped. when i was born, my -- i am a coast guard brat. i am 61 years old and have 47 addresses. probably, some stability would be good for a while. i intend to continue working.

i will remain busy and i do not intend on buying a boat. >> we would like to thank you for coming today. admiral allen. [applause] we would also like to thank the national press club staff for organizing today's event. for more information on joining the press club, please go to our web site. thank you. this meeting is adjourned.

>> live from the national press club and live later today, a senate hearing on efforts to regulate -- the concept of systemic risk has been a big part of the debate over financial industry regulations. the hearing begins live at 2:30

eastern on c-span. from "the new york times today, the senate last night confirmed more than two dozen of president obama's nominees to federal divisions. the president described confirmations as a good first step and seemed to signal that he would not be making recess appointments any time soon, but the president added that there are still dozens of nominees on hold that deserves a similar vote. if they did not act, i reserve the right to reuse might recess authority in the future. . .

>> as we begin by want to recognize the men and women of our state who are serving our country abroad this evening. as we gather here, about two hundred members of the tennessee national guard are employed in iraq and afghanistan. this comingñr friday, we will se off more than 3000 members of the 278 armored cavalry vision -- division being deployed to iraq. they spent 2005 their end five

years later are returning again. included among these soldiers returning is a member of this body, lou cann-- lt. general. [applause] çósince 9/11, nearly 20,000 tennessee national guard soldiers and airmen have deployed to iraq and afghanistan. .

these men and women have proved again tennessee's claim the title "the volunteer state." i have invited some representatives of these men and women to join us here tonight and would ask each of you to stand as i introduce you and then we would all like to show our appreciation. master sergeant rosy biggs. she returned last fall from -- to tennessee. captain david roberts returned in december from his fourth deployment to afghanistan, his third as a member of the tennessee army national guard. he was a security force team leader and completed over 250 missions. senior airman jessica web is a member of the 118th air wing and recently been won the 2009 chairman of the year award for

the entire tennessee air national guard. when she is not serving as a command post controller, she is one of tennessee's teachers, working at an elementary school. finally, i would like to ask general max hasten to stand with them. [applause] he is the new adjutant general. [applause] stay there. [laughter] he took over last month becomes my family with the long and distinguished history of service

in our guard. at the change of command ceremony last month, his father who was a master sergeant before -- for 44 years in the tennessee guard, watched his son be promoted to major general and saw him assume command of the tennessee national guard. i continued there was not a dry eye in the place. please give your apprelmá to these men and women. [applause] these tennis events are with us to nice to receive your thanks on behalf of their colleagues. there are tennessee folks who are missing.

since i stood before you lester, another 11 tennessee people have lost their lives in the war on terror for a total since 2001 of 114 brave men and women. as we have done the past and as is proper to night, i ask you to join me in recognizing their sacrifice with a moment of silence. thank you very much. i want to begin this evening by thanking the members of the general assembly for the extraordinary job you have just done in our special session on education. i know the weeks were stressful but the weight you have conducted your business is exactly the way it is supposed to work. there was nothing superficial about the results, the changes you made to block for real and they will change the way that

k-12 and higher education work for the better in the years ahead. a lot had been worked out ahead of time by representatives from both parties and both chambers as well as the education community. the result was a genuine melding of ideas from different points of of view. it was a better product for that both individuals and organizations with specific interests found ways to keep those interests in check and come together for the common good. there was no splitting along partisan lines for the final vote was genuinely bipartisan there is a governor's race going on and two of the candidates from different parties areñr mar players in the legislative process in a lot of places, this would have been a prescription for trouble. one of my favorite members of the special session was saying that two representatives sitting next to each other at the end of my table, calmly and

productively working together on moving these reforms forward. i think each and everyone of you. [applause] -- i thank each and everyone of you. [applause] in the end, not only was the vote by partisan, it was also overwhelming. and it made clear to everyone that these reforms are not a republican plan or a democratic plan. these reforms are a tennessee plant and that is going to make a lot of difference in the years ahead. i want to say a special word of thanks to the tennessee education association, the teachers' union. to all the members you represent, thank you. i know you have become a political whipping boy from time to time. i know you have a job to do for your teachers. your cousins and other states have not always been as

concerned with putting students a burst as they might be. if anyone ever had any doubt about your dedication to the good of the children of this state first, the way in which you handle yourself in the special session can put them to rest. you are good to work with. you have taught me a lot. you are a class act and i thank you very very much. [applause] i want to talk for a moment directly to the teachers in our state. i do understand that some of the changes we have made, especially those regarding the use of student achievement data and teacher evaluation, caused some of you concern. i talked with and heard from many teachers these past few weeks, some eight these changes, some love them. many are concerned but waiting to see.

i want you to know that i understand and respect your concerns. i understand that teaching is a profession that has many more dimensions than can be measured by a student's performance on a written test. i also understand that there are many factors beyond your control, the impulse of home, the includes a parents, the personalities of the students themselves. let's work together and find an approach that is both fair to your teaching profession and also gives us confidence that the money invested in schools is being used well. we can do this. the reforms you approved in the higher education system were far reaching. there is now lot of work to be done to flesh out those reforms and i plan to spend a good deal of my time during my final year as governor working to move this along. there's already been one very positive development. the doctor at the university of

memphis is with us here tonight. he has been working for some time now to put together a coalition of light -- like science organizations to work with university to grow its standing as a research institution. this meant this research consortium called great potential. it can help the university to grow its research mission and it can help lay the foundation for an even more robust biotech economy in memphis. almost three weeks ago, standing right here, i challenged the university of tennessee to become one of the top 25 public

research universities in the united states in the next decade. tonight, i challahs the university of memphis to do the same in its peer group. dr. rains, i challenge you to leave your university due to become one of the top 25 research universities in the next decade. you have a job to do. we consistently reach those upper levels and our sports programs and there is no reason we cannot do the same with their academic achievements, either in knoxville or in memphis. [applause] this is the eighth and final time i will report to you on the state of our state.

i will also present a budget to you. we have[q had a budget easy yeas and tough years. by any standards, these past two years have been extraordinary for this coming one will be as well. the recession which has gripped our nation has been felt strongly here in tennessee. we have seen unemployment and housing issues affect far too many of our families. our state revenues have plummeted creating tough challenges for us to maintain the services that our citizens want. there are many things about this recession that we cannot affect here in tennessee. believe me, i am very aware of the pain and uncertainty that this recession is causing in homes all over our state and i am very gratified by the renewed focus in washington on our economy. i wish the congress and the president well and our efforts to address these difficult issues. there are many things that we

cannot address from tennessee and what i have tried to do is concentrate on two things that we can. managing our own house, state government, to live within its means and continuing to look for ways to move forward on those things on which our future depends. every day, every week, every month, every year is precious and the state of our economy should never be an excuse for failing to advance the things that are the most important to us. even as we have made some painful cuts, we have made amazing progress, as well. the special session that ended had reforms in education and that is an example. the work we have done in setting higher standards in our k-12 system has gained as national recognition. we have attracted major private investments in the last 18 months that will benefit us from years to come. the boats wagon plant in east tennessee, the nissan investment

in electric vehicles in middle tennessee will help secure our place in automotive manufacturing. our concentration on green technologies and jobs will produce investments of more than $1 billion each. the pugh and charitable trust has named tennessee is one of the top three states in the nation for top green jobs. to the members of the jobs cabinet thank-you for all the work you have done to advance this agenda. [applause] we have talked about education and economic development many times before. i would like to take a moment this evening to celebrate an even more recent but quieter victory. mr miller has run are part of

children's services for the last few years. she takes great pride in helping and loving the many unfortunate children that come into their world. i also know that there may not be a more thankless job in the state government. their successes are quiet. the final adoption of a precious child to a loving home and family, when things don't work out, they are front-page news and the subject of brutal monday morning quarterbacking. when vy miller joins us, she told us you wanted to achieve formal accreditation for the department. i encouraged her. my own background is in health care whereas like children services, the outcomes are not always what you would want. in child welfare, justice and health care, accreditation is how you assert yourself and the outside world.

even when the the results are in perfect, your approach is right. i have to admit i was skeptical. the department children services had a host of internal tensions and philosophical differences. we did not have nearly the budget that other states devoted to child welfare. the department was the subject of legal action in federal court brought by an outside advocacy group who was operating under the terms of consent degree, the buy an asnet degree. may i say that the advocacy group in question, children's rights in new york city, has educated me about a very constructive role that advocates can play. they have been very tough and miss lowry has made me in the commissioner angry more than once. it is best when we work things out ourselves but if it has to

be this way, this is the way it should be. commissioner miller persevered with the accreditation in 2005. they cleaned house and fixed environmental issues in their officers and we did emergency preparedness plans and they went on site -- they went'by under wy -- they underwent on-site reviews for one year. can you stand for me? i am pleased to announce tonight that on january 22, tennessee became the seventh state in the union to operate a fully accredited child welfare system. [applause] paintbalpjtlet's move on to ours

financial situation which is the budget being presented to you tonight. my goal throughout this recession has been to remain true to the principle of the family budget that i talked about when i first became governor. it is nothing more than the common-sense idea that we will adjust our expenses to match are in, and we will be very careful about using money from our savings account. it is the way sensible families have to manage through these times and while the numbers in government are much larger than any family, the principle is the same perio. while there was no way to avoid some use of our ready date fund as revenues continued to fall, it has been important to me to have our finances stabilize the

that i could pass on to the next governor a budget that matched recurring revenues and expenses. i have spoken before about the value i place on good stewardship. i want to talk about our finances in three parts to night. first, to walk you through just where we are right now with regard to what is in our reserves. second, i will describe to you the basic budget that i am recommending and third, i believe we are in a strong enough position and it is raining hard enough that we can worst of some of these cuts. >rjust today, our president announced that he was proposing to extend for an additional six months, a portion of the financial help to the states that was in the recovery act. this would take the form of funding in the health and human services budget to continue through the first and second quarters of next year, 2011, the higher medicaid that has been in

effect since last year. this is the so-called enhancement. i very much appreciate the help of the state finances. it enables a much softer landing than would otherwise have been possible and allow us to preserve jobs and importantly, to plan more carefully for the reductions we need to make. i thought was a good move. we were all very aware that these funds would disappear at the end of december this year. if carefully planned, how we transition from using those funds to once again standing on our own. that was the four-year budget i presented last year we have a good plan. i think it is important that we stick with it and not get our heads turned by the possibility of more one-time money. accordingly, the budget you are being presented makes no use

whatsoever of any additional stimulus funds. if the congress passes what the president is proposing, we or the next governor and the next general assembly will deal with it once it is reality. for now, let's stick with the plan. first of our state's financial position. we are in a very strong position right now. as i stand here tonight, we have over $900 million in the bank in committed reserves for a rainy day and 10k reserve buys. we will draw those down modestly in the next few months according to the plan you approve. we'll end this fiscal year with aboutnd $850 million in our two major reserve accounts. in the budget you passed last spring, there was a plan to draw down our reserves by about $430 million to get to the numbers i described. as you know, this year's

revenues have fallen short of last may's projections by about another $178 million. one might expect, therefore, that our reserves would decline by that additional amount as well for a total of about $600 million this year. i am very pleased and proud to report to you tonight that we have handled this year's entire additional problem with additional expense reductions this year so that our reserves will end this year at the levels you budgeted despite the revenue shortfalls. in fact, we will have an additional $100 million to carry forward. in short, we are on a track with the plan approved last spring. we further adjusted it on the fly with additional spending reductions to match the additional revenue short balls that have occurred. second to the budget itself, the budget document that you are receiving today reflects the four-year plan that was submitted last year with further

reductions to reflect the for the revenue declines we have experienced along with the rest of the country. as you will see, this is a very difficult budget. it will seem even more difficult as the year unfolds. many cuts that were in the budget passed last year were deferred using stimulus money#9s ahead. there are cuts from two different years becoming effective at the same time. first of all, i want you to know that once again, our state's basic education program is totally funded. [applause] to achieve that, we had to make one common-sense adjustment and prose the growth in the capital outlay component this year. this relates to the growth

component of the allocations remain. we're doing very little extra construction and the government and it seems fair to ask public education to do the same in that narrow area. over the past several years, i have clearly pursued a strategy of constraining growth of tencare so we can fund education at acceptable levels. we want to do a better job of balancing our investments in our two major line items, tencare and education. we have been very successful at this these past few years. since its inception in the mid- 1960's, medicaid benefits had been a smaller part of our total benefits in k-12 education. in 1981, the cost of medicaid was about half of the cost of k- 12. medicaid passed k-12 with total

funding in 1992 and after that, it exploded. in the 2004 budget,tencare was temperate cent sign of the budget. -- 10% of the budget. in the budget before you,tencare ñris 24% of the budget and k-12s 19%, back to a ratio of about 1.25-n we hope we can continue this balance. in addition to the bep, we have put a priority on our pension system and once again, we fully funded the contribution that was recommended by our actuaries and adopted by our treasurer. the soundness of the tennessee pension system is something we can be rightfully proud of. outside of these areas, what you will see our budget reductions that average about 6%.

this year, it was not feasible to make these reductions across the board. there are a number of departments that have contributed the full 9% and others much less. higher education, mental health, and the division of intellectual disability services are 6%, children's services is 5%, in the department of correction, the only plausible way to get anything approaching 6 percent would be to close one hour to prisons. i declined to do that and so there reduction is just 1%. in the department of safety, the proposed reductions would have meant the elimination of 85 trooper positions and 56 other positions. rather than do this, we proposed a revenue measure to prevent an increase in the driver's license fee from $3.90 per year to $5.75

-- 257 -- $5.75 per year. we extended the license term from five years until age. this will have the additional benefit of partially funding the very much needed digital upgrade to their radio system, as well. with these reductions, we had a budget that was consistent with the four-year plan presented last year. to achieve these reductions in their entirety, this required the elimination of a variety of programs that are of real value. it is not a pleasant list of programs. it would also require additional layoffs of 1363 people in addition to the elimination of 456 other positions. that brings me to the third aspect of this budget -- the reserve funds that we used to soften the suspect. the problem we were faced with

was that we were looking at some very difficult cuts. at the same time, our reserves are very strong and the prospects for a return to growth in the months ahead look far better today than they did one year ago. in this environment, the question is, should we go all the way with these cuts or should we make some judicious use of our reserve to soften their fact. we decided to present you with plant that uses the reserves to fund a continuation of a number of programs for a two-year period. the reason for funding for two- years instead of one was to give a new governor some breathing room at the beginning of his or her term and to give some additional time for the economy to recover and perhaps make the cuts a moot point. the programs we protected in this matter are a number of them but they include the

coordinated school health program, the career of extended contracts, the family resource center sprayed in the department of health, the safety net grants to the federally qualified health centers, the diabetes prevention program. and the department of mental health, the community mental health recovery services and the alcohol and drug services. in the department of children's services, the home visitation program and a juvenile justice prevention branch. in the division of intellectual disability services, the family's support services program for it in the department of human services, the grants to the human resource agencies and the community action agencies. in addition, we proposed to preserve a portion of the positions that would be subject to layoffs to meet budget requirements. of the 1363 total layoffs, slightly over 1000 are for good business reasons, bringing staffing ratios in line or

closing an unneeded facilities. we should go ahead with these under any circumstances. however, there are 314ñi positis that we would strongly prefer not to lose. we're proposing to carry forward for two-year as those positions along with 80 others scheduled for layoffs this spring. at the end of two years, the economy may have made the layoffs unnecessary and it has been our experience that people in those positions are likely to have found other jobs, often within state government, making any in voluntary moves are necessary. finally, i know our state employees are glad to be working. they have been without raises since 2007. i would like to recognize their ñidedication in some fashion by using some of our reserves to continue the enhanced 401k match at its current level and we have placed a 3% bonus for state employees.

