for having originated a higher- interest rate loan? >> they would be of great value for me or anyone selling them in the open market. >> there is been discussion that some of the choir had recourse back to you in case of there was the fault. >> for fraud. >> was at 2% of the loans repurchased? >> roughly in that range. less than 5%. >> turning to you, ms. lindsay, did you subsidize mortgage brokers to provide loans at a higher interest rate? >> yes, we had a rate sheet. the brokers could pick their rates, and they would have what is called bar -- the borrower

does not pay and the lender does not pay the bar. and the borrower can also buy down their rate of discount. . the borrower can also buy down the rate at a discount. so it can go either way. if it is a lower rate the borrower would pay for the. if it was a high rate the lender would pay the broker for that. >> the lender in your case being new sentry? >> correct. >> and would you in turn, of course, al qaeda had a price from whomever you sold it to? >> yes. how we had our loans were in bulk sale. so we would sell $100 million at one or 2%, depending on what the market would bear. >> i'm sorry, one or 2% -- >> of the whole package. we would package them in one big ball. $100 million, and some investor would pay us one or 2%. in the early days we would get as much as six and 7%. but later on it was one to 2%.

>> and you get that as an up front fee when you sold a loan? >> yes. so if we have $100 billion, the investor would wire us a check for 2% over the $100 million we would send them all the loves. >> you would be able to sell the highest interest-rate loans -- >> yes. >> at the higher priced? >> yes and investors will look at that and evaluate what price they're willing to pay us. that was probably the difference between the one and 2% after going to pay on a full package. >> commissioner wallace and asked you about whether there were predatory lending practices, which would be practices that were intended to take advantage effectively of the borrower as opposed to mortgage fraud, which was by the borrower against the lender or the investor at the end of the day. werther practices that could be characterized as predatory and

that they attempted to steer borrowers to higher interest-rate loans who might otherwise qualify for lower once? >> not that i'm aware of. i'm sure it probably happened that we had about 7500 employees in our organization at one time so i'm sure that some people did. it was discouraged. we had our policy and procedure. we had our fair lending grew. we had a compliance group, and we would talk about predatory lending, and for example, we would look at somebody's income potential. so somebody was of retirement age, for example, we would not put them in interest only loan, or in some sort of an adjustable-rate mortgage. so we did do things to discourage anything that would appear to be predatory. >> mr. bitner, can you respond to that? >> i can give you an example of that. i think an example, the use of a

specific mind that a 620 or 640 credit score. we would question to ourselves why did the broker not take this long and perhaps run it to fannie mae or freddie mac's automated underwriting system because it appeared it is very possible they could of got a slightly better rate and a better deal for the borrower to do. what we so i think with such a large influx of new originators who came in who are so heavily called upon firms like mine and others that i think the path of least resistance for people are nazis in any in the industry was happy to say i'm going to send to whoever i am, and they will take it and turn it quickly for it. turned alone quickly around and we will close it and will make our money and go down the road. i think we started seeing a lot of that type of thing where a borrower may very well have gotten an industry that could've been three quarters of the point or a point that even better with a little greater diligence on the part of the broker. >> how is it that you capitalize your company be buying all the huge volume of loans? did you have any warehouse last

we were? >> idea. when energy industry, the dollar amounts that were used to fund the coming like mine were substantially less than they were maybe by the time i exit the industry in 2005. loans from parents and a right of other things to capital is a company where several hundred thousand dollars that got me into the business. >> but you had a line of credit available to you from somebody to actually provide the loves. >> correct. through cities warehouse division and gmac, great. >> what do they charge you for that privileged? >> i would have to go back and remind myself but i think it was one was a libor based, plus a couple points. and typically 50, 25 to $50 transaction fee per loan. >> would they then by the party that provide the warehouse line of credit customarily by all the

loans that you originate pursuant to its? >> well, it depended. in this case with the gmac which was our largest investor, they were also our larger warehouse line. they offered us better terms if we were able to use both the warehouse line and sell the loans to them. >> okay. i guess turning to ms. mills, if i could. how often did you require parties from whom you bought the loans to purchase the loan back because of early payment defaults or any other provisions that you had any agreement? >> initially when we first started to purchase large blocks of loans in 2005, we saw about 2% of the loans, the early pay defaults. and the last number that i remember in 2007 is about five or 6% early pay defaults. >> so and then you would go back to institutions like

mr. bitner's? >> no, we don't with larger institutions. we would never bought loans directly from a firm like mr. bitner's and we did not by loans from mr. bitner's firm. so in the example of wells fargo, just because they are still around, if we bought loans from them and we had early pay defaults, we had a system that track them. and we had a unit inside of my department that works with all of the firms that we bought loans from. and it was somewhat of a process. we would send a notice that said you sold us these loans and they did make a payment and you need to buy them back. >> and they were happy? >> it was a fair amount of back and forth. >> i know this will be difficult to answer, and maybe you can't, but how often we able to actually enforce these buyback provisions? i take it you can only enforce it for people who were left with an adequately capitalized down

the chain from whom you have bodies loaned? >> it was a very purposeful and our business bottle that we only dealt with will capitalize institutions. for a lot of the reasons we're talking about today. we place a lot of value on the wraps and warrants that we got from the source when we bought the lowest degree also felt that was important that they have capital to back up those reps and warrants. and so we were very successful in getting firms to repurchase early pay defaults, and tell the firms went out of business. >> right. and then you were stuck. somebody was talking waste. >> we were stuck. >> tell me, were you involved in the securitization thereafter? i mean after collecting all these loans, were you involved in the process of structuring them and selling them as ari be a? >> my group was involved in preparing the offering document. so that i did we perform the diligence on the loans when we purchased the polls, then once we owned the loans, we work with our trading desk in decide what loans would be securitized, and

it was my group to work with the rating agencies and the lowest and the accounts to put together the prospectuses that were used to sell the seekers to our investors. >> so you're the perfect witness answer the question i'm about to ask. that the last year and when we had some of the heads of these organizations before us and recently, i have been sort of reflecting that perhaps the system might have worked better if a variety of people along the way had additional skin in the game, if you will, or had to beat their own cooking was the term that i use, where maybe rather than take all their fees in cash at every step of the process, including the mortgage brokers, the intermediate purchasers, the purchasers, yourselves, you know, the lawyers who wrote the prospectuses, the investment bankers who got paid on the underwriting, the credit rating

agencies, that maybe they ought to take any actual security themselves a portion of their fees so that they are actually long in the security. and that maybe under those circumstances they would have a greater incentive to do a appropriate diligence and to be certain, more certain, that they would perform in accordance with the representations that they made to the investors. have you given any thought to that question, or anything similar? do you think that citi could operate your securitization of these mortgages if you got paid at least in significant part in the security and self? >> in the context of when we purchased loans as a principle, and then securitize of those loans, there was always a risk that we would wind up not being able to sell all of the bond. and would have some of the bonds left in our position. also when we did subprime securitizations, there's a component of the securitization where it's an equity piece that there was no market for, that we

wound up owning in almost all of the transactions where we bought homegrown. >> would that be in cbo's? >> no. >> the first round can you still couldn't sell a portion of those. >> it's called equity off of the name. ninjas net interest margin security. >> but isn't that like 2% of the offering. it very depending on the loans that are in the particular securitization. >> but you would charge maybe 7% underwriting fee off, just these issued a billion dollar art in bs. i mean, you customarily get a 70 million-dollar fee. >> i'm not sure where those number are coming from but in the context of us by call loans and selling bonds the only way to business makes money is if you sell the bonds for more than you paid for the loans. >> okay. all right. so you're saying that your pricing -- so openly, but i thought the impression i got was

that you have pretty ready and willing buyers for these bonds, is that not her? >> we did, but dependent on market circumstances or investor appetite, it is possible that we would have bonds left interposition. but we are a market maker and we bought interposition all the time and bonds that would buy on the secondary market. >> you wouldn't acquire them without the intention ultimately of selling? >> it was always our intention to distribute. >> okay. i guess -- >> we like some additional time? >> just a minute or two of. >> i will yield you too many. >> thank you. >> three minutes. >> and i take it your compensation or your groups compensation i guess somebody touched upon this already, probably heather, but dependent to some extent on the amount of revenue that you generated through the securitization process for your group, is that right? >> i believe that is a component, yes. >> deed you ever -- did any of

these securities ultimately fail in the hands of the investors? if you know. >> failed is a difficult word to use, because it's not a pass/fail said no. >> how about lose i? >> i can tell you they've lost five and a performed worse than we expected. >> now i any time did they come back to see? >> as a market maker, you always have the possibility that someone that you sold bonds to comes back to you and says i don't like this bond that i want you to buy it back from the. >> but how often did that happen? >> i'm not on the trading desk. i couldn't answer that appropriately. >> let me ask you this. if you are country and your incentive compensation of your group was dependent on the origination fees of creating the securities, do you ever have an occasion when they didn't perform as well as expected of any clawback optimization that

went to the group? >> that's not a citi policy as far as i know. >> i guess, mr. boone, i guess i'm not entirely certain i understand, thank you very much, ms. mills. i'm not certain i understand the different area that you had. you had >> i was business chief underwriter of the correspondent area. we actually purchased loans. that part of the organization did not originate mortgages. other mortgage companies originated those loans, and they were purchased by citi. >> right. for what purpose? >> again, it was my understanding on the prime side , most of them were sold off to investors. >> were they securitized? i guess they were?

>> i was not on that side of the business. >> all right. well, then i think -- thank you very much, all of you. i think i have exhausted my questions here. >> thank you very much. mr. thompson? >> thank you, mr. chairman, and good afternoon, ladies and gentlemen. mr. bitner, it is not often that someone would have an epiphany quite like yours that would cause you to change your career, and so i applaud you not so much for the disaster that you had, but the fact that you chose to take some action as a result of that. i'm struck, however, by the fact that there would appear to be no state regulations over this part of the business, but you yourself and many others who physical patriot inside this could see where there were obvious flaws that action should have been taken. so in your opinion, were there

obvious steps that state or federal regulators should have taken that would have reigned in this crisis long before it got out of hand? >> i felt it is very interesting. when you look at people in the financial world who are responsible for managing money in the financial world, most professionals go through some strenuous testing. it amazed me to become a lender or a broker, which arguably is the greatest investment most of us as humans will ever make in the worse of our lives often times doesn't require more than a fingerprint test. texas has the most stringent test, and it is a 70% pass or fail test. i would like to see stricter standards to get into the business just as a baseline for lenders and brokers. a very big believe

and i realize this panel is not focusing on the rating agencies. i have a very strong belief -- >> we will. >> i'm struck him for the purposes of this discussion, excuse me. i know you will. >> you're in line ahead of them. that's the only difference. [laughter] >> and i feel fortunate for that, thank you. the reality is this. we talk about the originating distribute model. we talked about a situation where one is efficient usable all of the responsibility. securitization broke that up where no one truly had skin in