[applause] what you have in front of you is a straightforward budget. putting it together was difficult. it corresponds closely to the four-year plan you were presented last year, suitably reduced to effect further revenue shortfalls. it proposes to use $202 million of reserves to preserve some particularly important programs and several hundred jobs for two more years in the hope that the economy will render cutting them not needed. if you adopt all of these suggested enhancements, the state's reserves in its ready date fund will still remain comfortably above the 5% target, slightly over 6%. i believe this is a common sense

of family budget and -- in a very difficult time and i hope you'll consider and in fact it promptly. -- and enact a problem. this is my final time to address as governor. we still have a lot of work to do and it is far too early for farewell remarks or reminiscences. i want to say, however, a most sincere thanks to you for the way that you have treated me and work with me and my administration these past years. i have never had a job i enjoyed as much or give me as much satisfaction as serving as governor. it has been a humbling experience. to those of you who have helped me, my sincere thanks. for those of you who haven't, all is forgiven to night. [laughter] i know how much so many of you care about our state, care about its people. it has been an honor to work with you. thank you and god speed. [applause]

ñiñiñi[applause] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010] >> we are live at the dirksen senate office building for a hearing to regulate large financial companies whose failure could pose a risk to the whole economy. it is the concept of systemic risk or too to fail has been a debate over financial regulations. evan bayh is the chair. this is live coverage on c-span. it should be getting underway momentarily.

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>> good morning everyone. i would like to call to order this subcommittee. good morning, i am pleased to call to order this subcommittee for the hearing entitled " equiping financial regulators with the tools necessary to monitor systemic risk." a want to thank my ranking member, senator corker, and senator read my friend and colleague, and they're hard- working staff for requesting this hearing on an issue that may seem tackles to some but will prove critical as we were to modernize for the future. i would also like to welcome and thank our able witnesses who are here today and think our staff who have been instrumental with regard to technical aspects of

this analysis. i am happy to continue the dialogue that we have already begun on how to equip our regulators to move beyond examining individual institutions and towards monitoring and managing systemic risk across our financial system. welcome to our witnesses and thank you for appearing before the subcommittee to give an outline on the current regulator capability to analyze financial market data. most importantly, what additional resources and capabilities are necessary to provide effective systemic risk regulation. i understand very well that the weather in washington the last few days has not been ideal. some of our witnesses have been stranded here for several days so i appreciate the dedication you have some in making it here today. we promised to be most merciful and are questioning. before i turn to the governor trajllo, i would like to submit a few comments for the record

for it by somewhat lengthy statement given the technical nature of the subject matterñi.i will submit it for the record but will not read it. before introducing the governor, senator reid, do you have some comments you'd like to share? >> very briefly, i would like my statement submitted to the record also. i want to welcome the governor and thank you for holding this hearing at the suggestion of senator corker. this is a vital area and i think it could be overlooked. it is incredibly important. we all witnessed over the last several years is not only great market turmoil but great market uncertainty. my impression of a lot of the problem with lehman brothers, bear stearns, a.i.g., was the fact that regulators and other

banking institutions had no idea where their liabilities or counterparty exposure blogger there was no systemic way to calculate this or agar get the information. as a result, the regulators were flying blind, essentially. they're doing the best they could, trying to work things out but a lot of it was sort of flying with instruments that were not working in bad weather. it was more seeds of the past than systemic regulation. one thing i think we have to do is to create a repository of estimation -- of information available to the public. this is so that the system is much more understandable and that when there is a shock to the system, markets don't react out of fear. they should react with knowledge thank you.

>> thank you, senator reid. we have come on this committee, become accustomed to apria rule, centre corporate is known for his brevity but since you requested the hearing today and this is a major priority for you, perhaps you would have some opening comments you would like to share. >> i will be very brief. number one, thank you for having this hearing. it is friday afternoon and it has been snowing. >> we have been trying to have se. >> i want to thank the governor. for always being available and helping us think through these complex issues. our second panel -- and the governor has been holed up in hotels and been hanging around to give his testimony prior to recess. everybody knows we are hopefully working toward a regulatory reform bill.

it is important to get this testimony into the public record so we can potentially act upon it. we thank you all for being here, for your ideas, and with that, mr. chairman, as you walk out the door, thank you so much for having this hearing. >> thank you and on behalf of senator bynes, let me introduce our first witness, the governor of the federal reserve board. he is an expert international finance. he received his education beginning at walksbury latin school and went on to georgetown university, duke university, and graduated from university of michigan prior to resuming his responsibilities with a reserve. he was with the georgetown law school and prior to that, served in the clinton administration.

thank you for your presence and we look forward to your statement. >> thank-you. thank you both for your attention to a subject as important to financial stability that is often overlooked in the broader debate about reform. good information is crucial to the success of any form of regulation. as it is to the success of any form of market activity. many pages of financial activity make the quality and timeliness of information more significant for effective regulation. most important perhaps is the interconnectedness of financial- services firms. in few other industries,ñi do major players feel so regularly -- deals regularly with one another. major problems at one firm can quickly spread throughout the system. the financial crisis revealed

gaps in the data available to government regulators and to private analysts. it also revealed the relatively undeveloped nature of systemic or macro prudential oversight of the financial system. with this experience in mind, i believe there are two goals toward which agency and congressional action to improve data collection and analysis should be directed. first, to ensure that supervisory agencies have access to high-quality and timely data that are organized and standardized so as to enhance their regulatory missions including containment to stannic risk and second, to make such data available to other government agencies, to private analysts, two academics -- inappropriate usable form so that the public will have the benefit of multiple perspectives on potential threats to financial stability. my written testimony details some of the initiatives that the

reserve, to enhance the type and quality of information available to us, in support of our exercise of consolidated supervision over the nation's largest financial holding companies. i would stress also the importance of using that information to regulate more effectively. the special capital suskind we conducted last year, the nation's old 19 largest financial firms, demonstrated how quantitative horizontal methodologies built on consistent data across firms, could complement traditional supervision. it also showed the importance of having supervisory needs and knowledge determine data requirements. we're building on that experience and adding a more explicitly macro-provincial dimension in developing a quantitative surveillance mechanism as a permanent part of large firm oversight. while there is much that the federalñi reserve and other agencies such as the sec can do

and are doing under existing authority, i believe we will need congressional action to achieve fully the two goals i stated a moment ago. there are a number of specific areas in which legislative changes would be helpful. let me briefly were mentioned three. first, it is very important that government agencies have the authority to collect information from firms not subject to provincial supervision. they may nonetheless have the potential to contribute to systemic risk. without this ability, regulators will have a picture of the financial system that is incomplete and perhaps dangerous. second, it appears to me that greater standardization of important data streams will only be achieved with a congressional process. this objective of standardization has for years been elusive. most observers agree it is critical to identify risk in the financial system.

third, there will need to be some modification to some of the constraints on information collection by government agencies. there might be a party to share that information with foreign regulators or release it in usable form to the public. privacy, proprietary information, intellectual property and other important interests will be implicated in any such modifications. it is most appropriate that congress provide guidance how these interests should be accommodated in a more effective system of financial data collection. finally, as you consider possible legislative changes in this area, i would encourage you to consider the relationship between the authorities and é@qjt)páed h  collection and the substantive regulatory responsibilities entrusted to our financial agencies. generally speaking, regulators have the best perspective on the kind of data that will

effectively advance their statutory missions. indeed, without the authority to shake information, their effectiveness in achieving these missions can be compromised. this is all the more important given the current state of the systemic risk in which there are as many questions asñi answers. in these circumstances in particular, the insights gained by supervisors for their ongoing examination of large firms and the markets should be the keyçói but not the exclusive determinant of new data collection methods. this does not mean that agencies should collect only the information they believe they need. the aim of providing independent perspectives on financial stability means that other data may be important to collect through the use of private analysts and others. the agencies can certainly be asked to collect other forms of information that report or independent assessment to financial stability risks.

i think this relationship does count for considerable symmetry between regulatory responsibility and data collection. thank you for your attention and again for having this hearing. i would be pleased to try and answer any questions you might have. >> thank you very much prid. this need for better information is not exclusive to the united states. have you, -- can you comment on how other g-20 countries are dealing with this and the need for a national or international approach? >> a number of other regulators and overseers are around the world have already begun to address the issue of information. among them, the various workings of the european union and united kingdom, the bank of england.

-- bge yes 20 -- the g-20 have after some questions salient to this. they have developed a template for reporting information of the large internationally-active firms. this is not an easy undertaking for any one nation, much less for the world as a whole. it is something that the financial stability board has taken on as a task. there have been some preliminary discussions of trying to seek if we can't come to agreement on a template for reporting of the largest, most active, the most globally active financial institutions. it is far too early to report progress there but i can say that the effort has been launched. >> thank you, governor. we are proceeding down a

legislative path which we hope will incorporate this systemic collection of information. i have brought legislation in a want to thank dr. mendell and others for their help. this will have to be an effort that goes beyond to understand this. it is important we begin here. there is the issue of sovereign behavior. the greek government is now in a very serious crisis which is rattlingñi the markets. there is some indication thatçó derivatives and credit defaults swaps have come into it. apparently, there are reports that investment banking firms have helped them legally avoid a

situation. the long and short of it is that we also have to include sovereign entities in terms of data collection. >> one of the lessons that the international community drew from some of the -- some of the sovereign debt crises of the late 1990's and a very early years of this century was that there need to be more transparency associated with a lot of sovereign debt issuance. the international monetary fund undertook to create special data dissemination standards which would provide more such information. generally speaking, i would distinguish between the sovereign information and private financial firm information since we, as regulators, have a mandate over private firms rather than certainly over sovereign. it is relevant for us in thinking about systemic risk to the degree that our large

institutions have significant exposures to sovereigns which might conceivably have difficulty in servicing their debt, that becomes a matter for concern for the private financial regulators, as well. çó>> one of the issues that repeatedly is made is that too big to fail is the first chapter of the second chapter is too interconnected to fail. that raises the issue of a poco point of large institutions who might miss small institutions that could cause a problem. there's the possibility that multiple failures in small institutions could have a systemic problem. how do we deal with that in terms of these interconnections? traditionally, it is easier for us to go to a big national

institution and report x, y, and z. had we do this in a data sense? >> let me address data collection and the regulatory supervisory side. with respect to data collection, there is little question in our minds that the data collection of stories of u.s. government agencies need to extend beyond the universe of firms who are subject to provincial or market regulation. it is for the reasons you suggest, a large number of intermediate-sized firms have themselves a substantial amount of financial activity which, although not necessarily is associate with systemic risk and one firm, in the aggregate, they defied the trend in the economy as a whole.

we do think there needs to be that kind of authority in our financial regulators to gather the necessary information to round out the picture. when it comes to supervisory or ñrregulatory authority, the thre of us have been in this room and a number of occasions, talking about the choices we have in front of us. one of those choices is going to be how broadly to cast -- to draw the perimeter of regulation. will it be only four firms that own banks? will it be firms beyond that which are thought to be themselves systemically important or will it be some broader set of firms above a certain size? i think those issues will probably be more difficult to resolve than the data issues where i personally think there is little argument against the proposition that you need to gather this information. >> thank you.

senator corker? >> thank you. i want to thank you for raising this opera we would not have met with our next panel without you having this brought up. thank you very much governor, i think you are familiar with the national institute of finance as it has been proposed for they have discussed it being done in an independent way. i am wondering if you could talk to us a little bit about the pros and cons of what you know their proposal to be from the fed standpoint? >> this will not surprise you to hear that there are some advantages and disadvantages to each of the different organizational options that you would face. one such option would be the creation of a single,

freestanding agency that would have overall responsibility for all the financial data collection and a good bit of the analysis. on the other end of the spectrum would be presumably giving more authority to a single u.s. government -- existing government agency. as i suggested in my written testimony, there's probably an option in between. as you go forward with thinking about overall regulatory reform, to the degree that a council emerges, as i think it might, as an important center for coordinating the oversight systemic risk in the united states among all the various u.s. government agencies. we may want to lodge some of the data responsibilities in the council, as well the basic

benefits, i think, is it is a single agency. you have a single group. they can't take an overview. they can say they can prioritize for the contract to figure out what the most important unknowns are. they can devote their activities in that direction and they will do so in a way they are not always stumbling over one another. some of the cost associated with the single agency, apart from out of pocket costs, would include some risk that you could attached data collection from the process of regulation. i think it is important in our experience of the last couple of years has borne out the importance of having those with

the line responsibility for supervising and regulating being able to shape the kinds of data collection that they feel are necessary in order to effectively to regulate or supervise. in the middle of the crisis, it became apparent to some of the people at the fed that getting information on the kind of hair cuts that were being applied to some re-purchase agreement was a very important, near-term piece of information in trying to assess where the system was at that moment. if that capacity had been lodged an independent agency with some of its own priorities perhaps and having to go through a bit more of açó process, there may have been some delays in getting to that end. as with everything, there will

be pluses and minuses. it will not surprise you to know that from the perspective the20 th and constitution, there are big concerns about acting quickly on information but i hasten to add that here as in a systemic risk in general, nobody at the fed believes that the fed should be the sole or the principal collector and analyzer of data. this has got to be a government- wide priority. . .