the game. the only impartial group really that was supposed to act anywhere the rating agencies. it still continues to this day to boggle my mind that three years later there has been literally nothing that has been done. this is not a sign of this commission because i realize that's not what this commission is tasked with duty to get back to the days when we could create an arms length distance or find some other way by which they are compensated. that has nothing to do with the bottom of work. >> we are going to try to do something with that down the road. >> that surrey is an area as mr. georgia says, has come to our attention and will certainly look into it a little later. ms. lindsay, can i move to for just a moment, please? >> yes. >> don't take this question the wrong way, but given the class a new century, it literally imploded. wouldn't be fair to say that the risk management function as it existed within the organization was more window dressing by senior management to keep this

fraud perpetrated on as many people as they possibly could? >> with respect to my department, i strictly was in charge of fraud detection and prevention. so i would like to think that we did a pretty good job. as far as the rest of the business unit does come as far as producing loans, that borrowers couldn't afford, the guidelines that were created, yeah, i think it was a mess. one of the problems was sense of values kept going up, one of the questions, for example, i dealt with repurchase request as part of my job. and when i started seeing some of the repurchase request comment specifically the 100% financing, it would bring that to the attention of senior management, and they would say, that's just one loan or to loans. we make 20,000 loans last month. you know, so there were no significant numbers because the

values kept going up. and all of the fraud was masked, and production always wanted to see the numbers to show me the numbers that show me where we're taking a loss. that was the big thing. we couldn't show anybody that we were taking a loss because we were in such an upswing again another time we figured out that there was a problem, it was too late and new century exploded, or imploded. >> so would be fair to say that you were pressured by senior management to ignore those things that your normal barometer would have said are problematic? >> we were basically told to stick to the fraud. if we had concerns about a loan, we had risk managers that were put throughout the country to review loans. and some of their requests were ignored. some of the production teams would override their decisions. and other groups were really good and would sit down with them and figure out why they

were making the recommendations they were. part of the problem was the lack of depth or knowledge in the industry. and so the sales people -- says it was such a new industry, we have so many new employees throughout the country and subprime that had never been in mortgage lending before. so i think part of it was just their inability to understand what the problems were to make informed decisions. so they did ignore the more seasoned professionals who may have had a better insight into what. >> so how much did the competitive pressure, particularly between new century and countrywide, contribute to the level of risk that the organizations were willing to take? >> it was huge. i mean, the account executives would come in and say if we don't do this low, if we don't get this pricing i make this particular bone, arjun, countrywide, and they would name off in other of our competitors who will do it right now, can we

do it faster, better, quicker at a better price. so yes, it was huge. >> ms. mills, the vernacular is all about a proxy for market share in your business. and in my experience with wall street, that's everything. every investment bank, every corporate loan officer, everybody who looks at themselves wants to compare themselves favorably against industry league tables. yet you are proud of the fact that you were sliding. that seems counterintuitive to me to the culture of wall street. what am i missing? >> i won't say that league tables were not something that people talk about, but i can say that there was never pressure to do business just to gain league table position, in my business.

so my management was focus on being profitable and being a presence in the market. but there was never any pressure to be one, two or three. it was, as you know, do business that makes sense. by little you think you can make money and distribute the bonds. and i'm not aware of any pressure to just do business to be higher in the league table. >> so you are an island in the sea of wall street, or an island in the sea of citi? because other parts of the citi certainly had pressure split i cannot speak about my business and my interactions with my management. >> thank you very much. ideal, mr. chairman. smack thank you very much. ms. born? >> thank you very much. mr. bitner, you have just spoken about the inadequacy of state

regulation, or oversight of mortgage lenders and brokers. you also say in your written testimony that there were two statutes in the early 1980s that you think laid the groundwork for subprime lending. and i wonder if you could comment on those. they are the depository institutions deregulation, and money control act of 1980. and the alternative mortgage transaction parity act of 1982. what role do they play in laying the groundwork for subprime lending? >> well, i would be remiss if i said, or inadequate if i said i was truly experts on these winners researching my book and attempting to try to find were sort of a foundational point for the industry began.

several different scholars have pointed me to these particular acts as sort of starting point for we saw a foundation for that. the depository -- the monitory -- the money control act, excuse me, was by and large allowed businesses and lenders to charge higher rates in future borrowers that have not been in place. so there was structure that was put in and around that. the alternative mortgage transaction. act in 1982 also really gave rise to the use of variable interest rates, or what we really now referred to as arms or adjustable rate mortgages. those two in and of itself are certainly a very starting point. i think what really started to kick the industry into gear although those were very minor come the third sort occurred in the early '90s when they came out of a refinance weight in 93. and subsequently like most originators when you find yourself, this time i was not originate in the industry when

interest rates go higher and there's no other way to do loans because people stop refinancing. you look for alternative. it wasn't until a few years later until we saw the securitization of these products initially that was just more portfolio lending at that time specs are basically the role that those two statutes played was to give the flexibility to design new kinds of mortgage products because correct. at that time we just saw people dipping their toes in the water. it was not any sort of major entry point. >> thank you. go ms. lindsay, may i ask you about new century. it was, we avert, the third largest subprime lender in the country from 2005 to 2007. and i wondered what, in your view, caused it to go bankrupt?

>> that's a good question. we just -- we grew too fast. it got really competitive. and then that coupled with a repurchase requests starting to come in as the market kind of flattened out, as the values stopped going up, to mask any fraud or any problems. we started seeing repurchase requests. we had rats and worms with all of our invention as well. and the primary reason to repurchase loans were fraud or first payment defaults. we also a compliance and missing documentation, but the first payment defaults started growing exponentially. it was pretty, pretty busy. the middle of 2006 we create a specific repurchase desk to handle all of the repurchase is. and i just think we couldn't keep up with them.

>> so in other words, you just, because a larger number of the loans that you were selling, were slow in payment for not paying. you had a lot of liability with respect to them? >> that's correct, yes. >> and wasn't also because the mortgage market itself was slowing down, the originations were slowing down the? >> originations were slowing down. i think we pretty much exhausted all of the products we got out as far as we could, and there were no new borrowers out there. i think that was part of it as well. >> thank you. ms. mills, you describe in your testimony how diligently your operation has been doing due diligence on the underlying loans for your mortgage-backed

securities. and also how you cut back on purchases when you saw problems in the housing market. did your operation and kurt any losses relating to the implosion of housing markets? and if so, what were they caused >> i can't give the specific loss numbers. i will tell you that whole loan prices started to drop because of the dislocation that was occurring in the market. we had loans in our position that we owned that suddenly were worth less just by virtue of the fact as to what was happening in the market. we had lopez on our books that were supposed to be repurchased by companies that had gone out of business, and there was nonto go-to-repurchase those loans. we also had a large book of whole loans that we bought at distressed values, and those

loans also lost value. so the business lost a lot of money. we can follow up on the exact dollar amount. but as the zuretization market went away, there was no venue for us to sell the loans and securitize them. and because the business is not running a portfolio, we spent a lot of time in the last couple of years managing the whole loans that we owned. >> has that been a primary focus of your group in the last couple of years? >> yes. >> i would appreciate it if you could provide the information on the losses to the commission. >> ok. mr. ben, you described -- bowen, you described the significant problem with citi's implementation of its

underwriting standards for mortgages, and you said that you saw a significant number of defective products being purchased in 2006 and 2007 and that you tried to alert people, and that the purchases nonetheless went forward. what do you think the motivation or the impetus for going forward with these non-come applying loan purchases were? >> again, that would call on speculation for my part, and i don't know. >> thank you. i will yield the rest of my time. right. thank you very much. mr. thomas? nk you very much.

mr. thomas. >> thank you. commissioners need any additional time for any follow-ups? i want to -- go ahead. >> how much time do you need, mr. wallison? >> i will give you four and a half. >> we will negotiate the five, go ahead. >> microphone, mr. wallison. >> i have some questions for ms. lindsay. you refer to buyers of securitize subprime mortgages as unsophisticated. and that's quite interesting to me. these are buyers, after all, they are people in this business all the time. why do you regard him as and sophisticated? >> they were sophisticated and putting financial deals together. the reason i use the word unsophisticated is because they didn't know the risk of the underlying product.

these are all very high risk loans. >> and then they didn't know that. you thought of them as putting together the pools very well and negotiating i suppose about how these tools would be eventually marketed. but you didn't think they really understood the underlying loans. why would that be too? why do you think that is what i mean. >> my personal opinion is because what i have learned growing up in working in finance and working for hard money lenders and other subprime lenders who actually had a stake in the game, who had an interest in whether the loan performed or not. these were extremely risky loans. so if they would look back at a beneficial mortgage, for example. the highest loan-to-value and officials loan would have loved somebody with a poor credit score, and if they had spots on the credit, or on their employment history, they wouldn't loan than any more than 65% loan to buy. so they would have to come up with that other 35%. so the default -- anybody

defaulted on these loans, the linda was going to take a loss immediately. there was no protective equity, no cushioned. >> you so love to fannie mae and freddie mac? >> yes. >> with a unsophisticated come in your the? >> i don't know. >> was there any -- budget on but the others either. the point is did you think from looking at what they were buying that they might also be in sophisticated? >> i didn't see the actual product that they're buying other they were buying the subprime loans that had the higher credit risk, or the lower credit scores. i'm not sure what loan-to-value's they were using. so i'm not sure which packages. they may have been by a particular pool of loans that had a lower loan-to-value but i don't know the answer to that question. >> okay. ms. mills, in february 2007, you

started reducing your subprime exposure. why? what signaled you to do that? and that paper 2007 was early. >> we had started to see a deterioration in the quality of the loans that were being originated and as the deterioration in the whole loan prices that where loans could be sold. and so because we let money to a lot of people that we also bought from, we have access to the financial statements, part of what they require to do was to send as quarterly financial statements and they were all sorts of financial covenants related to the profitability. so on the fairest of microlevel we started to see that the types of loans that were originated these companies were not making money. and that in combination with the fact that whole loan prices continue to drop, we have started to step with a little bit from the business in the middle of 2006.