[captions copyright national cable satellite corp. 2010] [captioning performed by national captioning institute] >> as you all know, true, real time data is very expensive. timely, meaning daily, or end of the day trading is very important forç making an assessment on a regular basis as to the stability of a firm that may be under stress. one of the things that became clear during theç crisis, and r me, became particularly evident

during the stressed tests, was the substantial diversity rigid the substantial diversion in the capacity of firms to get a hold of their own data and know what their risk exposures were. one of the things we have been doing is placing particular emphasis on the management information systems of the firms, requiring that day themselves be able to get a hold of the data on trades or counter-party exposures. if they can get a hold of it for their own internal purposes, we will be able to get a hold of it pretty quickly. it is not a question of our telling them a "send us something you haveç on a daily basis," it is making sure they

have the capacity to derive that information and send it to us. >> may i ask another question? >> we all tend to try to find a solution that is unique and may be alleviates a lot of the daily work that it takes to be good regulators. a lot of whatq happened this lat time could have been prevented with the tools that we had if we had been more effective in regulating the way that we should have. there were certainly a lot of issues that caused this last crisis to unfold. we had this wonderful presentation that we're going to hear. we envision having all of thisç

real time, end of the day data, so that we know positions throughout our country so that regulators have the ability to know whether something is putting our country at systemic risk. what should we be concerned about from the standpoint of having this thing that sounds neat and costsw3 money -- how do we prevent it from being something that is not that useful but is collecting a lot of data that id imagine takes place throughout the city that is not utilized. secondly, i would imagine that data out like that could be used for nefarious purposes if it got into the wrong hands. t(if we actually have it, what should be our concerns? >> with respect to your first question, i do think that the

efforts of the group of academics and others who have been promoting the and i have -- nif have been very valuable in drawing attention to and moving the debate forward on the data needs that we really do have. to underscore something that i said earlier, theç absence of data from the shadow banking system was certainly problematic in retrospect. i think that the degree to which the tightly-wound, a very rapid shadow bankingw3 system ws channeling liquidityñr around te

financial systemçç and thus te way it came to a screeching halt, is something that was at least under-appreciated by even those who foresaw problems ahead. i do not think it is a coincidence, by the way that some of the names that i saw on the list of participants in that workshop were the names of scholars who have written on the substantive clauses of theok crisis -- causes of the crisis and the way in which adverse feedback groups began when things began to move into reverse. i think we need additional data sources. how to make suret( thatw3 every dollar ofç the governmental fus spent on this7s are spent most

wisely and how to make sure that we do not demand private expenditures that are not going to useful purposes is the kind of question that we confront alç the timeç in any government regulatory or data collection effort. çi would say that that is where some of theç principles we suggested in my written testimony would be of some help. keeping the regulatory and supervisoryç agencies closely çinvolved and as the prime movs of the data collection efforts will helpxd because we are goine first instance with achieving our statutory mission. forç us, that would be to consolidate the supervision of the largest financial holdings companies. that, i think, is one way to do it.

the second way would be to make sure that there is some thought about new requirements coming forward. this is why we have the rules we have. maybe some of the paperwork reduction act features need to be changed. but there is a good reason why that act exists. i think the council, if a council of regulators were created or the president's working group could formulize such an effort, i think it would be useful to have different agencies actually thinking about what new data sources may be important and having a debate to guard against any one going to far off field from its own regulatory mission. obviously, there are important

interests -- prius sorry -- proprietary interests. we ought to continue to have those protections. it is also the case that our country wants to be protected from financial instability. my conclusion is that the efforts to identify potential sources of financial stress and risk throughout the economy is not something that one or even a whole group of government agencies should be the sole actors. i think we'd do need to enable private analystsç and people wo have expertise but are not in the governmené uoçç lookçñriá is going on in the economy to offer it in their views to you, to us, and to the american people.

çlet us filter through how much of that might be well-grounded and where we disagree. if we are going to do that, we have to get the death into a sufficiently at greatest form to protect proprietary information and to make sure that it is çuseful to someone out there wo is trying to do an analysis and trying to have insight as to what is going on. >> thank you governor tarullo. iç also have to think the national academy of sciences. we had to convene that meeting. i am pleased it produced positive results. thank you very much. >> if i could just ask one more.

>> why don't you go? >>i] a number of us have been lookingç at speed bumps -- ways for us not to be faced with resolution. if we had resolution, we want to insure that this whole notion of "too big toç fail" is not pt of american's but vocabulary. w3xdw3the v2)sráy toç take unsd çdebt in an institution that is moving into problem areas and converting that immediately to common equity -- i know that is of little bit off topic. there is a lot happening. we are going on recess next week. i wondered if you might have some comments regarding that.

>> actually, senator we have been paying a good deal of attention to that in the federal reserve. i got together a group to try to think through some of the potential options. let me first began with taxonomy. different people mean different things when they talk about convince -- contingent capital. there are a couple of different concepts. one is a concept under which a firm would issue a specific kind of instrument, which wouldt( hae debt-like characteristics under normal circumstances, but by the terms of the instrument would itself have a conversion to equity when some traders event happens. the concept -- some trigger event happens. the concept behind that tends to be the following. there is a.

behind -- there is a. where -- there is a time frame where the company appears to be healthy. if they go down to a certain level, there will be a lot of confidence with respect to that firm. if at that point, the trigger means that there areok certain amounts of common equity in the firm, that might provide çreassurance and stop the slide down. i will come back to that in a moment. the second concept is really one that is as much about the insolvency of the firm. çsome have proposed that all forms of debt other than specified trudges of debt would

at some moment, whicht( would hw would be the equivalent of being on the verge of solvency, convert to equity. thereby, it would help to move forward what would be a resolution process under another name. you have weigh less debt and more equity. -- you have way less debt and more equity. the first has intrigued some bankers who see the opportunity to create new forms of investment the big issue there, and there are a number of other issues, but the biggest would be what is the trigger going to be? if the trigger is supervisory discretion, you probably have an issue because everyone will wonder whether the supervisor will pull a trigger or when he

would pull the trigger. it would create a bit of uncertainty. a second option wouldç be that you have the trigger tied to the capital levels of a firm. that still has supervisory discretion,ç but it is in the context of(a!system. the problem there has been, as you know, capital tends to be a lagging indicator. many firms close to their solvency -- close to their insolvency looked to be at a that probably would not do the trick. a third proposal wouldç be to have a market-based trader, a trader market-based trader -- market-based trader. that would be lagging assets.

that is something that gets the market in as a trigger so that no one can manipulate it in anyway. the concern about that approach is that it can induce a death spiral in the firm where people begin trading against the certain level. çómy personal view isç backed l three of these approaches -- is that all three of these approaches have significant problems. i, personally, have excluded full supervisory discretion as a real auction. i think it is worth pursuing the technical challenges. that is what we have asked our staff to do. to see if there is something here, which can be, and this is

qimportant, which can be a less expensive form of capital for the banks. i do not want to create anything that costs moreç than common equity for the banks. if we can figure out a way to have a capital instrument which is their, -- which is there, but çcosts less than a common equity,ç i think 9(.j5ñ worth qpursuing we -- . it isñr long winded, but i think you can tell we have been analyzed the. >> just one comment. i think senator corker has raised an interesting point. when push came to shove, all the varieties of risk-based capital were forgotten. and by overstating or misstating?

-- am i over-stating or miss stating? >> during the crisis itself, private analysts who were operating on the basis of less- than-full information, and regulators both found themselves focused on common equity. some of the market guys called it tangible common equity. basically, it was common equity. i think that what all of us, if we did not already believe it, and some of us did, concluded from this exercise that common equity needed to be and even more important component of the equity of financial firms going forward. the stress tests were conducted with the assumptioni] or under a

set of standards that looked to the common equity levels as well as the traditional levels. i think, senator,ç that regulators are aroundç the word that we have talked toç come up market analysts and the financial institutions themselves have all converged around the proposition that common equity really and truly is far and away the most of important component of regulatory capital. why? if it is adequate, it allows the firm to continue as an ongoing institution. there are some forms of capital , which will be available to protect the deposit insurance fund, but it will not keep the firm going on and on going

basis. i did not think any of us to relish the thought of another goal round ofççok majorçó cri. ççwhen i say all of us, i do t just mean regulators. i think that is a market is imperative. >> thank you. we have a sidebar. we do not need to continue it, but i think we need to spend some time thinking about the rules of capital going forward. twoç quick comments -- i do not want to trivialize this, but essentially, this center would be on control -- this sensor would be on control. things that could cause real problems throughout the economy. is that too simple? >> no. if i can hardback -- if i can

hark back to the original hearing, where you and i were talking -- i mentioned several times in the written and oral testimony, if the need for independent users. this is something i always believed, but you reinforced it in this context. no matter how good a job of the fed can and will do, or how good a job of market regulation the fcc can and will do, the uncertainty around financial stability are always going to be significant because of problems arise in in new ways. i think it is important for us to foster within the government and outside the government the ability of multiple agents to make a judgment on this. i guess i think that this is something within the government

that would be best pursued in a collegial fashion. if we are doing our analyses and the fcc is doing it and the treasury is doing it, bringing those together in discussion and determining whether there needs to be another analysis or initiative, seems to make sense. what also makes sense is having a council have at least a small staff of people who are dedicated to looking at all of this and doing some analysis. i am all in favor of that. i am not all in favor of it in a sense that we would not oppose it. i think it is an affirmative good. >> thank you very much. w3we need to move on with the

subject at hand. çi would like you to respond in writing regarding how, going back to the capital we're talkingç about, using a quartey stress test. i know we do not have time for that today. we thank you so much. if you could do that in next few days that would be wonderful. >> ok. thank you. >> iç will call the second panl forward.

>> thank you, a gentleman. let me introduce a first, dr. mendelowitz. he is the co-founder of the committee to establish an institute of finance and a former chairman of federal housing. thank you for your assistance. çour next witness is professor john liechty. çhe is the associate professor at the smeal college of business. çthank you very much, professo. we are also joined by professor robert engle. he is from the new york university stern school of business. he was awarded a nobel prize for economics in 2003.

finally, our final witness is stephen horne. mr. horn is currently the vice- president for master data management for the dow jones business and relationship intelligence. he specializes in data integration from thousands of sources in the improvement of market productivity. thank you, stephen. dr. mendelowitz, please. >> thank you, mr. chairman, thank you senator corker. i am pleased to be here today to bring the recommendations of my committee. the committee to establish a national institute of finance is an extraordinarily unique group

based on my 2.5 decades of experience in washington. i have never actually seen anything like it. it is a committee that has raised no money. it is a committee that represents no vested interest. it is a committee where no single member has any personal financial interest in the outcome of all recommendations. it is a committee where we have covered our expenses. we did not get the tax benefits of those expenditures. it is a group of extraordinarily talented, and in many cases, very distinguished members all brought together by the commonly shared view that the federal government lacks the data and research capabilities to effectively monitor and regulate systemic risk, and for

that matter, to effectively monitor and regulate financial institutions and markets. we have come together to propose a solution to debt and equities -- inadequacy. the exhibition is the national institute of finance. -- that solution is the national institute of finance. i cannot stress the importance of the research and analytical capability enough. a lot of time was spent with the earlier panel discussing data. there was far less mention of the analytical capability. the reality is we do not have a particularly good understanding of how financial markets work, because we have never had sustained research that would yield those insights. despite the fact that there are research departments at large financial institutions and

talented researchers in academia,ç but at the end of te day, but never had access to do the kind of works that would provide the analytical tools needed by regulators given the challenges that we face today. that is why in our proposal we have two key components. one is a federal data center and the second is a data and resource analysis center. we think the structure and institute should be set up in a way that ensures it can play a key role. it wouldt( be an independent agency, ideally. it would be an independent voice on issues of financial risk, regulation and policy. it would be independent for several reasons. one, hopefully it would be free from political influence. secondly, it would be free from having to investigate its own decisions and actions.

as long as it is not a regulatory agency, it is untainted by the fact that if it was investigating itself it would be given an impossible task if you are looking for high quality assessments of what is going on. thirdly, it would be self- funded. that would be for fairness. it is our understanding based on the research that we've seen and the discussions that we have held that adopting standards would produce a significant operating cost on the part of financial institutions because they would get this benefit. it is only fair that some such share -- is only fair that some such share would be used to fund the entity. given the burden on the tax payer, it is not appropriate that the taxpayer should be asked to pay for the monitoring of an industry that has already

imposed a tremendous burden on taxpayers. there is a benefit to being able to attract staff that would make it more competitive. all of this is critical, and it would yield multiple benefits. it would yield substantial benefits in terms of improving the efficiency and effectiveness of a natural regulation. çit would reduce the likelihood of a future systemic event. it would make markets safer and more competitive. it would reduce operating costs of financial institutions. the kind of data that would be required would go along addressing one of the problems that governor tarullo mentioned when he commented to find out that he was surprised that financial institutions did not have a good handle on what their exposures were. they did not have access to that kind of data. lastly, i want to say how pleased we are but senator reid

introduced the national institute of finance act of 2010. that act is structured in a way that creates a system that would be effected. we are very appreciative to see that legislative measure. that concludes my oral comments, and i would be have to answer any questions you might have. >> thank you. professor liechty. >> thank you, mr. chairman. i will proceed on the behalf of the committee to established the national institute of finance. we started one year ago. as an academic and professional statistician, i was very interested in a workshop that

explored issues in financial risk and bank regulation. i consulted some of the big investment banks, specifically helping them with issues related to the value in credit derivative securities, which played a part in the crisis. i would --ç i was hoping the workshop will focus on systemic risk. it was primarily focused on assessing the safety and çsoundness of financial institutions. çthat focus is important, but that in and of itself would not insure the safety of our financial system. rçin some ways, it is like insuring the groups of automobiles going around a racetrack are safe and sound, but ignoring things like whether or not the cars are bunched together. because there was a broad collection of regulators, academics and practitioners, i

asked a very simple question in my mind. does anyone have the data necessary to monitor necessary suspect risk? the answer was the same that i heard over and over again. the irregulars to not have the correct data. in addition, to get the data they need it would require additional legislation i've spent the bulk of my professional career designing systems to go from bad to information. collecting data is not enough. we need the couple it analytic tools if when to turn that data into useful information. we have to monitor a systemic risk. it would take more than data collection and more than just building models themselves. in my view, this is a fundamental scientific problem. we applaud for fundamental research efforts in order to understand the framework to be able to frame the methods, get

the models in place, and what we need. i echo the sentiment that we do not know all of the data and we will not know until weçó have a process. it is fundamental. [8gñbut meç illustrate with an analysis from the weather. it is very appropriate given the last couple of days. this focuses on hurricanes. when the financial crisis of 2008 hit, the regulators and policy makers were taken by surprise. although there were some indications, this financial storm hit with the same xdunexpected suddenness of the w england hurricane of 1938. theç mark the vineyard gazette noted at that time that this ç was the[[ç destruction of summer for an entire generation. çearlier hurricanes have brougt

such things to the government. even though the weather bureau is in place, it was not able to offer any warring -- any warning that had texas in 1900. it on the offered a few hours of warnings that hit -- for the hurricanes that hit miami. those that had better models have better data, but as the " new york times" noted, they never saw it coming. i would ask our policy makers to be more equipped today. in 1970, president richard nixonç created noah. çw3çóyyççit managed to do th. çit developed new analytic and forecasting tools. it conducted essential long-term

research. noah's current real time data is very impressive. it continues to bring substantial benefits to our society. it was made possible largely through the research efforts at know what. -- at no a. i would like to offer an observation and the question. clearly, our financial markets are at least as important and complicated as the weather. if that is the case, why do we not have the equivalent of no law for the financial markets? -- of noah for the financial markets. this concludes my oral remarks. i would be open to any questions.

>> thank you, professor. professor engle, please. >> thank you. it is a great pleasure to be here today. i appreciate the invitation from the committee. mr. chairman, mr. courter, mr. reed, it is a pleasure to be here. i recently co-authored a report that summarized a workshop of technical capabilities needed. this research council is the operating arm of the national academy of sciences, the national academy of engineering, the institute of medicine, all chartered by congress to advise the government on matters of science and technology. the workshop and its report was sponsored by the sloan foundation and were actually in response to a letter from senator reid. before i summarize the report, i would like to give you some personal opinions on the

national institute of finance and the questions that were in that call. our one-day workshop came to the following set of conclusions, i think. first of all, we're all convinced that with better data and analyticalu! tools, the problems of reducingñr systemic risk were actually solvable. okthe research necessary to accomplish this goal is already underway in bothç academic and regulatory settings. it is now being carried out with purely market-based data, and therefore does not have access to the full range of information that would be needed to make these models as accurate as possible. additional data collection across asset classes with counter-party position

collateral information would be extremely helpful. nevertheless, it was clear at the meeting and that many participants were unsure of exactly what data would ultimately be needed. there is an important question that keeps coming up -- çwhethr the total range of everything that you can think of is required and how would you select the subset of data that is really needed? the first step in this process would be the standardization and classification, particularly of contracts, and this would be a substantial benefit to the industry as well as to the regulators if this could be accomplished. it is one of the goals.

even more important, as dr. mendelowitz said just a moment ago, than the data, are the models. the debt alone will not tell us about risk, liquidity, bubbles, and other figures that are necessary in order to understand the risks that face our financial system. the analysis is extremely important as well. that concludes my brief summary of the meeting the national research council had. the full summary i would ask to be attached to the record. let me say a few other things. data gathered by supervisory agencies is already being used in attempts to try to calculate and evaluate systemic risk.

this data, however, is often available on an as-asked basis. in other words, it does not flow regularly. they need to request it from the agency's they supervise. -- agencies they supervise. this gives them a partial picture, in any case. this is available to regulators, but again, they cannot get this on a regular basis and there is difficulty sharing it across regulators. the same is true about reports. they are reported by financial institutions on a daily basis, but these reports assess the risk of the firm, and not the risk of the system. thus, they do not have important kinds of counter-party information that we would really

want to understand across the system. in summary, regulators do have a substantial amount of information available, but it is not on a systematic basis, and it cannot easily be shared across regulatory agencies. let mexd make just a couple of more points on more general topics. it seems to me there is a question of the independence of the national institute of finance. i am a supporter of the proposal for the national institute of finance. the idea that it is an independent organization is important because it needs to be insulated from pressures from corporations and government, however this independence could also be achieved if it were

house, i believe, within a regulatory agency that is already independent in that same sense. there could be substantial cross-savings from such a location. the international effects of this are extremely important. the location of the national institute of finance would necessarily -- it would be very important that it be able to collaborate and share data and analytical tools with sister agencies around the globe. otherwise, we only see a partial picture of the financial system. one final comment -- the security of the debt is extremely important to preserve, but i think that an

ultimate goal would be to make as much of this data in a delayed and aggravated form available to the public as quickly as possible. transparency is a great supplement to regulation. it is cheaper and it may be more effective in many ways than much of the regulation that we consider. an ultimate goal of the national institute of finance would be to disseminate as much misinformation as possible and that would require congressional guidance. >> thank you, very muchç -- thk you very much, professor on go -- professor engle. >> thank you. my name is stephen horne. i spent over 30 years building complex databases and making

data into usable information. i've testified on the impact of the financial meltdown and the needç for systems designed to capture the opera. real time information -- to capture appropriate real time information. legislation that would recruit -- legislation that would create such a data base has been introduced by senator warner. it passed the house by a vote of 421 to nothing. using the same basic infrastructure of the data base that would be created under the legislationw3 that içó describe at dow jones have identified over 400 leading indicators that when used together identified a potential systemic risk.

also, i want to add many other parts of the economy,ç whichç expands upon what our presenters have presented. they would be able to make are caused by a variety of factors. for example, in las vegas, a huge influx sociologist of groups worked into thei+zç regin moved into the market. ççone of these groups is reti. these americans were living on fixed incomes, savings, and their social security. but retirement homes. they still incurred new debt. the income from retirement accounts went negative. it had to dip into principles.

as foreclosuresç grew around them, the value of the homes decreased. those who have mortgages are now upside-down. those have see -- some have seen a lifetime ofç savings dwindle. with a major portion of their principal gone, they cannot afford to live on their fixed income and may have to go back to work. they owned their own home. new mortgages are very difficult. reverse mortgages are not an option because of the reduced availability of these programs. the combination of these factors shows that the market of retirees yen las vegas is a systemic failure i am expanding on the concept of systemic failure to talk about the markets as well as the systems that supports those markets. the example of this process --

if we can indicate -- if we can implement this data into a data base, we can implement surgical solutions that would apply the appropriate solutions to the most serious problems. databases applied to the potential systemic failure of the real-estate market was issued just days ago. we are currently observing markets in north carolina and tennessee that are at risk. if the proposed agency was in place, the government would be able to tackle these problems proactively. unfortunately, the data cannot talk to each other. the value and is in the ability to provide and analyze this data. the transformation of this data is neither easy nor expensive, however it will save significant taxpayer dollar.

it will make more efficient the targeting of resources. it would serve the greatest need. it would enable the government to ensure that the appropriate actions were taken before systemic failure occurs. it would help prevent waste and fraud with taxpayer puts the money. -- with taxpayer money. the use of commercial data is sufficient to protect as a commission. in addition, the language included in the legislation provides a greater protections. the system being proposed is designed to expand to cover global data. some of the debt overseas may not be acceptable -- accessible. other data is in better shape than our own and could be built into systems. in summary, the data technology exists to equip regulators with the tools necessary to monitor a

systemic risk. the only thing lacking is government action to make it happen. i want to thank you again senator reid, senator corker. i have to answer any questions you might have. >> thank you. thank you all. let me begin with the comments he made, dr. mendelowitz. it is very difficult to review objectively our own the decisions and actions. that is a very strong role in every type of human endeavor, particularly in these endeavors. that argument is for setting up an independent agency. you can also factor again that there are particular cultures in agencies that obscure and aluminate analysis of data i wonder if you can comment on this issue and ask all of each animal -- all of you gentlemen to do so.

could you please turn your microphone up? >> i am a little rusty. it has been a while since i've been in a room like this. there are a handful of critical things associated with the proposal and independence is one of the essential ones. if someone has control of the purse over the foundation, they are not independent. if they would have to investigate its own actions, they would not be unbiased. we feel very strongly that this is an essential component no matter how and where the institute is placed and structured. unless it has those safeguards, it cannot be effected. that is one of the reasons we suppose -- we proposed that the directorç be a presidential appointee nominated to a fixed term.

ççit is interesting. not only is this independence critical at looking at backwards decisions, but it is critical going for. one of the reasons our proposal includes the fact that they would not have regulatory authority is the fact that if the nifç i]had to do the analys and act on the analysis, its ability to report clearly, its findings would be compromised. the example i would like to give is a provision in law that i was involved in which requires the treasury department to make an annual report to the congress on foreign countriesç that manipulate trade rates for a trade advantage. those with filed this issue know that over the years a number of countries have a clearly

he most obviousç exampe value of the chinese currency. despite all of the evidence that has been there, i do not believe the treasury department has been able to conclude that any country was using its rate for their -- for another country's the advantage. i like to say that if systemic regulators use the data and analysis appropriately, that t(regulator would only be subjet to criticism. if he or she is successful, we would never see the next systemic event, and the actions would have taken some progress away from someone and would have slowed down the good times. if the regulators reached the

conclusion and the the time would come to present the conclusion publicly, i can just hear the wheels turning in the mind of the director and he or she would say "i do not know if we should released this. let's wait a little while." this issue of independence is essential and critical to the ability to do its job. >> thank you. there is a similar relationship with cbo. the degree of independence we appreciate and sometimes we disparage. i believe that director is appointed for a term of five years. he or she serves independent of the. they have proven that. i wonder if anyone else has a

comment on independence? >> i would be happy to. i will echo what dr. mendelowitz has said. the importance in terms of political pressures, the institution is able to act in the best interest of the country. if i have a -- i have five reasons for being here. my children. i want to have a safe, secure financial system. i want them the same opportunities that i had when they start providing for a family. you need to have someone who has the ability to speak the truth in the middle of a crisis. there are really two roles that you think about in terms of state regulation. seeing an understanding the risk and the second oneç is the actual implementation -- the

action you might take in terms of how capital requirements or the institute's themselves are regulated. it is absolutely essential. a second point that you might want to consider in terms of why you want to keep it independent and why you might also want to have someone of high stature involved with a presidential appointee, who was one to be able to serve not at the will the president, but in a fixed term, if there is a crisis and a system is in place, all eyes will turn to the national as to the finance. it used to have absolute credibility it needs to be like the national oceanic administration. it speaks because it is trying to serve the best interests of the nation. >> i want to invite the other

panelists to comment. one other factor that strikes me goes to your point about surprise. i thought your analogy with the hurricane of 1938 -- i will borrow it. it seems very compelling. part of this is that it was never seriously discussed at a national level. this coming in the growing housing bubble. the national characteristics. the growing derivatives trade. as a result come it sort of got lost in the shuffle. i think one of the purposes of having an agency like this is to get critical topics on the agenda of congress and the regulators. then it is our responsibility. if you did not have authority give institutions supported by data doing that, the problem you

will have is that the next time it will be something different. it will not be housing bubbles and some prime mortgages. it will be something we are not thinking about and itç will coe up. regulators will talk about it. i am sure the fed debated the housing both internally, but it never broke through. no one said this is a systemic risk or should be considered. that is my opinion. dr. and go -- professor engleçk >> i think independence would be effected -- effective. a systemic regulator has exactly the sameç target. it has the same goals that you both phrased. ut more

of a tool for understanding which data series needs to be çexamined, which institutions n be ignored for thei] momentxd ar woulñ have to beç studied late. çwithout having that decided by the end i asked itself, -- n aideeby the nif itself. >> thank you. go ahead. >> the words come to mind, and it is probably worth hearing -- moral dilemma. i think this is what it is all about. again, my esteemed panelists have brought up the concept of what i think is a moral dilemma. if you are inside of an agency

whose job is to support the financial markets in terms of being directly involved and assist in and begin growing and expanding, and at the same time regulate them, there is a moral dilemma. if you are in spite -- >> the issue that we haveç andi can only speak for my company, i work " is that if we did not get the date to correct, we are dead in the water because people will stop buying it. our moral dilemma is getting the facts correct. we either do it right or wrong. if we get it wrong, we are out of business. part of the issue that i have is that i do believe there is the need for an independent agency outside of the government to deal with these issues without having to face the moral dilemma. i believe there are issues that must be faced by congress but this will take a while to come

together. i did not think you canq contine to move forward with the state of the economy as it is in the current system of bubbles that are occurring all across the country without having the information necessary to provide information about words you currently are today. you are in very many cases at a point of stones, chisels and knives turning data into comparisons to the commercial market in terms of managing their own information. many of these companies that i know of personally are now all of a sudden spending hundreds of ofg their own internal risk ofg management and analytic systems including probably all of the top 20 banking and investment

firms. they have incredible plans for building their own and structure which should be done. this will probably improve their capabilities and therefore improve the trade of information between the parties. i think there is a long-term situation worse you need to get away from the moral dilemma. the short situation is the information given to the people that can do something about it because there are bubbles on the horizon that could pop. unless you understand them and address them, unless you spend less money than throwing it at the whole market, suspended at the appropriate places, you are going to have a greater push back from the taxpayer and having the tools and possession to do the things you want to do. >> thank you. >> thank you for your

outstanding testimony. something very appealing about the presentation and we thank you for spending time with our personal office talking about it. there is a piece of it that is almost eerie. it is the chaos of the market system and the companies you are talking about investing that money to get one 10th of a point off and they are taking advantage of anomalies that exist to make money. i mean that in a positive way. on the other hand, we are talking about the professor creating a model. you talk a little bit of thenoabout noah which is intereg

except it is talking about what is going to happen with the weather and there is nothing you can do about it. it is going to happen. on the other hand, you are talking about setting up models to keep anomalies or a huge systemic risk from happening. how do you keep yourself from interfering from this chaos that can be positive or actually creating self-fulfilling prophecies by virtue of the model they use about? >> >that is an excellent question. this analogy does break down when you think about the chemical system. it is not a bunch of pressure systems. it is more complicated than that. it is a very large scale game but if you borrow from the general scientific tradition, the first thing you try to do is

understand and explain to the the second thing is to try to predict and finally see if you can have any control. it is this progressive improvement that happens in your ability to gain scientific knowledge and understanding about the system. i am not sure how far we can go in terms of that path. i am not certain because we have not gone down that path in the research cents. there are a lot of things you can borrow because it is a game. if we begin to study it from a number of different perspectives and build a competing set of perspectives, i want to echo that you want to have this independence and multiple people contributing. you can take the hurricane modeling approach. there is not one model used. they use a collection of repeating models that give them

a multiple set of perspectives about how that is approaching and the impact. would we potentially impact the path of the economy if they interceded in certain ways? that is a very difficult question for me to answer. i believe that we can start to talk about those types of questions that we can set up this analysis. if we begin to understand when there are serious risks and understand how to prepare ourselves better, i fink we have -- i think we will have made progress. >> if you are setting up models to ensure that a systemic risk does not occur and information is being made public, the and not automaticallyç affect the

economy or at least financial markets. how can you not do that if that information is being made public? it seems that this evidence that is when to occur. >> i think that when people approach the financial markets, they typically approach from it statistical perspective. even though it is too complicated to really model effectively. there is a big simulation study and tokyo or that are trying to do modeling but typically, you have to look it aggregates and model from that perspective. we have a lot of information that is out there which is why we disseminated. we talked about adding more useful information. when you start to begin to have problems for people began to influence is if you have people

altering types of behaviors. many people are making mortgage- backed securities and selling them off to pension funds. a lot of similar bidders happening and a shot comes through and everybody has to respond in a similar fashion. the model collapses down to a much simpler system because everybody is forced into a corner and how they are going to behave for the most part, giving more information and modeling is not going to have an impact because i do not know anybody will have the ability to know the system one way or the other. we hope that you will find that the system that's the point where there could be bubbles and collapses and what might trigger those, how you respond to that is going to be carefully thought about by systemic regulators when they have that information under the they want to talk to banks publicly or privately. i am not prepared to lay that

out and decide that now. >> you are not thinking of creating a worldç full of elevator music. we would still have some degree ofç chaos in the marketplace. >> yes, it would be very complicated. >> you mentioned making information available and just for a layman like myself at a different level as far as mathematical modeling, what would beç the first three piecs of publici] information that mit come out of an institute like this that would be helpful for people to know. >>ç what i was going to sit before is also related. the systemic regulator is going

to have to use the incentives in the marketplace to achieve his goals. he is not going to be able to legislate one thing or anotherç and our use of capital standards and capital controls are ways of trying to nudge the institutions to take less risk or change their behavior. systemic taxes are designed to encourage institutions who have systemic risk to avoid the taxes by shedding the systemic risk. the reason i think that making data public is useful is seen in

the derivatives market where every time you enter a contract, you have a counterparty. this counter party has a risk that they will form is the terrific it turns out to have the values you wanted to. ç-- you want it to. considering these extra risks, it is hard to assess the risk of your counterparty if you did not know very much about what the counterparty is doing. if we had more information on the health of counter parties, how much exposure they have to these same types of contracts, the prices of the same deal with two differentok counterparties might be the same. you could decide whether you want toç take the weak or strog counterparty and you would get a different price.