we slow down our purchase activity. we stipulate our bits. we tried to buy, if there is such a term, sort of the core subprime product. so nothing goes like an outlier as far as risk. because the credit, the rating agencies were increasing their credit enhancement levels, which was reducing the amount of proceeds that you could raised by selling bonds. so we had to pay less for loans, and because everything we bought was competitive bid, we also weren't winning pools. >> who you bidding against? >> primarily other wall street firms. >> did they do the same thing you were doing, or -- you were selling to others it seemed to me from what you are saying. they were selling directly to investors? >> in very general terms, most of the firms that were in our space i believe bob loans and securitize them. but i can't speak, you know, definitively that that's all they did a. >> but the bidding is still

strong? >> number still a lot of activity, yes. >> one more question. you describe a process of working with investors and the credit rating agency. you said you would get a dollar amount and a rating for the rmbs. then you, you would market to investors and solicit feedback. his house like a very process. i think all of us would like to understand a little bit more have this really worked. >> okay. >> please. >> once we own a pool of loans, we would send a data file to the rating agencies. we primarily dealt with movies, snp and historic each rating agency had their own data requirements so what they they want to see and what format they wanted to see again. we would send them the information, the rating agencies have models that they sort of run the cash flows of the underlying mortgage loans through this model. and their comeback is and tell us how many bonds we could issues that were rated aaa, aa,

single-a, tripled it, and the with the over globalization amounts underneath the bbb needed to be. and then based on, that was sort how we size up the bonds in the offering process. and then we went out to investigate you went out with pricing. so you might try to sell the aaa at libor plus a spread. and you either had investigators or you didn't. if you have investor interest you might be able to tighten the spread. if he did have investor interest, you would have to widen the spread to. >> tightened the spread, with disparate, did the rating agency have any role speak i'm going to yield by the way an additional, we are over, and additional. >> i appreciate that. after you got the initial structure from the rating agency? >> you don't technically get the structure from the rating agency. you just get bond sizes and other features of the deal that are related to credit

enhancement. they are involved up until the actual day the deal closes. the pool could change during the marketing time. loans could drop out. love to go delinquent. so there was always this sort of final to up that goes on. on the day that the deal closes you get a letter from the rating agency that says i, rating agency, cuba, in relation to the security will let you issue this many aaa's and so on. >> did you ever go back to the rating agency during the time you're in the middle of talking to the investors and say we need a change here in this structure or that part of the rating or the number of bonds involved and that kind of thing? so that they changed their assessment and responded to your request and. >> i don't have any specific recollection of that happen in the subprime space. i do in there and i know we're not focused on prime, but in the prime securitization market, i do number instances where

investors wanted more credit enhancement levels in the rating agencies were requiring. >> mr. wallison, we will move on. thank you. ms. murren, you have a couple of minutes, if you would like, and mr. georgia, two minutes each. >> thank you but i do question all of you but it may be a simple yes or no answer. in listening to your commentary, it appears that we've talked about declining underwriting standards and the fact that this is a business where there were fairly low barriers to entry. and that the prices of loans declined over the course of the boom. so when you think about in their own minds weighing the factors that drove the boom, was it demand driven or was it supply driven? when you think about the relative importance of these two things. and then, in consideration of that, do you think that having had better oversight and reasonable barriers to entry, that things might have been different? >> i guess i will take that first pic i think it is a

combination of both. i don't think what happened without the other. and yes, i very much believe had been some barriers or, i'm sorry, not various but greater levels of oversight that we could have prevented this mess in happening, or at least minimize it to a certain degree. >> i agree as far as the load originators go, there needs to be more oversight with that. definitely. as mr. bitner point it out there were several states that didn't even require licensing, and they were allowed to originate loans and that was part of the probl problem. >> from my perspective i think it was both supply and demand driven. i don't really -- i can't really speak that well about the impact of regulation, just because the people that we bought from we believe are regulated or well-run or well-capitalized. so i did have the same sort of negative experience in dealing

with smaller i'm regulated counterparties. >> i was not involve any actual origination of the loans. these had already been originated by the time that i reviewed them. so i really can't opine on that pic. >> all right. thank you. >> mr. george of? >> thank you, mr. chairman. ms. mills, could you tell us in the typical structure that you had when you did these bonds, how were the credit rating agencies paid? >> they were paid the fee that was driven by the transaction size. so it -- >> they got a certain number of basis points up to a maximum cap dollar amount. and then they were sort capped out at the dollar amount. >> but they got a basis points based on the sides of the issue? >> the dollar amount of the transaction, yes. >> that didn't matter how they rated it.

they got a. how many times did you take to market or attempt to take to market a pool of loans that didn't receive ratings that you thought were necessary to sell them? >> i'm not sure i understand the question smack to the rating agencies ever provider rating that was too low for you to be able to market effectively a pool of loans that you securitized? >> what the rating agencies gave us was the dollar amount of bonds in each rating categories. uis have bonded each rating category. and there was typically appetite for bonds with various ratings. >> differential returns spent risk appetite in yield requirements. >> okay. you provided warehouse lines to argent to the tune of about $3.5 billion, is that rights

because it was a argent/ameriquest platform. i think we might've had once more warehouse line with mr. ar. >> later in the process you folks ended up buying argent, is that right? >> yes. >> how did that work out for you? >> could have been better. [laughter] >> that's good enough i think. thank you. >> in terms of the rating agencies and sending new materials to them and getting them back, was there ever something that could be described as negotiations? that is, you got something back from them, you argued back, they reexamined or looked at it? was there anyone that could be fairly characterized as negotiating with the rating agencies in coming up with the final package and agreement? >> what you could do is change the composition of the pool. if you got something where there weren't a sufficient

enough number of triple-a bonds, you could resubmit it. >> when it was submitted to you in that regard, was there any guide annuals or clear understanding of what you could do to make it work? >> what do you mean? >> were there any negotiations with the rating agencies? if you send me a imagine, and i send it back to you, i can give it to you cold, and you have to figure out what to do, or i can give you a couple of hints in terms of moving it in a particular direction, but it would be up to you to make that decision? >> i don't believe so. we know if you pulled out riskier loans, you would have less. >> i could handle that level. were there situations where you had to send it back two or three times to get what you were looking for? that you can recall? >> i don't know that i can answer that. >> well, the answer is yes, or

no, or i don't know. >> i don't know. >> i want to say this. i appreciate your willingness. unlike others, you are in a current position, and we are asking you questions about your employer, and so i'm very sensitive to that. having said that, i am going to ask both of you a serious question. >> can i make a follow-up to the last question? >> go. >> were there ever instances where you might have given the same bundle of loans to two different rating agencies to essentially shop for the best rating? >> there was a requirement from investors primarily on the triple-a side that bonds have two ratings. it was typically moody's, s&p. the demand for ratings agencies was driven by the investors so that we could sell bonds.

>> so the answer is yes? >> well, i don't like the word shop, because that wasn't really the process. the process was in order to sell bonds, you needed to have more than one rating agency. >> ok. did you ever choose the worst one? >> no. n or an emergency party, let's call it a tea party. in the history there was a political party called the know nothing party. that was the response that people would give when questions were answered. what i heard from both of you, one formerly employed, one currently employed, is i think one of the reasons i was very interested in looking at a citibank was in terms of its structure. and basically the answer that we

got back from you whenever we wanted to inquire about what i think most of us would think would be an aspect of the work you were in, or a partnership in some way. the answer was i don't know, because they were somewhere else. i know it's an enormous operation, and i know the history is more kind of a conglomerate than a synthesizing integrating structured. was this done just because of the way the company was billed? or did you go there might have been a design to the separation in terms of the information? and ms. mills come if you want to you can take a pass on that question. mr. bowen? >> mr. vice chairman, i cannot render an opinion as to what the organization structure was why it was. i -- it was very heavily

segmented. and i was responsible for my peace, and other people were responsible for theirs. >> let's revisit your e-mail once again very briefly. was that the first e-mail you ever sent? >> to mr. rubin? >> yes. >> yes. >> did you send into others'? >> at corporate -- >> i'm just asking you, were you an e-mail in terms of communicating with folks higher up the chain about what you saw as problems? >> there are in excess of hundreds of pages of documents that i submitted. >> i'm looking at something that could be characterized as sending an e-mail to hire a in this segmented operation to try to explain something that concerns you. >> i know that the warnings went

to the highest levels within my business unit, which was called the consumer lending group. >> i mean, your analysis of all is going on was a can to the fellow in the field who calls an airstrike on his location because his position is being overrun. and that was about the only way that you could resolve the problem that you are in. so i was just wondering if you have found yourself in those predicaments more than. >> you're talking about prior to citi? i don't understand. >> no, let me ask you. it was segmented and you wanted to send an e-mail. and you have, i use them, a book with people who are in your company, and you have a choice of selecting who is you want to send it to.

my question would be, why did you pick move in and not prince? >> there was speculation in the press leading up to that weekend that mr. prince would no longer be with the company. there was announced that there was going to be a special board meeting. but there is. >> but there was no water coming with folks in the coming have this info? you had to go find out about in the press rather than the scuttlebutt in the company's? >> i don't understand your question, mr. vice chairman. i'm sorry. >> we will just leave it at that. but you decided based upon what you read in the press, there may be a structural change in your company. and that putt did you do e-mail to rubin. is that because he wasn't speculated as being removed? >> i was -- i knew that there were issues that were being

considered by executive management. and the board of directors. and i felt like i needed to get these in front of them because to my knowledge, they had no -- they had no knowledge. >> and if you were giving it to the board of directors, it made sense it could've been rubin within the board of directors. was that a motive to get it to rubin? >> it was again speculated and the press going up to that weekend, that mr. rubin would be taking over for mr. prince. >> thanks. i'm interested because i don't know anything about it, how you operated in terms of -- i was a relatively small amounts of money. mr. bitner, you talk about how you got your company up and going. and would be correct to say that there was no chance of growing

that company, save for the warehouse concept where you could use these other folks money to do what you would otherwise do because you couldn't bootstrap itself, is that active? >> i think i understand your question. we did grow the company. the reality is warehouse lenders is based on amount of leverage. typically a 10 to 15 to one. so the amount of loans that i could find was i think limited to initial 10 to $59 on a monthly basis. about my country chosen of the companies that i knew also, we took most of our money and put it back in the company, to our net worth to grow the size of her warehouse lines to try to be able to find a more business is. >> at least in terms of new century, you were involved in that as well. >> yes. >> i guess i'm kind of figure out how you find out about this stuff. we discussed earlier state regulation, and perhaps problems

that were not there. you have professional organizations, don't you, where there are newsletters that were going out? . . >> you know, we did talk about that. nobody ever talked about, -- some groups did talk about the increasely risk with the interest only loans and when they readjust. that was more of our compliance department and fair lending

group who would talk about stuff like that. >> was there a discussion when you got into the whole business about the risk associated with that? >> the risk with boring the money to make the loans? if we didn't sell the loans, that was probably pose the biggest risk to us. >> but there was plenty of opportunity. >> there was plenty of opportunity for a long time, yes. >> long time is what in your business? >> well, we were founded in -- we made our first loan in january of 1996. then we declared bankruptcy in april of 2007. >> that was a long run? >> for subprime, sadly, yes. >> you were in at the beginning and collapsed when everybody else did. >> yeah. >> thank you, mr. chairman. >> thank you, mr. thomas. terrific. let me i have questions first for mr. beau than.