t(that way, you would understand what risks you are takingko and the weak counterpart is would not be able to amass positions. the poster child for this example is aig who wrote a lot of credit default swaps but did not have enough capital behind and investment bankers and final users fought a great -- bought a great deal of these contracts without recognizing they should have gotten a big discount on getting them because they were not really being paid off because aig had such a big position. çif you could make public information on a s basis that said for each counterparty, how exposed and how many positions

does this counterparties have one week ago on these kinds of contracts. this would give the market a way ofxd the body witting the risk that there were taking with each counterparty. -- that would give the market the way ofçxd knowing the risk there wery 0lj÷were taking with counterparty. the regulation has a dual role. it would encourage the migration of products to centralized clearing which we think would reduce systemic risk and it would allow investors to understand the risks and press the risks that are taking better and thereby both of these would reduce systemic risk. >> how long would it take for

something like this to become law, how long before an entity like this was providing some of the basic information that would be useful to somebody who is looking at systemic risk. >> i am not an expert. i have spoken to people who have built up large institutions. it does speak to the fact that you want this institution to be very high stature. you want high-quality individuals to the extent that you can build a world class institution. it works in the favor of all of us into the economy. the way you would start out as you would take existing data that is in the marketplace that you could find. you could require reports that

would be straightforward. i believe within 18 months to two years we could put together rudimentary maps of the entire system and you would see aggregation and some of the low hanging fruit. you could see a standing positions that are too large for that institution like the aig example. you remove yourself towards integrating counterparty information and the repositories -- in of the repositories. what science models will need to build from that? you could do longer-term more sustained research. i would imagine that it would take six to eight years to see

yourself what all the way up to the full vision that we see with the very fine grained view of the entire country party network and be able to do large-scale simulations to understand how different shocks to the economy might go to that network and what the critical points of that network are and how they might have cascading failures and where you might seek liquidity failures occur. i would envision that 10 years, he would see a fully functional system. you would see the label information along the line in shorter time frames. >> thank you. >> if i may add, i think the difference between what we are talking about here is mostly the fact that the nif are talking about building a very structured approach and building models

that can take all different sorts of views and looks at this problem and over periods of time, ascertain how to bridge approach these problems from an academic and regulatory approach. this becomes a platform for what they are eventually to when to do. i did not know if the two pieces will ultimately fit together but that is a possibility. the data that is available right now today is capable of being integrated into a platform where regulators to start looking at the government's rules that are in place today and figure out as compensation analysts do, if you think about their role, youxd he

a huge sales force that is saying i am going to try to break every rule so i can make the most money i possibly can. i am not concerned about profit because it is not built into my compensation but if some portion of the compensation has profit built into it. qtheyçç then say they are not responsible for all the mechanisms that trap the product so maybe i should notç be responsible for profit. you start getting into all these types of analogies as to how you should compensate people and how you should incentivize people to move forward. the same is true with the financial markets. the dilemma of brought up earlier is the same problem. you brought up the issue about influencing what these markets do. what i am thinking is it would be better to use the short term data we are talking about to help with some of the regulatory rules to get people on the same

path and direction and possibly those are things looking at specific pieces of law that may be in conflict with systemic risk. with shorting issues, that could be a neighbor -- a major driver of systemic risk. with a model, you could take that out and you could find out that there is a factor that should be reconsidered. from a government perspective, if you have the information and the short-term to do these things, these models become incredibly valuable over time because they start really showing the dynamics and the interconnections of potential failure that can exist within the market. for the near term, you have to use some of the information that can be converted from the data to figure out how to manage.

what i believe we have now is a lot of broad stroke rules that to not allow for the surgical precision of attacking the problems where they exist. this gives you the ability to do so. that is the difference with what we could have by going through this process of cutting out certain things that do not make sense and putting some things back into the process. we could be on the same page so that the institutions and the government and the taxpayers are not facing the moral dilemma of each other. >> thank you. i would like to go back to one of the issues you raised about interfering in the market. we relied on markets to allocate capital because they do it efficiently. we know from history that when

other societies have tried to rely on command and control systems to do those, they have failed miserably. for financial markets or any other kind to do its job switches allocate resources efficiently, there have to be a number of conditions met. if they are not present, the market cannot do it. the challenge is that it is clear with this recent crisisç, financial markets are prone to the financialç equivalent of sudden cardiac arrest. i would like to take credit of that -- credit for that but it was not me who came up with that. government intervention was needed to deal with thezv sudden cardiac arrest.

there was a time when if you suffered cardiac arrest, there was not much of the medical committee could do for you. there are now dramatic interventions so we are at the situation where you stave off cardiac arrest with long-term care to lower cholesterol and are more careful about what you eat. you exercise and feed a healthier lifestyle. you are able to reduce the risk. we could contribute the financial market equivalent to a healthier lifestyle. >> thank you. i have gone over a long time. >>ç i have a lot of questions.

we have gotten a chance to know you and i am sure we will be talking with you over the course of the next week. you are looking at housing in north carolina and tennessee. i wondered if you would tell me why and what you found. >> i appreciate that. alliance sorry i didç not put ó into my record. we look at indicators. we have to look it indicators manually because they are separate pieces. we look at the parcel of land that is identified. we know those are under water relative to mortgages and a note who is delinquent on mortgage payments. one of the key ratios that are

leading indicators are the 90 day delinquency rate on mortgage payments. relative to their peers, if you look at the chart, states like nevada, arizona, florida, have a huge market viability from being upside down on their mortgages. seven out of 10 homes in nevada are in-value relative to the mortgages that exist -- are in negative relative to the mortgages that exist. the 90-day delinquency rate of the past three months have increased -- has increased drastically. that shows me there is a leading indicator that says people are not able to pay their mortgages.

i start with that. then i look at plant closings and ships and on a " rigid ships in unemployment. -- i look at plant closings and shifts in unemployment. a start looking at the retail sector. çcommercial failure for the retail sector is up and that is also a leading indicator of the potential of people not having potential cash because they are unemployed and therefore start becoming delinquent on bills like their mortgage. we did not have the database built yet so i cannot run a model and come up with every county for every congressional district and tell you what the combination of those factors would tell us in terms of the potential for systemic risk or

failure of any of those given markets. i can tell you from leading indicators that these are pieces of information telling me that there are potentials for problems. the dublin -- the delinquency risk factor is one that we wait heavily relative to other factors. it is telling us people are having a difficult time paying their bills. that is why i bring that up. relative to other states in the same range of being under water, they did not have the same to legacy rate problems xlthat those states are facing. çççç>> thank you. i wish i didn't ask. [laughter] >> thank you for your leadership on this. that answer, irrespective of the

not good news, it's an indication of some of the kinds of data that one might generate an could in fact be useful even though you looking at different types of financial instruments. i appreciate that explanation. >> certainly. >> thank you for your leadership on this and so many other issues. i do not want to ask any more questions about physical localities. i did not mean to be disrespectful but given your access to all of this data, when did you and your colleagues first get the sense that there was a national housing problem? >> i have known there has been a problem since the first time that our partners, one of which

is the largest collector of the deed tax and more control property information in the country, when i started analyzing their data and combining it dow jones information about the individual market segments and the tremendous volumes, and started looking at various trigger event, things that show in action taking place that are either positive or negative, we saw this occurring before 2007. we saw the bubble before the bubble. the problem is this is macro data. they usually look at it within the housing market within a specific segment of the database they have. we have not brought it together with our unemployment findings and bankruptcy findings.

this prevents us from being able to do with -- . this date it together in a way so we can build real models. w3the systemic issues that we ae talking about between the major corporations, j.p. morgan, aig, are extensive. we understand that they are very complex and they are difficult to track. we have large amounts of information regarding derivative data but it is only segments of

the market. we cannot have all of that because it is all about available. part of the issue is the investment that needs to be done to build the database. >> ça i do not sense there is a mutually exclusive agenda. i think we are talking about the same thing which is building in the short term and information- gathering tool that will help us but for the longer term, get to the point where if this a housing bubble gives us insight into the need for the nif.

basically, five years ago, i started predicting a major credit dip in the housing sector that was going to push the economy and the worst recession -- in the worst recession since the second world war. what was happening to housing prices and household income and these delinquency default rates. it was easy to predict because of the widespread nature of home ownership. that was the easy piece of it. what i did not say and could not

understand or did not seek and cannot understand is how this was -- what i did not see was how this was going to affect the financial market. at the end of the day, you have to know were the concentrations of risks are and you have to know what the nature of the network obligations are. it is the exposure that can produce a domino effect of multiple failures that creates systemic risk. it is one thing to see a macroeconomics crisis tied to housing, it is different to see the systemic risks that flow from those concentrations. >> i want to thank you all for

your thought provoking testimony. i think we leave here with one main point, we need better analysis and if we do not achieve it, the bubbles that might be out there are percolating and will catch us again by surprise. we should not let that happen. thank you all very much. >> the hearing is adjourned. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010]

>> this monthççóç marks one yr since theçóç passing of the stmu&us money. as been money. committed with $179 billion paid out so far. to learn moreç about those projects, go to c-span .org/stimulus. >> his film was the focus of the recent supreme court decision on campaign finance. >> it is the only collection of american presidential portraits painted by one artist. see the entire collection on- line at c-span's website. >> updated and released just in time for presidents day.

"who's buried in grant's tomb ?" >> it is a wonderful way to humanize the pastç and to take event and movements that otherwise might seem impossibly remote. per se is somethingxd universal- there is something universal about us some day being on our deathbed. weç all have to wrestleok with questions of immortality, mortality, and those are some of the themes that run through all of this. it is also, frankly, and entertaining book. t(there are a lot of anecdotes designed took humanize all of these people. >> available now at your favorite bookseller.

>> up next, and john mccain and joe lieberman call for new human-rights sanctions against iran. it would target individuals accused of committing human rights violations. they spoke yesterday to reporters at the capital for about 30 minutes. for most iranians, the islamic

republic is the only government they know and many would rather forget it. 31 years of economic potential lost and the resources of the great and proud nation stolen by a corrupt ruling elite. 31 years of a regime that puts its own selfish interests ahea¤3 of the needs of the people. ç31 yearsok of justice denied, freedomç curtailed and dignity trampled. in recent months, the world watched and off as hundreds of thousands of iranians have said enough and demanded better for themselves. they have taken to the streets risking the violent reprisal of a regime without conscience in order to insist upon their universal human rights. as i speak, i ran the ads are demonstrating peacefully for freedom and justice. they are being beaten in the streets, unlawfully detained, tortured, and worse.

they must know that the free world and america's most of all w3favors they're just cause. i have long maintained that the date that the young woman who bled to death in the streets of tehran in the eyes of millions of people around the world was the beginning of the end of this tyrannical regime. we have an obligation to assist morally and materially that effort for freedom and democracy. today, joined by my4wñu! friend senator lieberman and senator evan bayh and jon kyl. the bill has two parts. we ask the president toç compie a public list of individualsç o are complicity and human-rights violations against iranian citizens and their families no matter where in the world those

abuses occurred. i want to stress that this would be a public list posted for the world to see on the web sites of the state and treasury departments. we will shine a light on the davis of the human rights abusers and we will make them famous for their crimes. this bill would then banned those individuals from receiving u.s. visas impose on them the full sanction ofw3 batteries unr that meant blocking any power they hold three u.s. kojurisdiction, and in their financial jurisdictions with u.s. banks. of this would be the first time the u.s. government has ever imposed punitive measures against persons in iran because of human-rights violations. in short, under this bill, human rights abusers would be cut off from the global reach of the

u.s. financial system and it would send a powerful signal to every country that they should think twice about doing business with the oppressors of the armenian people. it should be clear that the rulers of iran have no desire to meet their international responsibilities and every desire to use tools of violence and oppression to crush the peaceful aspirations=ñ of iran's citizens. faced with this disturbing reality, we must lead an international -- we must lead an international effort and put thisç at the front and center. this is not about picking winners. it is about standing up for the universal of values we holdç dr and championing those values.

the sanctions act is an important start to this effort. i encourage my colleagues to move quickly and to pass it into law. >> thank you. senator mccain is absolutely right. thisç is a fairy significant dy in iran. i hope we will look back to what we are doing here today as a significant turning point within the united states government. this is the first time if this law is enacted into law that the u.s. government will apply sanctions to people within iran for abusing the rights of the people of the run. we have been focused understandably and correctly on the application of sanctions to stop you ron's nuclear weapons development program -- to stop

iran's nuclear-weapons development program. those are external threats to their represent to the region and the world. we now turn inward. it is quite appropriate because it government that so brutally suppresses the rights of its own people, a government that lies to its own people and the world about what they're doing, a government that claims to be the most democratic in the region and then is the country where more journalists are in jail from any other country and the world, that government cannot be trusted. i am proud to be a co-sponsor. the abuses of the irony of

government against their own people --w3 the abuses of the by iranian government against their own people are profound. we see them with our own eyes. we see them over the internet. as the human rights movement has grown within the country, the government, just likexd other totalitarian restç regimes, hae chris -- totalitarianist regimes, they have increased their response and brutality. this is the beginning of the end

for this fanatical and destructiveçóçç regime ñ iç know it is difficult for people who are involved in this struggle within iran. i hope this legislation not only sent the message to their abusers but a message to the protesters and the members of the green movement. the fact is that this legislation has already won broad bipartisan support. we have 10 co-sponsors of the legislation. republicans, democrats, independents. conservatives,q liberals, moderates. we will hopefully be supported by every senator in the u.s.. i especially want to thank senator mccain for the dealership that he has given to this cause.

he has been a fighter for freedom and freedom agenda at the center of power for policy throughout his career. we hope this threatens the abusers and we hope this legislation says to the protesters that your struggle is difficult. as has been the case for those of report tyranny throughout history, ultimately, the cause of freedom and justice will prevail and the freedom fighters will prevail. senatorky kyl. >> one thing we are winning is when sanctions are tied to human rights abuses, they will muchçó

more likely to succeed. as you know, there is a bit of a debate about sanctions imposed on the economy of iran which affect all the people of the country will be effective in supporting our position which is that the iranian government should stop proceeding towards nuclear development work would cause the people of iranç to he a bad reaction to the west and of the u.s. specifically for making life more difficult. what we have heard and what we are learning is that this will gain the support of the people of iran and make the sanctions more effective. that is parti] of the theory behind this. that is whyç it is being announced on this day. looking back to the soviet dissident when he was in prison, he said he knewç the day would come when he would be free when

ronald reagan declared the soviet union the evil empire. freedom did come to him and to millions more. the same thing can be done with the support that america can demonstrate to this kind of legislation. >> one of the reasons the american people are angry about washington is their perception that we cannot agree on anything. today's announcement stands in stark contrast to that. we have republicans and democrats working together. we have some of the most conservative and liberal members have chosen to co-sponsor this legislation. it is very timely. it is the 31st anniversary of the founding of iran, people are being beaten in the street as

they speak in the president's announced that they have taken major steps to become a nuclear power. it is our job to foster the peaceful evolution of that government. our country is at its strongest and best. if you are a journalist in iran, you risk being thrown in prison and torture. if you speak out, you risk being killed. but we have to stand in solidarity with the people of iran. t(i have been privileged to sere on the intelligence committee for many years. one of the profound questions that we face is what is the antidote to radical islam?

i believe the antidote is to stand on the side of freedom. the freedom to speak your own mind. to enjoy the fruits of your own labor. to elected government of your own choosing. what we stand on the side of freedom, we send a beacon of hope to those around the world that there is a better way than imprisoning, beating, and killing. that is a contrast that will help us win. >> [inaudible] >> i think actions taken

yesterday by the at the destruction by imposing sanctions is very hopeful. i think the administration is now much more interested than he was one year ago. it is obvious iranians are not going to unclench their fists. we were in munich over the weekend. the speaker was the foreign minister of iran. it would have been amusing if it had not been so tragic. he basically tonight that there were any human rights abuses copen on. there was no problem whatsoever. this went along with his denial that they were trying to acquire

nuclear weapons. when we helped the people of poland, we provided a printing press so that they could get information out to the people of poland and particularly the workers of gdansk. what we are trying to doç is hp the i iranian dissidents get the information out. helping them free the internet. the modern means of communication that the iranian government is so strenuously trying to restrain. i hope that the administration will now understand that this unclenching of the fists has not worked. at has been over one year and the i iranians have proceeded towards the acquisition of nuclear weapons.

[inaudible] >> those of you that have been around the senate for a long time to know that most of the business of the senate is conducted by unanimous consent or bipartisan. it may be regional more than partisan. we to a lot of business. what you are seeing in the two items you mentioned are other examples of that as is this announcement by this bipartisan group. there are others not represented here today that represent both spectrums of the political parties. there has been a lot of emphasis because of a couple of major high-profile issues like

health care debate. the reality is that on a lot of things, we do work together and get things done. there are a few high-profile things on which there are profound differences. we have an obligation to represent our constituents as best we see fit. there will be some differences. [inaudible] >> i thought i made it clear for a long time, i would say much if not most of what we do is on a bipartisan basis. there are occasionally high- profile issues that create very strong views on both sidesç in which there become partisan divides. and that is the nature of the senate and the nature of the political system. far too much of made it particularly by members the media.

>> i know that the protesters follow what happensç here. i hope that people take this bipartisan sponsorship of this measure as an expression of the broad feeling of the american people. we stand with the green movement. we stand against their repressive government. [inaudible] >> there is legislation which all of us have been involved and which imposes a broad set of sanctions.

i know that senator kerrey has been supportive. senator dodd has been very supportive. the administration is getting on board. i think we could see passage of this very soon. >> it happened quickly and it happened unanimously so some people may have missed it. about 10 days ago, the senate passed this broad iran sanctions bill unanimously. it is on its way to a conference with the house. it is a very similar bill. i want to mention that senator mccain and i introduced this proposal as an amendment to that bill. for procedural reasons, senator

mccain crisis and agreed to let the main bill go forward. i feel optimistic. we have a good possibility to have this proposal of hours be adopted by the conference committee as part of the broader iran sanctions bill. fat bill will come up to both chambers fairly soon. i think the announcement today that they have gotten to 20% in richmond fuels' the case here and i hope that the un for movement. [inaudible]

i]>> they blocked the internet. they said that google will no longer be allowed in iran. they are taking every measure to shut down the modern ways that we use of committee kidding. they are aware of the rally in the ability that this new mates of communications -- new means of communications has. our job is to help them technologically as well as morally to see if we can find ways around their attempts to block this vital means of communication.

>> something we talked about returning from the trip to germany is the support the u.s. government gives to radio free europe and radio liberty. it is a tremendous asset because the broadcast news and to iran in a way that people can appreciate that there is a different point of view than that of their government. >> to give you an illustration, the day we were returning, and we got word from our representative that seven people who he and his staff interviewed in different locations around the world came

on board with the station. they have all been offered a position for that purpose. there were all arrested and detained that date for the day before. the iranian government is doing everything they can to oppress the information that has been discussed here which is why what senator mccain said is so important. everything we can do to help those people will help build the case for liberty and enable them to succeed in the end. one way to do that is through our support for radio free europe. . .

as a draft of the legislation and it would be senator mcconnell's u.s. and as we return from this president's day break, the senate will take that legislation up and i said publicly, i assumed within short order it would be adopted. so, jobs are clearly a very big issue. the reason i guess i do not put that into the highest profile is we're going to see a series of smaller job stimulation packages. this is one of them.

it is not the same size and scope as the original stimulus package was. >> [inaudible] >> it will. that agreement has not been reached. what they said is it was part of the agreements that would be necessary to move this bipartisan legislation forward. there will be the unanimous consent agreement that will set up the way forward for the -- for taking up considering and voting on the state tax reforms at a minimum. those that center lincoln and i have proposed. >> i am concerned about how it is paid for. i am concerned about letting it up with other extraneous provisions which seems to be the habit we have gotten into. i would -- withhold judgment

until i get a chance to see how much extraneous stuff is added on to a. and how much does it increase the deficit again. >> [inaudible] and when you said [inaudible] >> i would have to look at it. and see what he has in mind. the fact is this was a constitutional ruling by the united states supreme court. i strongly disagree with it as we know. i would certainly have to look at it before i would want to sign on to any provisions. for example, foreign corporations and so on. i would have to look at it. >> [inaudible]

i wonder how you think this is different. >> the reason we passed the military commissions act at the end of 2006 was to put a stop to that. it was wrong of the bush administration to do what they did. i must say, in some deference to the bush administration, we never interrogated a guy for 50 minutes and said we got the information that we needed and give him his miranda rights. the second thing is, no one question the patriotism or even the dedication to fighting the war on terror.

saying that we were assisting al qaeda. that is an insult. far beyond any boundary i ever saw in the bush administration. this individual should be in a military tribunal. we are working on legislation that indicates that once the individual is deemed an enemy combatant and that person should be tried only in military court. it should never be given read their rights. thank you very much. -- it should never be given miranda writes. >> more about iranian issues. from this morning's "washington journal", is 45 minutes. -- this is 45 minutes. y analyst. she has reported from more than

140 countries for six continents for papers like "the washington post," and others and author of several books on foreign policy and we will focus on iran. guest: always nice to be here. host: we saw interesting video of president ahmadinejad, the anniversary of the islamic revolution. help us understand the size of the crowds. how did they do that in iran? çguest: on this particular occasion, this was such an important event for both the regime and the opposition. it was a test of will, a test of strength. the regime knew that after eight months of unrest and turmoil in the country that it was particularly important to bring out as many supporters of the regime as possible, and they busted hundreds of thousands of people from not only parts of pteron but other parts of iran to signal that they are in

control and that they do still have a lot of support. host: we have been seeing throughout the year the active demonstration of people opposed% to the power structure. where were they yesterday and how did they respond? guest: they had been planning for weeks trying to get the opposition out on the streets. they had been a very creative in their call to turn out on the streets, whether it was graffiti on buildings, posters put on the internet, very artistic appealsç threw facebook and twitter to kind of call to get out on the streets to signal that they are still very vibrant and resilience. many did get out into the streets but it was disorganized and very early the government put out the vigilantes', security forces, to get people

on the street and break up in a gathering that might look like it might turn into an anti- government protest. host: i want to tell you robin wright will be here for 45 minutes. a lot of time to get in depth about iran and u.s. policy toward that stake there. let me give you the phone numbers -- also had e-mail and twitter and you can join us that way as well. i want to ask a larger question. and maybe obvious to you because you have been reporting on this for so long -- but why should americans care for iran? guest: it is likely to be one of the two defining issues for the obama at the devastation over the next three years. it is a country that has an important geo-to strategic position. it boarded the old soviet union

but it is still close to russia. china and iran possible missions is becoming very important. china isç buying a significant part of iran's oil and this is a relationship that turned around increasingly east would rather than look westward -- then westward. this is a country that has extraordinary influence in the shi'ite world. it is the largest shiite dominated country in the world and it has its tentacles in iraq where it still has troops. it has close the like -- alliances with groups like hezbollah in lebanon and hamas. çi]i]with many of the extremist groups. it is the top ofq the list of state department state sponsors of terrorism. so, between its vast oil and gas resources to its influence and a part of the world where the u.s. has the political and economic

interest, iran will always poor into the denied the state to weather is in power in tehran. host: what do analysts such as yourself see in the green revolution? guest: green movement is in many ways the most vibrant civil disobedience campaigns any world -- anywhere today. it is not just turning out on the streets in days of protest but also what isw3 happening in the background. that in many ways shows the scope of the green movement, which is the largest position movements since the 1979 revolution. it is also creating a different kind of model of people power for the middle east, for theq islamic world, which is the last block to hold out against the democratic tide that has swept the rest of the world since the 19 seventies. -- the 1970's. whether marking the currency was anti regime slogans on national

bank notes, whether it is boycotting goods advertised on state-controlled television as a signal that we don't like you are supporting the regime. there are a vast array of things people are doing in the background to signal their discontent with tehran today. host: we have seen the regime has reacted with increasing violence. they had some trials, said some dissidents to death. how will this reverberate with the public at large? guest: i think this is where you will find a lot of people who may not have been as engaged in the political process up through the june 12 presidential erection is becoming -- elections being increasingly dissatisfied. it has affected many people beyond who have taken to the streets. there is a sense that the

newspaper's been banned, the sense of big brother watching everything that is going on, that this is a state that has become militarized and is today a police state. host: is there consensus in washington about if we should support -- support this movement, and how? calguest: the obama administration has taken an interesting position. the aftermath of the elections that were disputed over allegations of fraud, they have tried to stand back and not play a role. our focus had been on iran's nuclear program. but in december you began to see a shift as the administration began issuing statements about human rights abuses -- as the government, because of a show trial, because of the clampdown on the streets, the mass arrest,

began taking a more outspoken position criticizing the regime. one of the most interesting things to happen this week is a joint statement by the united states and european union calling on iran to comply with international human-rights standards and universal declaration of human rights to which iran is a signatory. host: i have a clip i would like to pull. a speech yesterday -- president ahmadinejad spoke frequently about iran boss in nuclear ambitions. let us listenç to a little bitf some of his remarks on that and you can help us explain why the country is going with its nuclear ambitions. >> when we say we do not manufacture a bomb, we need it. we do not manufacture a bomb. we do not believe in it. we did not believe in manufacturing a bomb. we have the coverage to announce it. if you think a nuclear bomb can

save you, you can keep it. if you think a nuclear bomb can't save it, you can keep it for yourself you should know you are mistaken. you are making a mistake. we are openly announcing that through your management method -- we oppose your management method in the world, we oppose your bullying policy. we oppose your policy of imposing your views. we oppose your blundering policies. we oppose your method of administering the morals that is filled with discrimination, in a humane --ç inhumane. we have the courage to announce it and you should have the courage to say that you want to dominate the region and the iranian nation does not permit you to do so. host: that is obviously the

voice of the translator over the address from president of ahmadinejad. what did you hear there. guest: iran is talking a lot in the last week about its nuclear program and the fact it has moved from enriching uranium at a low level to a higher level. this ofoatd' one of the things that is important to understand is what they have done so far is move from enriching uranium for peaceful nuclear energy, which is at 4%, to 20%, which they will use for medical research reactor. to create isotopes for medical purposes. enriched uranium for weapons needs to be at 90%, so there is a still significant way to go. but the fact is they have crossed the threshold of going from low enriched uranium to

hire. of course, that lead to wider concern. ahmadinejad tried to say -- we said before, we don't intend to develop the weapon and the outside world should hear what we are saying, if we wanted a bomb we would tell you out right. it but the problem is, the iranians light for 18 years about a weapons program that they had -- lied for 18 years about a weapons program that they had that was uncovered in 2003. because they still have not answered all of the questions from that program to the international community, there are suspicions that they may be hiding something else. of course, there was a recent revelation last fall about a secret reactor they were building in a religious holy city that surprised the international community -- the united states revealed its intelligence. çthat led to further suspicions about what iran really wants to do long term.

host: when he speaks, for whom does he speak? guest: a very important question. iran's regime is very fractured in the same way the body politic has many different sides to it. the regime is not speaking just with one voice. there are those who are conservative who are not -- particularly those in parliament, who are not happy with ahmadinejad, who believe he goes too far, that he is too provocative with iran's own people or the international community. .

ñri]çç caller: good morning, t(i ççóhç questions concerning the ç--  am sorry, ñrlet me çñrget çmy down. ok, i am sorry.ç ok. i wanted to talk about the fact that, do we remember çóthat the head of ççthe çgreen t(party is çççça former prime minis something like that.ççç i have grown to be very weary ç of people who are reformed from the former regimes. because they turn out to be just another version of the people in çópower in the end.

about i]this because it çhappvñq in many okçcountr the world.i] and çalso i feel ñrvery çmuch the 3ópeople t(i]çt(of iran.]d because çthey ççare ççcomp powerless, why i]all qof this 3 power play ççis çi]ççgoingq r most time you have to get to power and make it turns out finally, and it makes it so hard for the ordinary man to change the reseem. -- regime. host: first of all, he's weary of qreformed reformers. guest: among the elite ççin p today there are many fractions. there are more in the green movement, you have those in the

defeated presidential candidate and a former prime minister, one who was an early revolutionary and father of the nuclear program. and you have those who never voted for anyone in this power and opposed to the islamic republic. you have a huge spectrum of people who don't line the status quo. some want to overhaul the system and some want to reform it. if the green movement makes inroads, i suspect you will over ther)visions. host: do okyou agree with okher çar powerfulless? çar that people have taken the power in their own hands. for eight months they have taken to the streets, w3and in the çrun up çto this i]çanni

çñ -i( aççççmyçç don't use weapons. we are a peaceful movement, çç thpy say.çóçç|çz7çoks-ññrç limit, ççthey ñofáxdcall çon nurses çwho are supporters t(to take first ai .i] çxdçççt(çç vh)e is xd÷a ççlot ççqqof planning, their leadership is not effective of motivating ça] this is where çyou may xdw3see anniversary as a fáturning w3po where çmany çwere disappointe w3' n the street and didn't have a strategy and may see them looking for alternative leaders. host: next we have michael on thev: republican line. caller: good morning, i just

came back from that region about a week ago. and i noticed certain political dimensions of that region. and how connected they are, çç with zvçxdççqçkhr saudia ar holy sites and mecca, and you have millions of people coming from all of the world. and w3iran accounts for a total -- quarter of the total of people who attend çomeha each year. and now they are suspending services for okçthat region. i noticed something boil w3çq boiling in that area. specifically with the çyouth,

surrounding areas when the çóñr egypt, and egypt won. the youth were balling xlçin ç streets, çand this mywas in s arabia ççand they were up and down the çstreets and blowing ( the horns and dancing on the cars. it was contrary to the image you see of saudia arabia.u! in some xdi]ways it is, but i w surprised to t(see the out bursd of that energy and people blowing the horns. host: michael, do you have a question at the end of your observation? caller: yì, i am getting to the question, can she give çw3d particular time frame, çwith  intellectual t(barometer xdof tç

region, and give me a time frame of that regime crushing or falling, within five years or 10 years.ç because it zvdefinitely çóçwil fall, a lot of these regimes.ç host: michael, can you tell us what takes t çyou çççto that of the world? are you ñrçin çthe military?ók caller: no, i am not w3qin the military, i go there on my own and observe. host: oru/xare you able to trav easily from country to country?ç xdi]any problem. host: thank çyou very much, ñr it common for americans to travel the region? >> he -- guest: he may be a muslim.u.jç he brought up theçç)t(çyoun population in iran. in the aftermath v:çof çxçtheó

revolution, the clerics called on women to breed t(the islamic region.çw3 and they@odid, çand the çç population çwent çfrom ownñç to 62 million.ç a by-product was a regime revolution to not implode çtho numbers. ç clerics talk to their clocks about the importance of limiting the family, the numbers of children and they have brought the average family down from seven children to seventwo -- to over two.