i'm going to start is with you. i want to try to get a good understanding of what i do look at the data in the citigroup, it appears in the various lines of business where citi was buying, selling, securitizing, or holding mortgages it shall with looks as though the writedowns would be in the business of $20 million. this would exclude what happened in the collateralled debt business. i'm trying to get an identical of risk. how the losses occurred. how they might have been avoided. in your opening statement today you talked about how your review, i guess of the underwriting standards in the business lines you were in which is the wine of mortgages for portfolio and mortgages for

sale. >> i was not involved on the selling side. just on the purchase side. >> purchase side. all right. you made the comment on what was happened made a mockery of citi's business. i want to go to your e-mail on december 3. i believe mr. prince stepped down, what on the 5th? so hastened down a couple days later. looking at your memo and having looked at the transcripts of the interview of our staff with you, it appeared from the sale of the third parties, you indicate that's a $50 billion business. you underwrite a small sample of those who see to what extent i want to get clear -- to what extent they met your policy criteria. you were concerned that the sample size was too small. that the policy called for 5%

sample, is that correct? that you believe there was undersampling? >> yes. that is correct. >> okay. secondly i want to understand if 40 to 60% of the files are either outside of the policy criteria have documentation missing from the files and then it rose to 80% tell me specifically what that means. these were standards that citi was selling for what it would buy, or was it verification that the loans were what the sellers represented they were? in other words, is it a standard you set or you sampled these things to see if they meet the standards that the sellers say they meet. the sellers represented that they sold to citi according to our standards. and it was our standards i measured those loans against. >> well, i guess what i'm understanding is you had

standards, and they had to meet that standard, and they were deficient meeting that standard, but the purchasers were happy notwithstanding that, correct? >> the purchasing of the mortgages was against our standard, but we did not underwrite all of -- in fact, we did not underwrite any of the mortgages there prior to their being purchased. >> what i'm saying is when you say these were deficient, tell me how they were deficient? >> in one of two ways. one, they were not underwritten against the expressed guidelines by city, or they were underwritten and they purported to be against the guidelines by citi, but they did not have documents required by citi policy to support the assumptions that were made in

the underwriting decision by the originating lender. >> ok. and what were the risks that flowed from that? that you would be getting loans that were suboptimal, that weren't written properly, that had risk and risk layering that were inappropriate for mortgages that you would hold and potentially resell, correct? >> the risks from my standpoint, as i outlined in my memo to mr. reuben, that we in tun, being citi, represented to the investors that these mortgages were made according to our guide lines. >> and they were not? >> and they were not. >> is that also applied in correspondent fundings, wall street purchases, the same essential problem? >> we did do underwriting in the wall street subprime channel. >> but you were overridden, is

that a fair statement? >> in many instances, that is correct. >> you believed the risks were too great, and you were being overridden? >> there were many instances where my underwriters' decisions were reversed >> honk have you been in the risk management business? having run a business. there are always people who recommend for and against certain transactions, but did you see a mark change? hard time -- >> i guess i'm saying did you see more overrides, in other words, absolutely. >> all right. so you saw accelerating overrides. all right. let me talk to you about another party.

ms. mills, the one you said could have been turned out better, one of the most aggressive lenders located in the state of california. and as i understand it, from looking at documents that our staffs put together, there was an interview to acquire a captive subprime originator to give you a flow of loans. you reviewed that transaction didn't you mr. bowen? >> i was involved as mr. davis was in the due diligence of that acquisition. >> and you recommended against it? >> yes. >> and on the basis of? >> we sampled the loans that were originateed by argent and

we found large numbers that were not underwritten according to the representations that were there. >> okay. large numbers. what kind of percentage? i do not recall, mr. chairman. >> i have no access to that document. >> okay. you don't have access. >> it was enough to cause you some concern. because obviously you state that as the reason for your decision. >> yes. >> there was a lot. >> yes, sir. >> all right. whatever that means. terrific. let me move on now to ms. mills. you mentioned there were certain underwriters you didn't feel comfortable doing lending business. were you in the ware house business? >> yes. >> my understanding is citi extended $11 million to ware house lines. so in a sense, and i'm sure

there are many other institutions that provided these, so you were providing fairly significant credit report. i guess my count there were about 26 of them across the country. let me start by picking up and saying when you said they are somebody we wouldn't be comfortable with, give me an example of entity either purchasing or providing the warehouse line. >> sometimes when we go to visit a company that wasn't a start up but hadn't been in business for that long, we would go out and conduct an onside review and meet with senior management. having done this and having people on my teams that had done it for many, many years, there's a reaction to whether or not the companies knows what they are doing. where that's the management, whether or not they are making money, what the business plan

is. so there are con treat examples that you can look at such as profitability, but there's also a sense that, you know, maybe they are not ready to do business with us. maybe they need to have a little bit more time under their belts before we would be comfortable they had worked out the kings, for instance. >> would you normally also get a commitment to having them funnel product to you? were they linked agreements? >> no. >> of course there was the relationship. >> part of the reason was to establish relationships with the originators. but there was no direct linkage. >> there were 2600 companies. which i believe is -- excuse me, sir. >> my concern is how much you

rejected. >> i can't remember. i know there are company that is we went to see that we did not lend money with. i knew we did not review because of the comfortable operations. >> did you have an average? >> our minimum capital requirements, it's not like there were hundreds of companies to choose from. you know, i really would not -- i wouldn't want to speculate. >> you wound up with 26. so it's like 100 batting average? >> i like right now is 26 is every warehouse line that we've done. some of them have nothing to do with subprime. they are current lines that were financing fannie and freddie fha loans. >> there's agency and nonagency. correct. it's one of the documents which i'm sure the staff with classify. let me proceed on this. one thing that mr. prince, and we'll have a chance to talk to him tomorrow morning. one the things he said, he said

two things. i want to see if you share his views on these matters. he said, i believe in the hindsight, the lack of adequate originate of mortgages create the situation on the demand side found a place where more raw material would be created and created safely. more and manufacture these mortgages were created as raw material for the securitization process, not surprisingly in hindsight, more and more of it was lower quality. at the end of that process, the raw material was bad, tockic quality. that's what ended up coming out of the other side of the pipeline. the second thing he said is, i found out at the end of my tenure, about the warehouse lines, he found out they would be extended,dy not know it before. $11 million of warehouse lines. getting that close to the

origination function, being that involved in the origination of some of these products was something i wasn't comfortable with. on reflection. do you share his view about the tock silty of the -- toxicity of the problem and mix the business lines between what you did as the third party buyer of originator and sellers. >> i'm not sure what mr. prince was referring to when he talked about the types of loans that he referenced. i don't think there was a mistake for us to lend money. i think it was a way to facilitate the business. that was to create mortgage-backed security. we were not that close to the origination side of the business. we bought loans that cloned, we never set money to the

originator, we set up the warehouse lines so that there were mechanisms where we couldn't be deemed to be the originator. we were in a different position than an originator of loans themselves. we had complete control over what we bought and what we were willing to finance. our warehouse lines had restrictions as to the types of loans we would finance. we would not finance every type of loan, we will limited as far as types of loans, ltvs, season of the loan, how long the loan could stay on the line, it wasn't a blank check to an originator that we would finance anything they originated. >> all right. let me -- okay. john, do you want to ask? okay. yeah. well, it'll be hopefully surgical here. this is an origin point. after mr. thomas asks his question, i may return to ask

all of this you question. i want to go to the responsibility of a market maker. everyone here at some level has their business model, they are originating, securitytizing, and you've said today and others have said, we are market makers. whatever people want to sell and buy, we will be market makers. what's the responsibility of a market makers to ensure that the product they are moving into the marketplace is a good and sound product? in other words to undertake the responsible level of due diligence that you would feel absolutely comfortable that this was the kind of product to move akin to manufacturer who makes a technology or a -- you know, a toy manufacturer understanding whether or not that toy manufactured perhaps in another country had led in it. what's the responsibility of market makers in the financial system to warrant the products they are moving? >> what was the last part?

>> the warrant to stand behind the quality of the products they are moving through the system? and just, you know, it's a large question. to the extent that everyone is saying i'm just passing this along. where's the responsibility along the chain for ensuring the quality of the products moved into the system? because i understand, can i ask you a question, duh not have your own underwriting standards, you relied on underwriting of others. >> correct. we believe we conducted the appropriate diligence which is a document that you deliver to investors that we had high confidence that what we were telling investors about the loans were accurate. there were pages and pages of with information about the loans, there were page of risk factors where we told investors every possible scenario that could describe something that

would go wrong with the securities. there were pages that described the origination and guidelines of whoever the originator was for that particular pool. there were ratings from rating agencies on these bonds. and our job as an underwriters is to comply with securities laws and, you know, this business is regulated by the scc. we used outside council to make sure citi as a form and underwriters was protected. it's the investor decision to buy the bond. >> all right. well, you did have different standards for the loans that you were buying to hold; correct? different standards. in other words, in the business, you accepted whatever was given

you to; correct? >> i believe so, yes. >> and then on the other side of the business where citi was originated to hold, they had a higher standard is my understanding. >> i'm not familiar with the standards. >> are you familiar? >> i was not involved in the origination channels, mr. chairman. >> do you agree with ms. mills characterization of the responsibility of market makers? >> i can't express an upon on that. >> all right. last question here. >> mr. thomas, do you have? >> the phrase market maker, i guess in your analogy, which i would like to follow through on, that you have people who make products. we're talking about what motive they had to make sure the product wasn't toxic or if you sell a baby plan cell. -- blanket to make sure it

doesn't burn easily. there are actions, plus you have other folks looking at it. you started off your testimonying indicating that was the responsibility of the people who were buying the product. i mean a good old fashion, we're putting it out there. but it doesn't have anything to do with us if it goes the direction that apparently almost everything was going. i was hearing a little bit of that out of you as well. commissioner, georgiou said maybe if you had some skin in the game. do you think if you were on the line, you wound up with a lot of loss. in terms of each and every product you put out there, it would have been sobering, or there was just so much to make that, you know, $20,000 out of $2 million isn't that big of a number. keep shoving product?

>> yeah, i think that if you have skin in the game, you're going to protect it more. i think it got so overwhelming at the end to try to get product to sale that the@@@@@@@ @ @ @ @r

28, 2007 nonagency strategy memo. i don't know if that was yours. it was not yours? okay. because would you know who's it was just because it speaks about even as late as march 28, 2007, it talks about gaining additional access to mortgage origination, both full and bulk to enable citigroup to grow its home loan purchase business. you know, for instance, when it would have emanated and where it ended up? >> i believe that presentation was put together by the business management unit of global markets. >> which would have been above you or -- >> business management is sort of, you know, they management the business. >> but it was not your document? >> no. >> so i will put that aside and

ask them about that document. i do understand that you slowed down your purchases, but at the same time, and they'll be here later today, the collateralized debt obligation was ramping up. it was raising its limits from $30 billion to $35 billion. there was a unit that had $30 billion in writedowns. was there any communication between you directly as someone who's buying, seeing things in the market, securitizing, and yet folks on the other desk who are ramping up, buying their residents, you know, their mortgage-backed collateralized debt obligations being able to ramp up the same time you are pulling down? >> no. >> all right. thank you. mr. thompson.