now those kids born after the revolution are coming of age. they are in many ways the leaders on the street. the dynamics in iran today are young people and women. the other interesting thing that happened after the revolution, were the number ço traditional çfamilies çthat ç trusted w3an islamic system to educate their çkids and girls.ç and they çt(started çsending girls çt(to school çor çóscho beyond elementary school.ç and çtoday you find women w3th3 are architects and lawyers and d an ççiranian women won the no peace prize.fát(i] and women that ççwon at çcan and international festivals around the world. and they had a female çvice president. host: related çto çthat, one writer says that it seems çtha

the green women's ççmovement repressed, xdis that a çpast oç the i]çislamic extremism?w3çwç he ok international guards, the ççp years çof first term ççxdof ç president ahmadinejad brought w3 the revolution guardsçó çççt(ç w3çt(w3 an entity that reflect the

militarization of the state as well as the role of the hard- line faction. president ahmadinejad is a former revolutionary guard. in terms of the revolutionary guard versus the women's movement, it is clear the regime is trying to prevent many of the most reform-minded women's movements from achieving their goals. there is one group trying to get 1 million signatures to change some of the laws on family that have to do with divorce and alimony and custody issues. by and large, the women's movement remains vibrant and has been defiant despite the repression. >> we're talking to robin writgh wright about iran.

caller: if you were to do a public poll to the iranian people on obama in america and in iran, how do the iranians feel about obama? guest: there has been division. there have been public polls. the question is how reliable are they? many iranians are nervous about telling the truth on the telephone. one of the interesting things to happen on november 4 which was one of the major protests on the anniversary of the takeover of the u.s. embassy was that, instead of shouting "death to america and death to israel" the protesters were saying death to no one, peace to all nations. there were saying you are either with us or you are with them. them being the government.

the obama administration has tried over the past year to engage the iranians because of its nuclear program to figure out a way to get them to the table, to talk about the issues that have been a dispute now for many years. that effort has so far been unsuccessful. the appeal was in part to recognize that what is happening in iran is important not because of the nuclear program but because of human-rights issues. host: couldif we stop iran from making and new, could they buy one? guest: this is one of the things -- iran is at a stage that it is unable to put together the three different components, the

societal material -- the missile material, it has not been able to produce all three aspects. the one we are concerned about is the fissile material and uranium enrichment and its ability. that is where the focus has been over the last several years. host: this is from the democrats' line. caller: i have no problem with the iranians wanted to become a nuclear power. i have been listening to your desk and she has not said anything about the numerous lies israel has told about a nuclear weapons they stockpile. why is it that our policy is hypocritical when it comes to israel? if iran was bombing palestine, we would be bombing iran right now. israel can bomb everybody in that area and not a peep out of our media.

they have lied about their nuclear weapons. they did not do anything the americans tell them to do. obama told netanyahu to stop the settlements and they said he was not doing anything. i am sick and tired of supporting israel. i am sick and tired of sending my money to them until they do what they're supposed to be doing. you ought to do a program on israel and the lies they told over the years about their nuclear weapons and what they're doing to the palestinians. i do not see the iranians bombing anybody. host: thank you. your response? guest: it is widely known that israel has a nuclear program. one of the interesting things is that the iranians keep calling for a nuclear-free middle east. that is a common culture of the region. that is in part aimed at israel's program.

if none of them can have a nuclear weapon, israel cannot have one too. one of the issues and the tensions as you have not just iran in the west and you have israel which is in the region. there is an existential threat that if iran should develop a nuclear weapon, it feels that it would be vulnerable to any future attack. the iranians had not invaded any other country for 200 years. they have been the regular victim of invasion. most recently by saddam hussein. in what was the bloodiest modern middle east conflict. there is a lot of speculation that if there is not some kind of diplomatic alternative, some kind of diplomatic resolution to this nuclear question, that israel might take unilateral military action and bomb suspected nuclear sites in iran which would change the balance of power in the region,

potentially affect oil prices, and potentially get the green movement supporters to rally around the regime for the sake of nationalism. host: the next caller is from columbus, georgia. the republican line. guescaller: i was curious about iran's relationship with russia. it would seem that russia is playing with fire in many ways, backing the iranians and this could backfire on them in some ways. i was curious about your observations on that as well as iran's relationship with pakistan and i will throw in the third question. when we talk rubberize of the younger generation in iran, -- are the guards able to coopt the people to undercut the unrest that is going on in the country?

guest: it is an interesting question about the revolutionary guard. we in the outside world because we are isolated from iran, i have been going there every year since 1973, we tend to have stereotypes. and for all kinds of people into the basket. the revolutionary guard is the verse. all young men have to do national service and many opt to do the revolutionary guard because they have better training programs and they can be a kind of credential that might get you access or entry into a university or better job. also because they get off at 2:30 p.m. and that offers the opportunity in this very dire economy in iran to take on a second job. one of the interesting things the government found in 1997, when the first reformist

president was elected was that 84% of the revolutionary guard voted for the reform. we should not assume that the rank-and-file in the revolutionary guard are hardliners who support the regime. they make many of them be national service. on the issue with russia. that clearly has been a very important dynamic in trying to get iran to the diplomatic table. russia and china are two of the five permanent members of the security council. to get resolutions that will pressure iran -- has required in the past russian and chinese descent. the last u.n. resolution was very weak because the u.s. could not get either country to sign on to anything tougher. russia has a longstanding relationship with iran. it is supplying building its first peaceful nuclear react

or. it is not open even though it was supposed to be open years ago. iran is looking to russia and potentially to china for additional peaceful nuclear reactors for energy purposes. russia over the last few months has taken a tougher position. russia is not excited about new sanctions because it will affect its economy. russia has been unhappy with the language that president ahmadinejad has used and iran's discovery of the secret nuclear reactor back home. host: how much damage was done by the bush administration in naming iran one of the access -- axises of evil? did that espionage encourage

iran to build a nuclear program? guest:th the original interest n a nuclear program that might extend beyond energy has its roots in the iran-iraq war. when iran realized iraq was working on a nuclear weapon and israel bombed iraq's secret site. the iranians were concerned that they needed to have a nuclear weapon to balance the nuclear capability, to balance of the iraqis. that is where the origin of this program was. it is clear that in 2003, between 2001 and 2003, there was greater interest in iran under a reform president in dealing with

the u.s. in trying to get beyond what president -- the president called the wall of distrust. there were repeated overtures. the problem with iran for 31 years now is that they have never been on the same page. we have been interested in battering relationships with them when they have been unable to take steps toward us. that is one of the real tragedies of the last 31 years. we could not get beyond the takeover of the u.s. embassy. iran is one of the countries where the majority of the people like americans. they do not like u.s. foreign- policy but they like americans and they want better relations with the u.s. host: this is chris. guest: i have admired your work

for a long time. [unintelligible] ever since my cousin was the motor boat driver for the sh ahrina. they are educating the girls. what is their education like? what are they being taught? >guest: one of the interesting things is this was a movement that was backwards. at the top of the list was the fact they banned education for girls. iran's education system has gone troops and downs since the revolution. in the immediate aftermath they had their mini-cultural revolution were they wanted to islam size -- i islamicize

the the curriculum. one of the things that is interesting is iran has won the highest award from the united nations for closing the gender gap between girls and boys. it has one of the highest increases anywhere in the third world, the developing world for closing the gender gap and bringing rolls into the educational system. host: the next call is from middletown, new jersey. good morning, your on the air. caller: thank everyone for c- span. i find tit -- host: i think john is moving on. good morning. caller: i'm a vietnam veteran and i am not opposed to war but

i do feel that the united states is going to enter into world war iii once iran's nuclear installations are attacked either by israel or the u.s., probably by israel. the politicians in -- and the media in this country for the most part are prostitutes for the state of israel, and obama has done everything he could to destroy this country in every way, shape, and form, especially militarily. we have weakened our military. we are ripe for attack. since the soviet union -- that is not politically correct, i still consider it that enemy of the u.s. and china, they have treaties with iran and they are in a great position to attack the u.s. because what they will do is they will probably accuse the united states of common during all the middle east oil reserves and -- commandeering the middle east oil reserves and

use that as a pretext to attack. we will have this one world government established because the united states is the one that will be primarily hit the hardest. host: will get their response. what did you think? guest: i disagree on a lot of different levels. one of the interesting questions is, what does this tension between the u.s. and iran eventually lead to? the military option is on the table or has been left on the table. no one in washington wants to see another war. not only because we're stretched thin already in afghanistan and iraq but because a conflict with iran would be different from either afghanistan or iraq. we're talking about a population three times larger than iraq's with much more sophisticated infrastructure and a much more threatening military. iran has the most powerful

military outside israel and the middle east. this is something that everyone wants to avoid. that is why i think you'll see over the next year a series of moves largely through the un and between the u.s. and european union in trying to pressure iran through sanctions, not only the kind of blanket sanctions, this is something far more targeted at revolutionary guard and people associated with a nuclear program and increasingly, there are calls for sanctions against those who are scenes at -- seen as human rights abusers. host: the "financial times"has a headline, [unintelligible] guest: they have not been

terribly effective, leaving iran to deal with the europeans and some of the closer asian neighbors. one of the largest trading partners is the united arab emirates through dubai. sanctions are very difficult in tehran. that is a reality. i lived in southern africa for many years. in a zimbabwe during its civil war. incredible international sanctions. dirty shed did not crumble until south africa joined the ban and kept produce from getting to south africa to the world. that was a moment where the rhodesians recognize the

economy would collapse and rhodesia did not have oil. that is a valuable commodity that will continue to make it a player. sanctions can make life more difficult for the regime. the most interesting thing that is happening is something unusual. that is the banking sanctions that have been imposed on iran. not through the international committee but going to international financial organizations and saying, iranian banks do not comply with international law which they now say since the 911 attacks, a financial overhaul to track terrorist funds. every bank has to know where the money came from, not just the last transaction but all the way back. this is to prevent laundering by terrorist groups. through the new international banking regulations, the treasury department has managed

to convince banks, more than 90 major banks around the world including some in china, not to do business with iran. this has made it much more difficult for iran to get lines of credit to do business. it has had to find banks, small boutique banks in odd parts of the world where they pay a higher fee. there is interesting and creative mechanisms that have been used over the last two or three years to try to pressure iran. host: as we close, for people who are interested, there seems to be much going on. is there something critical in the weeks ahead they should watch for? >guest: to see if there are public protests but to look for civil disobedience. they would get martin luther king and gaudy and others as models to put pressure on the

regime to signal their discontent and force the regime to introduce some reforms. host: thank you for being here this morning. >> tomorrow, pakistan's role in fighting the war in afghanistan. our guest is ikram sehgal, an intelligence consultant. douglas wilder discusses the removal of the dnc chairman. then neil munro. blogger every morning beginning at 7:00 a.m. eastern here on c- span. >> tune in to "book tv" 43 day president's day weekend. henry paulson talks with warren

buffett on the 2008 economic collapse. then gary wills on how the atomic bomb change the u.s. presidency. books on american presidents. h.w. brands on fdr and craig shirley on ronald reagan. for the schedule, go to c- span.org. >> reporters is u.s. ambassador kenneth merton. philip crowley introduces the ambassador and then delivers the state department briefing. >> it looks here like it is a snow day.

good afternoon and welcome to the department of state. for those of you out there in the viewing area who have wondered where have you been for the past week, we in washington, d.c. have been experiencing an unusual amount of snow. rather than doing briefings, all of us have been at home shoveling and doing things to survive snowmageddon. we have intrepid members of the state department press corps with us. we have been able to try to continue business under arduous circumstances relative to washington, d.c. we are back in business. i am pleased to see many familiar faces back in the briefing room. we are at one month beyond the heavy earthquake and we thought it was a wonderful opportunity,

having ambassador ken merton to bring him down and give you a sense from the ground view of what is happening in haiti. what -- how he has been able to cope and begin to recover from the devastating earthquake of a moment -- a month ago. haiti is experiencing a 3 day period of national mourning. we stand with haiti as it goes through this difficult time but we thought it would be a wonderful opportunity to have our ambassador who has been leading an extraordinary effort on the ground to begin the briefing to give us a sense of where we are. thanks for joining us. >> my pleasure. some of you i have seen in haiti. nice to see you back in one piece. i thought it might be useful for you if i could give you a picture of where i see our

efforts one month after the quake. and did you a chance to answer questions -- give you a chance to ask questions. how about giving you a brief plug to my colleagues at the embassy. those of us here can be proud of our american diplomats and soldiers on the ground who have helped deliver an immense amount of aid and relief to very needy people. i would ask you to keep in mind that in many cases, the people providing this assistance, certainly among the embassy and staff, these are in many cases people who have lost everything they owned. they have lost clothing, mementos, pictures, we lost colleagues down there, we have one of our foreign service

colleagues die in the crash. we have others who are still hospitalized. it has been a difficult time for us as well but i have been proud of everybody in the u.s. government who is down there doing fantastic work in terms of getting aid and relief to the needy haitians. one month bonn, where are we? i think -- one month on, where are we? in terms of food and water distribution and getting madison's out, we are working with our international partners, particularly world food program. we have been able to almost routinize the distribution of food to the 16 sites where it is delivered on a daily basis. we're giving people two weeks rations of food and giving people things they like to eat, things like rice and bulgur wheat.

that is an improvement at least in terms of the haitian perception of our effort. we face ongoing challenges. our next issues we're most concerned about are sanitation issues and shelter issues, particularly regarding short- term shelter. you have all heard people talk about we are coming up in the coming weeks into the rainy season. we want to do the best we can to make sure we have reached an touched many people as possible, as many families as possible with plastic sheeting which is what we are distributing so they can take that plastic sheeting and put it where they are currently staying or take that to where they ultimately are moving permanently, and they can use that as a construction material. sanitation issues, as you

obviously know, there are many people who are not in their houses for in these temporary camps in various open spaces around port-au-prince, whether it is the soccer stadium for the park in front of the national palace, or many other places. we are working to provide those people with sanitation the train facilities or portable toilets were appropriate. we're not where we want to be but it is an ongoing effort. we're working day and night to get those facilities as good as they possibly can before the haitians have been displaced from their houses. again, i think in terms of international cooperation, i have been very pleased at the cooperation on the ground, not only interagency amongst the united states agencies and ngos

on the ground, but with our international partners were working hand in glove who are working with the military wing and in terms of the humanitarian aid delivery. we're working very closely with many of the big donors down there. french canadians, eu, many others i am not mentioning. it is working really well. i believe that this will -- some of the people will be able to look back at the future as a model of how we have been able to sort ourselves out as donors on the ground in responding to an earthquake. beyond that, i will stop my own remarks and let you ask whatever questions you might have. >> i wonder if you could give us a rundown on communications you have had, contacts with president clinton over the last

couple days. there was a report that he was on 80 conference call even while he was in the hospital. were you part of that? >> i was not part of that conference call. i have not talked with him. i read the same reports in the newspaper you have on that issue. >> what do you think would be the effect on the effort? >> president clinton brings a tremendous amount of personal popularity and respect to the international effort in haiti, he is very popular in haiti. i am sure all haitians join me in wishing him a speedy recovery. beyond that, there is not much more want to say on that issue. it is pure speculation at this point. >> there was a report yesterday that the u.s. had given the haitian government a draft plan

to look at and talk about three construction authority. could you describe what is envisioned, what is laid out in that draft? >> president obama has asked us to be as thoughtful as possible in getting ideas to the haitian government, to the haitian people. we're trying to do that. other donors are trying to do that. i am sure other donors that have shared thoughts with the haitian government in terms of the specific -- there are ongoing conversations. i have been out of haiti since monday morning. i'm not sure what to characterize it more than that. i am somewhat behind the curve in the ongoing discussions. hopefully will be the haitians to decide on -- it will be the haitians to decide on what they want to do in terms of their

reconstruction effort and in the server architecture. it will be their decision in the end. >> we had a reporter who said [unintelligible] to process people for# is that an indication what is happening to the evacuation effort? is that winding down? >> what i know is the numbers of americans asking to be evacuated from haiti has gone down in recent days. since last week some time. i would note that up until now, as of tuesday, we evacuated over 15,000 americans from haiti which as far as i know, is a record, beating the lebanon evacuation of 2006. that is a lot of people. the numbers have gone down. i do not know about the tent or the status of the tent. our american citizens and

operations have been able to go back to providing other services for american citizens who were there, such as providing passports and notarizing documents. that demand for evacuation has tapered off. i do not know the specifics of the tent. that is the situation on the ground. . .

to the best of my knowledge the incarceration of these people has been done according to haitian law. we have had an appropriate level of consular access to people. with been able to determine that they're being fed, kept safe, and are given medicine. beyond that, we have told the haitian government that if they want to have any conversations with us about these people and their situations that we are open to that, but beyond that

they can gauge of legal counsel -- they can engage the the council. beyond that, i am not sure there's anything else to tell. >> does the haitian government express a desire to talk to the u.s. government about their cases? >> a desire to talk about it? i would not characterize it as a desire. we told them if they find themselves of the point where they want to have a discussion with us about it that we are happy to. >> there has been no such discussion? >> not with me in any case. >> cnn. from where you stand, has the case of the americans become a distraction to the overwhelming needs of the haitian people? >> i am not sure it is a cause of distraction.

to those 10 individuals and their families it is not a distraction. it is an issue of high importance, as it should be coming to their families. we would ask people to remember the fact that there are up to 1.5 million haitians in port-au- prince who are out of their houses and are homeless. they are desperate for humanitarian aid and medical care. i certainly would not categorize this as a distraction, but we also have to realize that there is a large, large humanitarian issue out there as well. yes? >> can you update us on the status of the 10 americans right now? what is your understanding on if and when they are released they will be facing repercussions or legal action in the u.s. bac? >> to the best of my knowledge,

i have been out of haiti since monday, they are still in the jail. there are being kept safe and getting their food. >> if they are released, the u.s. embassy personnel, your staff, will take custody of them essentially and help them get out of the country? >> i am not a consular specialist. i believe -- i know that we monitor cases of americans who are incarcerated. presumably if they need assistance getting out of the country we will probably do our best providing them with that assistance. beyond that, i would ask you to check with our consular affairs people with what we are exactly permitted to do according to the law. i just do not want to provide you an incorrect story because of my own ignorance. >> those deliveries have now

stopped. why not focus on tens instead of plastic sheeting? -- focus on tents? >> i will not agree or disagree with your numbers. first of all, the plastic sheeting is more effective in protecting people from rain, number one. secondly, these smaller pup tents in good for one thing, sleeping. the plastic sheeting can be used as a building material. -- the smaller pup tents are good for one things. we give . we give the sheeting out in rolls of to provide shelter from the rain. when they move, in many cases they can take the sheeting with

them. as they build their house, they can use the sheeting as part of the newhouse -- new house. if you are talking about larger tents where you have up to six people inside or larger, those people would agree that you do not have the privacy and dignity which might have in your own self constructed shelter. that is another advantage. people can be amongst themselves and their families. you can sit, stand, coke -- cook, and it is a much more flexible tool. from my understanding, it is better in protecting from rain given the thickness of the plastic. >> after the sheets are delivered, what is the next step as far as helping with housing and rebuilding? >> as i understand it, we are in

the process of delivering the sheets. we hope to use local labor to continue to cut the sheets in appropriate sizes. it is going to take a number of weeks at least to get these out to everyone who needs them. i would remind you that we're not the only people on the ground doing this. there are others providing this type of assistance. we are coordinating to make sure we are not duplicating our efforts. it is something we are working on now. >> do you have an idea on a number? >> i do not on the top of my head. >> what is next? >> the next step is a broader question of, obviously, the haitians need to make some determinations in terms of where people can rebuild, are they allowed it to rebuild? if you have been into port-au- prince i think he will know -- i

think you will know there are houses that have been built on steep hills that might not be the best place to rebuild. these determinations need to be made by the haitian government. there are also people who have built on areas likely to flood, and as we know in previous reining in hurricane seasons this has led to a loss of life. if i were in the haitian government, i would want to discourage people from building in those areas. those should be the next steps where they are able to determine the the rubble has been cleared and they can go back in to build. that is how i imagine moving forward. yes? >> who is doing the city planning? is there a ministry in haiti to do that kind of thing? do they have enough people who

have survived and have the skills? >> there are several entities to do that kind of work. there is the ministry of planning and economic development which have a role in then -- which would have a role in that. the usually work with international endeavors in the country at large. they have a ministry of public works. oftentimes you'll see the anagram as tptc. they are the most involved in terms of urban planning in terms of building and widening streets. thus far, i think the ministry of public works will have a key role in that. president preval has also named three individuals, one of whom is the current minister of tourism but is an architect and urban planner by background and

training. he is involved in working through their ideas every construction. there's another man involved from the private sector. the third individual, whose name is not coming to me, is also involved. we have offered our assistance to them. when i say "we" that is a very broad "we" as the international community. we have resources from which we can grow. we have been in discussions with them. i am not sure how far advanced or concrete those plans are. that is an ongoing effort. yes? >> i heard you say in your opening remarks that you thought eventually the response to the

earthquake might be seen as a model. i realize it is only one month since this happened, but i would be interested in your lessons learned. are there things that would have been helpful to you the first day, the first week, the second week? are there other ways this could have been handled perhaps even better? >> it being completely frank, i have never really had a chance to sit back and think through my lessons learned. -- being completely frank. there are some things i am very thankful we did do. those would probably be too much of a micro level for you to be interested in. i will say, at the risk of saying like i am putting myself on the back, -- that i am patting fisa on the back, but we

do have good relations prior to the earthquake with the international community which has really helped soothe the relationship on the ground with all of the new actors. the u.s. military, usaid, all these various agencies within the u.s. government. a similar governments have had other agency responses, like france for example. fire rescue workers, militaries, other people coming in that i do not know of. canada, as well, has had a large interagency presence. i think that we had a very frank and open well working mechanism for court in maine within cells has allowed us to allow that to continue in a larger level. -- a mechanism for cooperating

within ourselves. >> i wonder if you can update us on figures and if the people participating are mainly engaged in removing rubble? >> to the best of my knowledge, the cash for work is focusing on removing rubble. usaid has two separate $50 million programs out there which will be run over the couple months -- over the coming months focusing on providing money for people to purchase food and keep themselves closed. also it is to help clear the rubble which is a gargantuan task. step number one will be to keep the streets clear or getting them clear. again, i do not know how many of you have been down there, but in

many cases building has -- buildings have collapsed into the streets. teams are of there with pickaxes, shovels, and rooms to dump these out of the way to clear the roads. >> the number of people who might be participating? >> i do not know that off of the top of my head and do not want to mislead you. yes? >> can give is a snapshot of the operations of the embassy now? -- can you give us a snapshot? >> on the consular side which is come in a case like this, put forth a huge amount of effort because the primary goal is to look after the well-being of american citizens who are overseas. as i said, early on the first two weeks our efforts were

people wanted to get out with our families -- with their families so we were focusing on that. as time has passed, we are having people coming in from other parts of the country or who have decided to stay and decide they have a role to play in the rebuilding and cleaning efforts. they may need help in replacing lost passports which will be a problem for everyone. many people lost all documentation they had. some people are needing to prove it that day on property if they want to start rebuilding their house. the need papers notarized, etc. -- they need papers notarized. we have pushed a lot of people out of the political and economic sectors in to the

consular sector to a that effort. we have taken a somewhat of a step back and our officers are going back to working on issues like political reporting and working with the political actors from different countries to figure out their ideas for moving forward and reporting that back to washington. on the economic side, people are working on what it will take to get american carriers backed up and running as the airport and what support they need in that regard. the embassy management sector, the public affairs sector, we have obviously had a huge wave of public affairs interest and lots of journalism -- journalists in the country. we have had a lot of help from other embassies in the region who volunteered to come and help.

the management sector, the administrative sector, they have both had a huge job keeping the embassy, frankly, running under very difficult situations. we had a situation where we had many hundreds of people on the embassy compound, many more than it was designed for. we had over 100 surgeries done in our conference room including four amputations. we were trying to get the place in some semblance of normalcy after that was going to be a huge task. again, just making sure that people can go back into their houses, those that still have them. i now want to leave out our colleagues in the securities sector as well. they have done a terrific job in terms of making sure that various neighborhoods are safe for us to go back to.

frankly, they have enabled a lot of the search and rescue efforts and workers who came down in the immediate weeks after the earthquakes of people could have a semblance of security and safety. our usaid colleagues are going to be bearing the brunt of a lot of this work moving forward. there's going to be, as you can imagine, a huge effort of reconstruction and rebuilding. they will be at the forefront of that. anything else? thank you very much. always a pleasure. >> just to continue with other subjects, obviously secretary clinton will be going to saudi arabia and qatar. her schedule has been adapted

slightly. her departure time was pushed until tomorrow afternoon. her primary schedule once she arrives will go on without change. after arriving on sunday, she will then move on to saudi arabia returning to the united states late tuesday evening. undersecretary of burns will be traveling -- undersecretary burns be traveling to azerbaijani, lebanon, and turkey. he will be demonstrating our continued support to sovereign independent of the non. in syria he will meet with the president and foreign minister furthering your continued interest in dialog with the syrian government on all aspects of our bilateral relationship. he will then go on to turkey to

discuss the 2006 shared vision framework for our strategic partnership. he will then continue on to as a rush on -- on to azerbaijan. the administrator for usaid will be in haiti tomorrow traveling there with the general deborah frazier of the southern command -- general doug frazier for humanitarian relief efforts. he will be there during this period of mourning as we reflect on the 30 day anniversary of the earthquake. the special envoy will travel to chad and sudan this coming week

for discussions with members of the sudan's splem on resolving the remaining issues on the implementation of the comprehensive peace agreement. then he will be attending bilateral meetings with both the splem and the congress party and to discuss referendums and post referendum issues. like all sports fans tonight, we're looking forward to the start of the winter olympics and will be rooting for team usa and recognizing the value of the olympics and sports in terms of our joint international goals. we are grateful to our friends in canada for hosting this great event. with that -- >> about bill burns going to syria, is he the highest level

official to go in some time? why now? does it have to go -- do with the ambassador? >> it does not have to do with the ambassador, per say, but to what syria represents. this is further steps in our bilateral relations. we will reflect on a number of issues, regional issues, house syria continues to view -- how syria views the middle east. yes? >> about the statement put out on tony blair yesterday, you said he would be intensifying his partnership to deal with negotiations and political negotiations.

what does that mean? what will he be doing that he had not been doing? will george mitchell of doing something different? >> for example, we continue to work jointly on how to increase the capacity of palestinian institutions. we work on how we can continue the growth and expansion of the palestinian economy and recognize that these have the ability to support the efforts on getting the parties into negotiations. it is making sure we are working as closely together as possible so that on the economic front, the political front, and with negotiations we are doing everything we can to advance palestinian interests as a way of encouraging them to continue to prepare for a point in the

future where we hope there will be a valuable -- a viable palestinian state. >> why the necessity to reinforce the former prime minister blair's role? he is a hard-working guy. i just do not get it. >> we have had periodic discussions with prime minister blair and the courts had. -- and the quartet. we're looking for a variety of ways in which we can encourage the region to move forward. we think that on the political and economic fronts that there is an opportunity here to be able to help provide the kind of support to palestinian leadership that it needs. >> on the political front, his focus has been the economic fronts. what is he doing on the political front now that he was

not doing before? how does that not potentially duplicate senator mitchell's? >> you have to deal with political leaders to make sure you are building the economy. you want to see ways in which the region can continue to invest in the palestinian state. in the west bank, in particular, there has been encouraging economic news. i think that it is a true complement to what george mitchell is doing and we are going to intensify our cooperation to. >> the senator mitchell have any plans to sees his role or reduce it? >> what we were describing yesterday in terms of cooperation, it is not a plus or minus equations. he is working hard on getting

the parties into a negotiation. tony blair is working on his part in terms of building institutions necessary for a viable palestinian state. the u.s. has a role to play in that, as well. i would not say that the advance of what tony blair is doing comes at the expense of the george mitchell. >> senator mitchell will not give up his role? >> not at all. >> you have said yourself we have been unable to get the two sides to get to negotiations. >> we are looking at every thread that is able to support and advance peace in the middle east. success will involve advancing on the political front, economic

front, and the social front. all these elements are importance of people have the confidence to take the important steps to make these difficult decisions that are necessary to achieve what we all want which is comprehensive peace in the middle east. >> still on the issue of haiti, do you have any information on it the status of the detained americans? on haiti, i think there is a concern amongst some international aid groups that perfectly understandable need to rush emergency aid and money to haiti may have the unintended consequence of the starving is some other international aid projects. is this a concern of yours? what is being done? >> let me get the first question. you are talking about the u.s. context? on the first question, the haitian legal system continues

to evaluate the charges. we have received no formal notification from the haitian government as to resolution of this case. i would not expect one through this three day period of mourning. to the extent that the judge in the case have something to announce, i would expect early next week. i know there are a lot of rumors flying out there. we are anxious to see the case resolved as quickly as possible and as appropriately as possible. this is the haitian legal process. when they make a formal announcement, as the ambassador said, we are prepared to provide whatever support is appropriate. >> and just on the haiti issue? >> we are working with omb on

haiti supplemental. we expect the package to go up to the hill in the next few days. obviously, that is an omb and white house decision to announce. the government is not allowed to spend money it does not have. that is a startling fact here in washington d.c. in the face of the earthquake 30 days ago, we have been tapping into accounts that were initially set aside for other parts of the world. this is, in fact, good, solid budgeting and management works. with the supplemental which we expect congress will act upon expeditiously, there is someone down there today evaluating their needs. then we will be able to