>> ms. mills, pardon me with tables. if they didn't matter, why buy argent? were you involved? >> i was involved in the diligence that went on for the argent platform because they were a client of ours that i had done business with over the years. at that time in the market, a lot of other wall street firms were buying originators and their -- we didn't think that the end was there. we didn't think that it was over. we didn't think that was the end of subprime. >> so lead tables did matter? >> this is not about lead tables. >> market share did matter. >> i didn't say that. this is about having access to originations so that we could supply bonds to our fixed-income investors. and so with all of the other origin originators, independent being bought by other wall street firm for our business and

our business of creates mortgage-backed security we were concerned about having access of supplies. argent was a platform that was available, we knew them, it was a very long month to month diligence process. in that time, call it the summer of 2007, the subprime market and securitization essentially dried up is our view. i think we thought of it as akin to fall of 1998 where the capital market froze for a couple of months. then they balm unfrozen. argent had stopped originating loans because our purchase was bending. and our thought was until subprime came back, we would use the platform which was just an origination platform, if it didn't have any loans in it. and we would originate agency eligible loans and fha type loans until subprime came back and because it was out, we could

control the types of loans. we with all know how that worked out. >> thank you. >> on that question, at some point, somebody decided it would be better to have them in house than the business model you were following. >> to buy the platform? >> yeah. >> in the context that there weren't that many independent originators left. >> and it was easier not to do that because you didn't have that other side load to attach? do you know where that decision came from? where were the groups that discussed moving in that direction? >> moving in the direction of? >> i know i discuss it with my management. and i know that i was involved in some discussions with the two gentleman or one of the two who ran fixed income. after that, i was not involved in any direct discussions. >> would you say that you were

rightfully so kind of one of the originators of the idea? >> no. >> no. do you know where it was originated? >> no. >> okay. consistent. thanks. >> all right. members, we are close to on time considering our lights out problem earlier in the day. i want to thank all of you for the time you've given us. and for your answers to our questions, i appreciate it very, very much. we are going to take a 10 minutes break, ladies and gentlemen. and we will be back here in 10 minutes. thank you very, very much. [silence] is important it is

operationally independent and its job is to protect the

interest of the u.k. taxpayer. >> order. questions to the prime minister. sandra? >> mr. speaker, i'm sure the whole house will join me in paying tribute to the two british servicemen who've lost their lives in afghanistan and the last week. from first battalion guard, michael sweeney and from third battalion the rifles rifleman mark turner. we owe them an image of old debt of gratitude. they were both engaged to be married, and our thoughts are with their loved ones and their families. mr. speaker, it is because of all our brave men and women in iraq and because of them are country and families is safer and more secure. i think at this time it is right to remember all who have given their lives in iraq and afghanistan, and all those who serve in our armed forces. i spoke to president karzai and then president obama yesterday. our security forces will be

increased by around 500 in afghan security forces, providing greater security for people in the region. and support to our troops. mr. speaker, we are reminded the of the sacrifice today made by our emergency services. we send our condolences to family and friends of the two brave firemen who died last night. we pay tribute demonstrate by all our emergency and public servants. mr. speaker, this morning i had meetings with others in addition to my duties in a house. i shall have further such meetings later today. >> stand on for? >> met at my condolences to all those who've lost their life for the service of this country. mr. speaker as he is reelected will the prime minister stand that he will not take a pound out of the economy? >> mr. speaker, the big issue is whether we can secure, whether we can secure an usher the

economic recovery to withdraw 6 billion pounds from the recovery now would put jobs at risk, but businesses at risk and put our address. we cannot cut our way to recovery, but we could cut our way to the double-digit recession. mr. speaker, in 2011 we will use the rise in national insurance to guarantee that we have our policing, guarantee we fund our schools, and to make sure that the health service guarantees of cancer care, these are guarantees that will be kept because of the decisions we made. >> david cameron. [shouting] >> thank you, thank you, mr. speaker. can i join the primers in paying tribute to guardsman michael sweeney and to rifleman mark turner who have been killed in afghanistan in the last week. afghanistan in the last week. 280 bridge servicemen@@@@@@g"@ $

as mr. speaker, this is the last prime minister's questions of this parliament it is the last chance for the prime minister to show that he is accountable for the decisions he has made. [shouting] >> will he start by admitting that when british forces were sent into helmand they did not have sufficient helicopters to protect themselves and get the job done? >> mr. speaker, i do not accept that in any operation in which we sent, to which we sent our troops that are commanding officers gave wrong advice and told us that we -- and told us --

[shouting] >> they were not properly equipped. and every time in every operation we asked our commanding officers, are we able to do this operation, and are commanding officers have said yes, they can. so i have to say to him that we have done our best to equip our troops and we will continue to do so. it is right that i take full responsibility, but i think -- [shouting] >> but i think the advice of our commanding officers and advise of our commanding officers is very clear. >> david cameron? >> the answers sums it all up. take no responsibility and always blame somebody else. [shouting] >> why can't he just admit something that everybody knows to be true? there were not enough helicopters. let's listen to the colonel, former commander. he said this, repeated demands for more helicopters fell on deaf ears. increase risks for my

paratroopers. but as he put the decision-makers, yes, the ministers, they were the one driving into combat when they should have been flying into combat. the foreign office minister that he appointed said as late as last year and i quote, we definitely don't have enough helicopters. presumably the prime minister will tells all these people were just a seat. >> mr. speaker, mr. speaker, we have increase the number of helicopters in afghanistan. we've increased the flying time by more than 100% that i think he should recognize their adapters so they are now in afghanistan, he's also recognize, he should also recognize that the chinooks were also adapted so that they too could be in afghanistan. he should recognize that we have other helicopters in afghanistan that are working, and we are part of an international operation in afghanistan where we shared equipment with our coalition partners. and i have to say to him, the amount of money spent in afghanistan now is 5 billion pounds a year.

that is 1000 extra vehicles, that is twice the number of flying time hours per our helicopters. and i think he should accept that our troops, for the operations they are asked to undertake, have been given the equipment they need. that is the right position. >> david cameron. >> no answer. and i have to ask you this -- [laughter] [shouting] >> order. government backbenchers must calm down. mr. david cameron. >> and why should anyone believe this prime minister when he was of the first in history to go in front of a public inquiry and not give accurate information about defense spending? let me ask about another decision for which this prime minister all to be accountable. in the last 13 years, he has robbed pension funds of 100 billion pounds. his own welfare minister said this, when labour came to office we had one of the strongest pension provisions in your. and now to prevent some of the

week is. presumably he was deceived as well. were the prime minister finally admit that robbing the pension funds was the wrong decision for britain? [shouting] >> when he said there was no answer to the last question, it is him that is never given an answer on any single policy. mr. speaker, mr. speaker, as far as -- as far as pension funds are concerned we debated in this house two years ago and the shadow chancellor put up the case that the dividend tax credit had, i showed at that time that during the period before the stock market crashed what had ask a happen with the resources of the pension funds had doubled. he lost his case when he put it to the house of commons. there is no use trying to put it again. what we have done -- [shouting] >> what we have done over the last 12 years, the pensioners winter allows opposed by the conservative party. what we are saying we will do is

link pensions to earnings, taken away i a conservative government. what we have done is taken 2 million pensioners with a pension tax credit and giving them dignity in retirement, again a post by the conservative government. and what we now have is a nationally concessionary fare scheme which gives pensioners a chance to travel the country at risk under a conservative government. >> david cameron. >> that, mr. speaker, is the sort of reception we're going to rebut in this election campaign. [shouting] >> and he must be, he must be the only person in britain who thinks robbing pension funds was a good idea. this is what his own adviser who sat in number 10 downing street said, this prime minister will go down in history as the one who destroyed our pension system. he just ignores what he doesn't want to hear, and he tried to cover up the consequences. people are finally starting to

rumble gordon brown, and it serves them right. [shouting] >> presumably she was deceived as well. let's take another decision which the prime minister needs to be held accountable. [shouting] >> order. honorable and right honorable members are shouted themselves hoarse before we even got to the castings. >> they were shutting out about national insurance contributions and this is a question about national insurance contributions. the prime minister has made the decision to introduce a jobs tax which will kill the recovery. this morning on gmtv he said that business leaders who opposed this decision have been easy. is the prime minister really telling us that he knows more about job creation that business leaders who employs almost one many people in this country? >> mr. speaker, once again i have to tell him about what happened during this recession. and what we have to do to take

this country out of recession. we had to nationalize northern iraq and they opposed. we had to restructure the banks. business support us but they opposed. we had to take action to secure help for the unemployed. businesses support the future jobs fund. they opposed it. we had to take action to help homeowners. business supported it. they opposed it. and we had to take action to help small businesses. and they opposed the funds that were necessary. as far as national insurance is concerned there is a choice. there is a clear choice. we can put the national insurance up, and therefore protect our schools, our hospitals and our -- or we can do with the conservatives traditionally do, and that's put our hospitals, police and our health service at risk. [shouting] >> the choice, the choice is to go on wasting money and put up tax on every job in the country. [shouting] >> this is what they said. cutting government waste won't

endanger the recovery, but putting up national insurance will. let me ask him again, does he believe that these business leaders including members of his own advisory council, does he believe they were deseeded? >> mr. speaker, we cannot cut our way to recovery and that's why to withdraw 6 billion pounds from economy now is the wrong thing to do. let us be clear the conservative policies would put jobs at risk in neatly, with put businesses at risk immediately and would put growth at risk immediately. as far as 2011 is concerned, we've got to make a decision. do we want to maintain the improvement in our policing, our public services, our health service guarantees, and maintain investment in the schools? we say that will cost that xmi our national interest. they say no. public must make up to my. to the want the public services to be maintained or do they want the traditional tory policy of putting our public services at

risk? >> this morning the prime minister said these business leaders have been the seat. since then another 30 business leaders have come again and -- [shouting] >> let me just read the prime minister, paul walsh on the prime minister's business council, not a tory, one of his advisers. [shouting] >> yes, yes. he's probably a tory now. so is half the country. [shouting] >> let's hear what he had to say. and if it is not to decline businesses have been the seat, national insurance is a tax on jobs. let's hear from john egan, former head, how can there be a deception? national insurance is a tax on jobs, pure and simple. isn't the truth is, this prime minister would wreck the recovery by putting a tax on every job on everyone earning

over 20,000, a tax on aspiration, a tax in every business on the country? this government would wreck the recovery. [shouting] >> mr. speaker, mr. speaker, it's the same old conservative party. >> order, order. order, order. order. members must calm themselves. there are several weeks to go. the leader of the opposition was heard in the prime minister will now be heard. prime minister? >> once again he said nothing about the future. it's the same old tory. mr. speaker, to think he was the future wants. [laughter] >> mr. speaker, mr. speaker, the shortest ever -- mr. speaker, 2.5 million more jobs and striking 97, a sure start in every community in our country come more people staying on a

school at ever, more students going on to university, more pensioners out of poverty. more dignity and security in retirement, and we are the government that has plan for the future. they have nothing to offer, on a labor government. [shouting] >> mr. speaker, is my right honorable friend oh where that on the weekends the bbc has claimed it as the hungriest place on earth. given my right honorable friend's outstanding record on international development, will he use his influence with the international community to ensure that the helpless people of that region are recognized for the suffering that they now endure? >> mr. speaker, as long as there are children suffering and as

long as there are mothers die in childbirth, and as long as there are people who are young people not getting education in schools, we have a duty as the country to act. i think my right honorable friend has done a great you to push this forward them that we as the government have doubled expenditure in real terms for overseas aid from the -- to 9.5 to today, and that is a doubling of our investment in overseas aid that is unparalleled in the last 20 years in any country. and i have to say, i would hope there would be all party consensus that spending on overseas aid can continue. >> mr. nick clegg. [shouting] >> i would like to add my own expressions of sympathy and condolence to the family and friends of rifleman mark turner and third battalion the rifles, and guardsman michael sweeney, first battalion guards. having served so selflessly and

bravely in afghanistan, have lost their lives there this week. we owe them and everyone who has been killed and energy in afghanistan into a huge debt of gratitude. i would also like to join in paying tribute to the bravery and sacrifice of the two firefighters who lost their lives in southampton last night. mr. speaker, today he and he are trying to fool people -- [shouting] >> by trying to fool people with her theory about political reform. last week, yet last week we had yet more troops, this is not true, the minute -- here in black and the labour party protecting their trade union paymasters them the conservatives protecting their paymaster. [shouting] >> who do they think they're getting? after sabotaging this deal, after sabotaging this deal, why should anyone trust a single word they have to say on police

or reform? [shouting] >> mr. speaker, there is one person that prevent the liberal and labor proposal getting a great by the conservative party. they withdrew from the talks. the reason is one name, lord ashcroft. that was the reason. [shouting] >> order, order. the house must calm down. member -- order. members should say their voices for the conversation they will need to have with their constituents in the coming weeks. mr. nick clegg. order. mr. nick clegg must be heard. mr. nick clegg. >> mr. speaker, their answer was ridiculous that the two parties are colluding together to block reform. just last night they colluded to block the most minimal reform our electoral system. just by the way they came together to block our proposal to give people the right. they came together to block our proposal to clean up lobbying. mr. speaker, we all remember back in 1997, the house of this

new government, look at them now. look at them now. you fail. is over. it's time to go. [shouting] >> mr. speaker, it seems like a speech instead of a question. mr. speaker, he cannot deny the fact that when we discussed a lack world funding and political reform the labour party and the liberal party of greed on the means to reform the political funding system. there was an agreement between our two parties. the conservative party got out of the agreement and they pulled out of the recommendation of one person, the person who finds the conservative party, the person who has given 109 pounds to the conservative party, the person who has been offshore for many years, and that is lord ashcroft. [shouting] >> linda gilroy. >> the first new medical

hospital for 25 years. what plans does the prime minister have to protect the progress that has been made the way in which waiting list have plummeted? >> mr. speaker, we have given every patient a guarantee that they will receive treatment within 18 weeks of seeing the doctor. that is a guarantee that we give personally to every patient, and in the next parliament they can enforce it and go private or go to another health authority if it is not meant. the opposition party which used to back that guarantee. we have given a guarantee to cancer patients they will see a specialist within two weeks. and in the next apartment they will be able to other diagnostic test within one week. that is a guarantee we have given. the opposite party will not support that guarantee, even to cancer patients. we have given a guarantee to general practitioners that they must be people in the weekends or in the evenings as well as during ordinary working hours. as a guarantee that we're giving, but the opposite party refuses to support a. people will make up their minds

in whose hands is the health service save. it's in the labour party's hands. >> the prime minister opened his election campaign yesterday by promising to campaign amongst real people. but he spent the whole day visiting the homes of staunch labour supporters. [laughter] >> does he intend to spend the whole campaign visiting and moving from state house two state house. [laughter] >> by the time i met them all, they were all staunch labour supporters. as a result of the message we put him. i had to say yesterday, yesterday i visited a number of places and i asked, and i asked people, i asked people what the major issue affecting them is. and they said they wanted to secure the recovery. and i have to tell people that the conservative party taking 6 billion out of the economy would put the recovery at risk. the issue is very clear. jobs with labor, unemployment

under the conservatives. >> mr. speaker, will my right honorable friend heed the warning of the former bank of england member, that if you follow the advise of the right honorable members lord whitney and patent and took persistent action to cut the deficit, it was late out onto unemployment unemployment but the rising poverty, social disorder? >> mr. speaker, this is the central issue of this you. will be secure the recovery? the conservative party says take 6 billion out of the economy and it doesn't matter. in fact, take six-point out of the economy now and there is more on deployment, more businesses go under and there is less growth. i believe when you look at what people are saying in an doing in every other country, they are saying we got to secure the recovery before we take any further action. only the conservative party is think a money out of the economy now. they have made a historic

mistake. >> will the prime minister confirm the whole truth about helicopters? as confirmed by parliamentary officers from the ministry of defense. that he has already cut helicopter numbers from 522 to below 500 over the last 18 months. and under his plans, by 2020 there will be only 303 helicopters, a cut of 42%? >> mr. speaker, i'm sorry that he takes this to because we have ordered -- [shouting] >> it does we have ordered more helicopters for the future. we have reconditioned to be in afghanistan. we have repaired the chinooks in such a way they cannot be used in afghanistan. and we have increased the number of helicopter hours that are being flown by our troops. now that is the answer to those who say that not enough is being done. more helicopters, more

helicopter hours in afghanistan, in afghanistan now. >> has my right honorable friend had a chance to read in yesterday's financial times most of which speaking for the change of government britain will find itself dangerously isolated in europe? [laughter] >> does he agree, does you further agree that we must work with chancellor and other leaders and not get into bed and breakfast with extremist politicians, the holocaust, that are not acceptable in our democracy? >> mr. speaker, if the conservative party had really changed the would've changed its position on euro. but it's the same old conservative party moving further and further to the extreme of europe. can't form an alliance with chancellor merkel or with president sarkozy or with the right democrat parties in your. so they have to go into alliance with the most extreme comments

of europe, and alleged thing they did was vote against the transfer of information to do with the problem of tax havens, exactly the sort of policy lord ashcroft would want him to support. >> what did the chancellor mean when he said that the job losses resulting from the national insurance hike would be manageable? how many is manageable? >> i will tell the conservative party about jobs. jobs is helping young people. jobs is helping young people to get into work. and 200,000 jobs created by the future jobs fund now and over the next few months. jobs is also helping young people stay on work with getting working in education. the summer school we are care in teen. and jobs is helping small businesses through this difficult time with the time to become with a reduction of business rates and with the help we're getting them now. take 6 billion out of the economy now and you put the recovery at risk.

take 6 billion out of the economy, and that means that thousands of jobs would then go. >> d. in court a? >> thank you, mr. speaker. the prime minister is aware of the effects of the retrospective introduction of business rates on company operations around the country including my own constituency. five years after th the invitatn evaluation of his agency has many companies. one went out of business after being summoned for a rate increase which was reduced on appeal. with the prime minister me with the chance and the department and get a fair and equitable solution to keep jobs in our port is a? >> i am grateful to him that he has been a persistent advocate of the port and the jobs that are created as a result of that. i have to say to him i'm happy to meet with him to talk about this issue and to talk about what we have done, which is equal interest repayments in

installments paid over an unprecedented eight years. i am happy to talk to him about what more we can do. >> has my right honorable friend authorities said, a member of the prime minister's own management committee, this advisory committee, has said i don't feel -- [shouting] >> it's my firm do that the proposed national insurance increase is a tax on jobs. so why does the prime minister think he's got it wrong. >> mr. speaker, i said the country has to make a choice. the conservative party have made their choice but i say to the country, if we want to maintain and improve our schools, if we want to maintain and improve our policing, record numbers of policing in this country, neighborhood policing, and if we want to ensure they can to guarantee, a gp guarantee another guarantees of our national health service, and

that has to be paid for. i believe the country will make the choice in favor of maintaining and improving our public services. i think once again the conservative party are exposed as the party that opposed public service improvements in our country. >> thank you, mr. speaker. over the years there's been a continual drift away from the imposition of the direct taxes to indirect taxes. as the prime minister knows, these bear most of only on those who can afford least. and i wonder if the prime minister will agree with me, it's becoming time that we went back to the traditional labour party policy on taxation, and that is to redistribute wealth in favor of poor people. and i would like to see in this general election say that he's going to see that there will be

direct taxes imposed on the billionaire rich and we should be paying the real bear of taxation in this country. >> mr. speaker, there is one point on which i would agree with him, and that is the importance of tax credits that have helped -- that have helped lower income and middle income people get out of poverty and secure their livelihood. the conservatives are not interested in tax credits. 6 million families in this country received tax credits. 20 million children and mothers and fathers benefit from tax credit. one of the cuts the conservatives propose for this year is to cut child tax credits for middle income families. now that we do more to push people into lower income groups than anything else. they should change their policy and help middle income families in this country. >> david green?

>> the prime minister promise with his jobs for british workers, can he confirm the latest official figures produced this morning show that the number of u.k. born private sector workers is several hundred thousand lower today than it was in 1997? [shouting] >> mr. speaker, net migration to this country has been falling as a result of actions that we have been taken. and it has fallen in the last three years. and it is falling because there are more people here locally getting the jobs that are available. and i think the conservative party should think twice about the policy on orders on migration because the very businesses they are quoting want to be able to bring people in this country to do the jobs that are necessary. we proposed the australian point of system on migration. their policy of a quarter of immigration without giving a number would do great damage to british business. >> thank you, mr. speaker. as i know my right honorable

friend is aware, the last 10 years have seen an unprecedented increase in support for science and technology in this country. but would he agree with me that now is not the time to cut investment in science research and education? for it is in these areas that we will enter our future economic success and economic growth. >> mr. speaker, record investment in education, record investment in universities, record investment in science in our country, record investment in new innovation in our country, that is the record of our labor government. and i'm proud to tell people that we are the party that supports industry in this country. >> given the allegations surrounding the council and the demand for an inquiry, the inquiry supported by the farmer there, with the prime minister

support such an investigation, or easy afraid there is something to hide? >> mr. speaker, it came down to the apartment and he spent most of his time, most of his time boating with the conservative party. he should go back to scotland. he should go

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[captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010] >> it would reduce the incentives to choose the youngest nominee to have a legacy on the bench. this is a good thing for the supreme court and the third- article judges, but it is not clear if this proposal would be helping the confirmation process. >> obviously, this is a good thing, to protect them when they make decisions. there are many different proposals out there to get around the constitutional requirements. there is one proposal that would

give the president the power to have a new supreme court justice every few years. the youngest with actually work on the cases. the older justices would not be deprived of tenure. they just would not be there for many of the cases. the idea behind these proposals is to take -- one of the ideas is to take some of the pressure off of the confirmation process. you know that s -- that this person is going to be on the court for a number of years. i am not certain how big of a difference that this would make, but this would be injecting fresh blood into the court. >> and there have been other proposals. after a certain number of years,

the justice would be on the court of appeals or something like that. they have spent a lot of time thinking about this because this has no chance of happening. i cannot have a strong feeling. >> any of the proposals not involving a constitutional amendment turn on the presumption that you may take a sitting justice and make them a senior judge who is still hearing the cases and they have not lost their status in article 3. therefore, they are still within the confines of the article and the constitution. the likelihood of this happening is very unlikely. >> i just have a question. one thing that is interesting about the new nominee is the choice of an intellectual heavyweight against a sitting

politician. i was wondering if you could talk about how you think that the confirmation process would play out with the sitting politician. if this would be a fight between these political parties. many people seem to think that if this is a senator, the process may not be as harsh on the candidate. i want to know your ideas about this. >> this is an interesting question. the confirmation process would be different because expectations would likely be different. and you have suggested a politician could not be an intellectual heavyweight. it seems that there would be less that would be expected of a politician and able to describe the judicial philosophy or dealing with the commerce

clause, or whatever. i do not know how much lower that the bar would be. this raises a whole other set of issues. primarily because this politician has been giving political speeches where they have said something that could be seen as controversial by the other party. it would be a political decision to decide how relevant that these statements were. . obama talked about breaking out of the mold of simply placing judges and getting people with an understanding of the legislative process and being the chief executive. this is certainly not outside of the realm of possibility. >> during the bush and reagan years, i was expecting one of the president to name --

presidents to name orrin hatch to the supreme court said there would be diversity from geography and i think that this is a good idea. if you are looking at just the makeup of the judiciary committee, you have white house from rhode island. he is one of the great democrats on that committee, and there is also a lawyer, very smart. i would not put it past the president to be thinking in terms of a senator. there are a bunch of names and i am certain that you have been reading about these people. i think that with obama, the constant refrain that he does

not want to choose somebody from the judicial monastery, this may actually drive his decision a little bit more this time than in the past. it is hard for democrats or republicans to really wage war against one of their own, at the end of the day. it is much easier to be against a sitting judge, who may be elevated to -- but their colleagues who they have spoken with, and have worked in the legislature with, the culture is such that this may help, actually, with moving along the process. >> i agree that it would be great to have someone on the court who is not from the judicial academy.

when harriet miers was nominated, it was a knowing when people complained that she was not a judge. this is just -- i found that this was ridiculous. the conventional wisdom is that it would be easier to get someone confirmed from the senate. and again, i am not a historian. i think that grover cleveland and eventually got a politician, and taft was on the supreme court after being the president. i would also talk about john of ashcroft. he was nominated after he lost his reelection bid in the senate. he was beaten at his confirmation hearing and was finally confirmed by a very small margin. it could be that if obama shows the democratic senator that was very popular --

>> courtesy is not what used to be in the senate. >> i am not a lawyer. i am from the media. i was wanting to ask you this. there has been some discussion about the religion of the next justice. justice stevens is the only protestant. i would like to talk to you about this, if obama is going to think about that and if there is another catholic on the court, there may be a firestorm. and what about hillary clinton? >> i cannot let go of the comment on john ashcroft. when he was in the senate, he was waging war against the

judicial nominees of president clinton. i remember there was a wonderful african-american judge who had been on the state supreme court. he had been a state court judge. and he had actually voted more times than not in favor of the death penalty for certain defendants. john ashcroft, when he was running for reelection, talked about two or three opinions or statements that were made where he was arguing against the application of the death penalty. he had the endorsement of the aba and police chiefs in the

state of missouri. but only for political reasons, john ashcroft challenged him, and he was defeated. every other republican -- he had every republican in the senate. this is not as if there was a lot of love for john ashcroft. this came from his own political needs and his desires. he was going after a lot of really wonderful nominees for different positions. i am now getting to your question. and i apologize. there was an article this morning on national public radio about if president obama should be influenced by the fact that there are no protestants on the court. i do not think that this is something that many people will talk about.

but, i think a lot of people will think about this. there is an undercurrent of conversation over the fact that roberts and alito were both catholic. this should never be grounds for opposition to any justice, but the fact of the matter is that, as a country, americans think a lot about religion. i do believe that this could be a real factor in their minds. it was indicated that quite often, the centers will seize upon an issue, regarding religion as a way to get opposition to a candidate. i do not think that this should be a factor board is an appropriate thing to consider.

i think that this will be, because the americans will think about this or talk about this. there are many constitutional scholars who have promoted the idea that there should be religious diversity. i think that jeff stone has written that we should have more religions represented. >> i have nothing to add about religion. on hillary clinton -- >> thank you. this is an interesting suggestion. i think the president is happy to have her where she is. i will use her to play off of

the theme, which is of the age. i think that one phenomenon that we have seen is the desire to have younger and younger judges and justices, so that they will serve longer on the court. and i think that clinton would have the disability in that regard. i think what we have heard about last time, that there is a kind of cut off about the age of 60. this means that i will have no chance very soon. i think that this may be a problem for her. >> i would like to follow up with one second, if you will indulge me on religion. if we presume that obama will consider whether there is a need for another woman or

african-american on the court, the first asian-american on the court, and all of those are relevant factors, why is religious diversity not equally relevant? >> and you may think that this. >> i am illegal fellow -- my question is on the circuit courts. within the last year, there have been three nominations that were prevented and there were 90 votes, zero in favor of supporting these judges. is there any thought in these changes? there is one position that has been vacant for almost 17 years.

do you have any thoughts on this? >> is your question about how to reform the circuit court? >> this seems to be a problem. >> i think i know what you are talking about. >> the question is that all of these delays in the last year. i know that this is an issue to arlen specter. >> the fact about this is that every seat is their unique. there may be the confirmation issue, so someone is very controversial. you had a long time before the judge was given -- he could not be confirmed and and you had somebody else who did get confirmed after a long delay.

sometimes, there is a long delay because of the disagreements from the different states that they belong to. you may have a seat that has been vacant for many years. there is a question about whether this belongs the idaho or california. and in the fourth circuit, there were just moved from north carolina to south carolina. each one has a different story and it is hard to know which is subject to reform. the president is waiting for the centers from that state to come up with the recommendation. this depends upon the circumstances. >> going back to the other part of the question, a long delay with a unanimous confirmation vote, this is an indication that republicans are trying to slow things down. we have seen this across the

board, with the department of justice and judges and other executive-branch nominations. sometimes these may be because the senator is working on a problem but i think that what we have seen as a strategy to slow down the confirmation process. >> i am happy that you have asked this question. everyone focuses on the supreme court, and not on the court of appeals. with the supreme court deciding fewer than half of the cases that they used to. i think that the supreme court decided 150 cases a year, and now the number is somewhere around 75 or 76. the court of appeal is their rate -- the court of appeals is very important. there are only about 200 of

them -- these judges in the country for 300 million people. and these people are very powerful. particularly since the supreme court is now making most of these decisions. some of us would say that this is a good thing. the republicans know exactly how important that those judges are. we only had three confirmations last year, and these were not progressive, liberal candidates. they are very coveted judges. >> we will make this the last question. >> you probably may know that the united kingdom has just established the supreme court for the first time, and they have been looking at ways of reforming the judicial

appointments system. there has been some talk of involving the parliament. they have been looking at the other reforms, and they have not addressed them today. this includes the super majority. more nomination consultation. there is some of this right now, with the understanding that this would be more expansive. simply having this in the executive session. they're having something to take charges out of the hearing. they will not do that. they will have the post- appointment hearing. >> this would be -- this is very interesting and i have not followed that. i will be looking this up right

now. to think about how to structure the process from scratch. i have never done that because this is never something that was on my plate. what would you come up with? >> i think that these are all interesting ideas. the super-majority requirement that we all must have at this time, because of the filibuster. what would the hearing be after the appointment? we can all go for that.

>> who is appointing them? >> this is a matter of the constitution. >> not having a hearing -- it would be very hard for us to do that. even if everyone agrees that the testimony produces nothing useful, it feels like rolling back the access to public information, eliminating some measure of public accountability. it is hard for anyone to want to do this. even if this is not a productive part of the process. >> there was a panel that we were on together and one of the panelists gave a very interesting presentation about

the history of requiring the nominees to appear in person. and this was intersected with race relations and brown vs. the board of education. this is a very interesting -- >> thank you, to the panel. we appreciate this. for those of you who are still here with us, there will be another program next wednesday on the filibuster. please come back.

>> on c-span, the state department and its lead armed negotiator talks about a recent weapons agreement with russia. that is followed by press conference at the signing ceremony for this treaty. and then, washington journal, followed with a discussion of the agreement from a group that advocates the destruction of nuclear weapons. >> public affairs content is available on television and on- line, and you can also connect with us on twitter, facebook, and youtube.

>> the united states and russia have signed an arms reduction treaty in prague. the chief negotiator discussed this agreement in this half- hour news briefing. >> good afternoon, and welcome to the department of state. the president, on friday, announced that we have completed work on this agreement. given this historic development, we're going to bring this to the podium for the first time. she spent a great deal of time in geneva, working with the

negotiations that began last week. we thought we would start this with the undersecretary for arms control. we have more on how it got to this place and where we will go from here. >> good afternoon. this is my first time up here. it would be nice to be here sooner, i am going off the brussels tomorrow. before i get into talking about this, i want to echo the words from obama about the horrible things that happened in moscow. >> i spoke to my counterpart to express my condolences.

our prayers are with the people who were innocently cut down today. this is a very big month for national security issues. the tree will be signed early next month, on april 12 and 13, obama will host the security summit and they will release the review and this conference begins in new york in may. those are additional parts of the agenda. the president supports the ratification of this. we have no specific time line for the consideration. we are doing the best that we can to move this forward. we have the conference on disarmament, and we know that an

agreement will not be reached either quickly -- we do believe that we must make progress and van the production of these materials. the obama administration knows that there is no greater threat to the american people than nuclear weapons. let me speak about this treaty for a couple of minutes and then i will let you fire away. this landmark agreement accomplishes two goals, enhancing national security by cutting the nuclear-weapons that both of the sides committed to deploy, a program to the obligations in the treaty. it does this as it allows us to keep the nuclear levels that we need to protect the country. this does nothing to constrained missile defense.

this is about offensive strategic weapons. secondly, this will continue the goal of selling a relationship with russia. we believe that the united states and russia are able to work together in many areas of mutual interest. the real issue that is at hand is that the treaty faces transparency and must have predictability. as we go to the review conference in may, the conference between the united states and russia are guided by the rules and we are doing our best to revitalize the rules of this treaty. i look forward to working with the senate, to ratify this treaty. the goal is to make the treaty in the spring and to seek application by the end of the year. i will be happy to take your

questions. >> you just mentioned submitting this to the senate in the late spring. will this be public before then or after them? and i have a second question. with the accounting rule for the bombers, this seems to say that they are counted as one nuclear warhead. the weapons themselves are not counted at all. what is the rationale for this? you have numerous missiles that may be counted this way. >> the question is how we will package everything and when this will go to the senate. obviously, we are going through an important signing notification with our closest allies. many of the allies -- they are

reaching out to the networks across the world. they have to recognize that the treaty has three parts. the protocol and the amex. both of these are finished, and they are being informed. the annexes -- they were really talking in the verification regime. there are going to be inspections, and they will talk about how many people arrive on tuesday. how long that they can stay, and these are very technical in nature. we hope to have these completed by the end of the month. and we hope to put a package together to go to the senate. the white house and the president will be involved in this as well as secretary

clinton and others. this will come from all three of the pieces. the different parts of the treaty will become public and become part of the debate. when you talk about the bombers, it is important to look at these numbers. these are important because they show how important that the treaty is, but how both sides have made significant commitments. we will ltd. the strategic warheads to 50 of them at every site, below the maximum that was in the previous treaty. there will be 800, the total number that will be deployed, these are the heavy bombers. this is 50% below the limit from 1991. and there is a separate limit that will be deployed with the capable, heavy bombers.

we have these elements designed for this treaty. we have the on-site inspections for these systems and the data exchanges. these are the best elements. the kinds of questions that you are asking, we will wait for a larger part of the debate. you are talking specifically about the heavy bombers. >> what is your rationale? >> we want to talk about the important treaty. >> you want to talk about why you took this approach? >> this is something that we agreed to. there are heavy bombers on our side, and mobile missiles on the russian side. what we did is we did everything

that we could so that we knew what we were going to inspect. you have the ability to do those inspections with transparency and accountability. how are you? >> thank you. i hate to bring you back to the same subject. just this morning, i was at a briefing and there was an expert, and he said that this treaty -- i do not know what words they are using. this limits missile defense. can you definitively explain this. >> i am kind of an expert as well. i know a little bit about missile defense. i was there when most of this was negotiated. as we have said before, they

made it very clear that there is no relationship between strategically offensive and defensive weapons. there is no constraint on what we can do with the missile defense system. this is definitely -- this is in no way, there are no limits to the ability to put the best approach forward, with the other systems that we have. we certainly have these systems and there is no constraint. >> it is good to see you. a quick follow-up on that and then i have a larger question. is the signing and ratification of this treaty -- is there going to be a greater atmosphere to

follow up on the decision about a joint missile defense system proposed by the secretary general? this may sound obvious to some people following these issues, but as a united states and russia reduce their arsenal, how does this work in comparison to the other growing nuclear power is out there like north korea and iran? how does this put the posture in terms of defending the united states against threats? >> the missile defense cooperation -- we have been talking to the russian friends for several months about the opportunities to cooperate. we have made it clear. the approach that was announced in september is a system that has been put up on the internet

and is available for review. everyone has the ability to understand the basic approach. this system was faced over 10 years and this is based on the sm-3 approach with the land- based system. this may deploy over 2011 -- in the mediterranean -- 2018 in poland. these are lan-based radars that are part of this. this is a system that was announced because the president was wanting to have ended visibility. protecting the american soldiers and the nato allies against the short and medium-range threat out of iran. this is not a system -- this threatens russia. this is capable of doing anything. this is not against russia.

this is not formed against russia. we have made this very clear. there is a lot of opportunity to cooperate with the united states and russia. bilaterally on the common threats. we are afraid of a number of common threats, with the medium- range missiles. this is the kind of system where we can cooperate on the radar, were the early-warnings, and the reason that obama chose this approach is because this is a very good system and many countries that have the in- indigenous technologies -- un- indigenous technologies can be part of the approach. >> some of this may come from

the fact that we have been able to agree on the new treaty. will there be more confidence for russia to join? >> this process, this journey over the last year -- obama and secretary clinton, they are setting the reset button. this is a transforming exercise. one reason that this will be successful for what it does -- this is the first exercise where we have to work cooperatively with the russians, for equal benefit. the negotiation has improved the relationship. russia and the united states are very big players. we do agree -- the whole start negotiation has been working to give us a better opportunity to work together and get the kind

of stability that we have been looking for. >> and that was part of the bigger picture? >> the key to this from president obama is that both the united states and russia take these commitments very seriously. and the more that we make them the cornerstone of the nine-plus -- proliferation strategy, the more that this is about north korea and iran. and we can bring people together to agree on these principles. i think that this is when i move into the numbers that we will be sitting over the next few months. >> not withstanding your words, a moment ago, the words of the president. the russians do not believe what you have said, that this is not a threat to them.

we agree on some things and we do not agree on other things. why is this so difficult to convince to the russians? >> this is true about some russians, but those that i speak to understand that the limited approach is targeted at a short and medium-range fret that is coming out of the middle east. this is a system that has great potential, but there are very defined limitations. the capability of the russians will be able to overwhelm the system like this in seconds. this may be about where these deployments are at, sensitivity about that. the russians have been briefed, many times, about the basic approach and anyone who is wanting to look at this is welcome. >> can you give us an idea about

the expectations for next month. >> the nuclear summit is another example of the comprehensive approach from obama to the issue of the non-proliferation. and coming on the heels of the signing -- with the hearing in prague. he has several heads of state coming in, where we are coming in with a very serious engagement in very high levels. the president will talk about an issue that agitates him more than any other. i think that this is another example of where the president, every day, is taking these issues very seriously. there will be a number of heads of state here, foreign ministers here, and president clinton will

be having -- secretary plan will be having bilaterals with her contemporaries. we will bring together the heads of state to talk about nuclear security, and the president does not have to be briefed by the staff. he understands this issue and what he wants to do. he is wanting to make certain about the disagreement and the concerns, and the united states -- they are a member of the nuclear weapon states. we want to make it clear that every country is responsible for nuclear security. >> >> of the united states and india, the business council with the 14-member companies -- how

will this affect the commitment to the treaty, and also the nuclear conference next month in washington between the united states and india? >> we have a great relationship with india and we are happy to see this agreement moving forward. this is one part of a very large agreement and we're happy to see that this is in force. >> again, just for a moment, can you talk about the presumed linkage between the missile defense in the context of the treaty. and secondly, the secretary spoke recently on missile defense and he said it that the co-chair with the deputy -- they have tabled a number of proposals for bilateral missile

defense applications. can you please elaborate on this? >> i will take this first. i spoke to the deputy prime minister after giving my condolences for the tragic incident on the subway today. we were making plans on what we could do with some of the free time on april 8. we have a very good relationship, working together on many different issues. this is an issue that we care about, significantly. one thing is that we have tabled a number of different things. we have responded on the issue of missile defense and the number of other things. the bilateral commission that has been put together has every element -- the subcommittee has met and we have the agenda items

and so i will be meeting with him and we will continue the conversation. >> the first is the linkage -- >> there is no connection. >> there is none? >> there is the inter- relationship that the presidents have acknowledged. this is back in july. they did this in the first treaty. the inter-relationship between strategic offenses and defenses farms. this is everything. >> a quick question. the united states -- they are ready to do business and they are ready to roll with india? >> there are no more hurdles, as far as i know.

everything is moving forward. this was a very successful negotiation and agreement with a very significant partner in the united states. >> it is good to see you again. can you elaborate on a couple of the aspects of this, with the exchanges. can you talk about how many and secondly, the mobile missiles. can this be done with the monitoring? how will you gain confidence. >> we will exchange -- you know what secretary gates said on friday. we have this as part of the beginning and over time, it is

clear that this is not necessary -- and we have decided to do an exchange of five of the launches, and this is going to be the work of the bilateral commission. this is the overall administration of the treaty to make decisions and we will -- each side will make decisions about what is going to be put into this exchange. this is where we are on that. what was the exact question on the mobile? >> how is the united states going to gain confidence on the mobile missiles that they have deployed? >> >> on this case -- we do not

have the mobile's. the russians do. we do not have the same kind of oversight that we did in the original treaty. we have enough transparency to give us everything that we need. we are confident that we will be able to have we need. >> can you elaborate? will they be able to bring them into certain areas on certain days? >> there will be numerous inspections that will be part of this, and testing will have to be part of this. >> congratulations. can you elaborate on the global strike and how this falls under the treaty? i know that at the white house press conference, the admiral or

secretary gates said that -- this is not effective with any language? >> there is no effect for the global strike in the treaty. this is something that we are not specifically address and in the treaty. this is like missile defense and there are no complaints. >> i think that what the expert was saying today, there were no limits on the planned missile defense programs. what about what is not planned? and on friday, he was also going into this. there was a comment from moscow, that he was implying,

the understanding was that if there is a jump on one side or the other, the other side is able to get out of the treaty. >> there are no constraints to missile defense in this treaty. that is one part of this. each party, if you look at this treaty itself, each of them have the ability to include a unilateral statements and those statements are still being negotiated. each of the parties has their ability to make these statements. both of the sides had statements, and certainly, from our side, we had certain statements and the russians had certain statements, and we aggregated this treaty and they're out of this even with the missile defenses. unilateral statements are what

they are. these are still being negotiated. the the statement by one side that is not influenced by the other. they are part of the treaty package. in our case, there are no limits or constraints on this. >> you said that those statements are still being negotiated. >> each side will make an adjustment over the unilateral statements and what they will say. >> if this passes the history, you have what happened in the start agreement. we ended up aggregating this treaty. the statement was that we use

this for missile defense. we did not. >> is this going to undermine the treaty? they understand that missile defense is somehow frozen -- >> nothing that we have said shows that this would be constrained or frozen. >> given this focus on the zero- option, and given the fact that they have significant cuts -- the question is rising is whether the united states is actually able or willing to defend them the way that they expect to be defended. and that will lead them to believe that they also need nuclear weapons. this will be an increasing

argument. >> no one is questioning the resolve, that we have extended to our allies and others. i do not believe that anyone thinks that the quality has degraded, and the quantity has decreased. it is important to remember that we have the strongest deterrent in the world. obama has made it clear that this is important. if you look at his budget, this is about $5 billion. this is an increase to maintain the quality of the program. i think that what is important right now is that as we talk to the allies, and we make it clear about this -- and we talk about the commitment for this regime, that would put the facts out there.

we have a very strong deterrent with significant investments in this. the president has the ambition for the nuclear weapons and he is very eloquent about this. he has said that this is something that is in the future and this will take persistence and it may not happen in his lifetime. but he certainly has put a lot of time and energy into this to make certain that this is what the ambition will be. this is an ambition, but the president has gone very far to make certain that we have the strongest and healthiest, and best deterrent in the world. >> would you like to see the next step with russia -- is this in the realm of the possible? >> as i have said before, i spent a few hours on wall street as a small child.

the most important thing in a negotiation is to create the opportunity for the next negotiation. this is a treaty that will serve the united states and the russian people very well. this makes significant reductions. this is the kind of inspection that we are doing and this creates a trust, but at the same time there are verifications. we have transformed our relationship by -- we have a much more congruent way of doing business than we did in the recent past. and this will serve us very well. but what will we do next? we have an agenda for that. >> our tactical weapons part of this? >> this is the ambition of the president and secretary clinton,

to begin to have this conversation. thank you. you did not hurt me. >> the secretary of arms control from a couple of weeks ago, talking about the sighting of the strategic arms reduction treaty, which is scheduled for a few minutes from now in the czech republic. president obama and the russian president are going to sign the new strategic arms treaty, with the united states and the soviet union citing the original treaty in 1991. we expect this to begin at 6:00 eastern. we will show you some comments yesterday from the state department on the trip of the president to sign the treaty, and also on the violence that broke out yesterday. we will show you part of the briefing from yesterday. we will take you to prague when

the signing ceremony is underway. >> welcome to the department of state. i have several things to talk about before taking questions. the secretary departed just a little bit ago, and she is going to go join obama and that the death -- obama and medevedev, with the under-secretary for arms control. the secretary for european and euro-asian affairs. and there will also be bill byrne said the chief negotiator for the treaty. the secretary of compliance and implementation. have we put out the statement? you have seen a statement by secretary clinton.

the theme this year is urban health. this matter. the rise in the number of people in cities will be one of the top global health issues of the 21st century. six out of every 10 people will be living in the city by 200030. and this will rise by 2050. in many cases, the speed of urban development has outpaced the ability to maintain health, water, and sanitation along with basic services. likewise, there is a statement that we will be putting out, on the 70th anniversary of the massacre -- in the polish and russian leaders will participate in a ceremony, commemorating the murder 70 yea