with the former nasa like operator on apollo 13 mission. today marks the 40th anniversary of the astronauts' safe return to earth after the near disaster. after that, supreme court justices stephen breyer and clarence thomas testify on the court's budget request for the next fiscal year. later, a portion of our recent hearing on the 2008 collapse of washington mutual bank. .

. earth after the accident. -- up next, the second part of an oral history at johnson space of a. today marks the 40th anniversary of the safe return to earth after the disaster. this is one hour 20 minutes. but it is time to move on. i can remember, they said that those guys landed on the moon.

was there a similar feeling and mission control? >> it did not take a second for the office to ratchet up the objectives. what are you going to do? and what we're going to do is that the time that the crew is dissenting, we will give them a verbal guidance update. dissenting, we will give them a verbal guidance update. we will try to alter their trajectory so that they can land. they did not do it. i think that the entire mission ahead this. not for change, i was a spectator. it was interesting to watch other people. the mission started off with a real bang. shortly after liftoff, the spacecraft was hit by couple bowls of lightning.

the navigation system platform has started crumbling and the electrical system drop off line. -- it was the call that he made. he was just a few seconds and a reflection. he calls the jerry griffin and says that they need thought. this was a recommendation that no flight direction had ever heard. they made a recommendation that no one had ever heard. capcom, said the command with a? behind it. at th-- with a quesiontion mark

behind it. we did not know what they're saying. they had a portion that they worship responsible for in the command module. -- that they were responsible for in the command module. when they flip this thing down to of salary and all of the sudden the state is restored properly at mission control and now the controllers could get to work. the concern at the time is that what ever happened on board the spacecraft, they could react to the fuel cells. if this occurs, they will start from oxygen integrity. it was extremely important to get data back and figured out what happened on the spacecraft. john aaron was a general in

mission control. he proceeded to talk the crew through bringing the cells back on line. once they had gotten floweret -- power restored, then the concern of trying to establish what to do with the navigation platform. by the time the crew got to orbit, we had restored a majority of the spacecraft systems. jerry griffin, with the help of his leadership, made the decision. that day i was sitting in mission control talking to a deputy who is concerned about the spacecraft. be they went down into the trench and started pulling each one of the controllers.

i have a picture of them discussing this and tel. the team had only technical issues to work. in the business of mission control, the mission of space flight, you have to make this. it is up to the people on the council to take responsibility.

>> it in part that's because they have the same experiences that you had. >> the name was christopher columbus and this was completely proper for this guy because he was bacunder control. he was the mentor for everyone. he set the mold for everything that would be done thereafter. the flight director was going to take any action necessary.

he knew what these guys were doing. his job was to give them the confidence to make the political decisions. >> when craft moved up to center director, i became the flight operations director. there is the political heat that comes down when someone wanted to land a shuttle. we made a call to launch when all of the mission rolls were not satisfied. we should have pursued our mission suspension.

>> we are coming up on one that made you famous. apollo and 13 was your story with as much as it was that of the astronauts. >> this is an example where the maturity of this team continued to spread forth in a magnificent fashion. we had made the missions earlier. we would always have four mission control teams in place in parts of the missions. these to not fit neatly into 8 hour shifts.

having a fourth team in place made the transition easier. if we had any problems during the course of a mission, this team would try to find some way to work offline and the remaining teams would continue to work 8 hours shipfts. my team was designated and we had responsibilities. we were going to do a consortium. but during the course of the mission, it changed dramatically. the launch was normal, our crew members were fred hayes, ken

mattingly. ken mattingly was a command module pilot. he became disabled late in the training. we trained with backup crews during the course of preparing for a mission so we had all the confidence that we needed. we got them into the mission assignment, the mission had been going very well. we had a minor problem. we lost on the second stage of hard fight. there was a shutdown time in remaining engines.

we made the decision to inject to the moon. the dejection went normal. s some as the first sequence had been accomplished, my team picked up the council and we were following in the shift rotation. we would take a look over the command service module, we did not see anything significant. basically we used this mission to look ahead at the mission and to try to close out any open items that might have been left over from the mission. we had to get into the sequencing where we would now be

in the proper shift for the lunar orbit insertion. the second shift was in the new timing sequence. basically it was 8 hours later. during the course of the shift, we had a lunar module and an initial and module inspection. when they open up the craft, at the has a couple of different broadcasts, a kind of tv tuner of the lunar module. the broadcast was concluded. we were in the process of closing out the items. after the television broadcast was concluded, the families were behind me.

the final thing we had to do was to get the crew to sleep. we had a very detailed checklist we went through. we had gone through each one of these items very meticulously because in mission control, the greatest error is to have someone missed an item in the checklist which causes us to wake up the crew. there were awards given at parties if this happened. we were very meticulous falling through the checklist. we were down to the final item in the checklist. earlier in the shift, we had had an anomaly.

we had a communications antenna that did not seem to work properly. it gave over incomplete problems. the nature of the problem is that the intent would not set the earth signal properly. all of a sudden is started tracking. in a similar fashion we had a series of anomalies assisted with pressure or they had gone through some very rapid cycling. we were down to the final entry.

the fuels that we used on board of the spacecraft are oxygen and hydrogen. this is a supercooled liquid the band is packed in a vacuum tank. we use some of these, they have turned into a very soupy fog or vapor in the tank. inside of the tanks, we had some chance to -- fans to turn on to stir up the mixture and make it uniform. then we increased the pressure. we have asked the crew to do this. in the meantime, the next control team was reporting. the noise level was building up.

the leader of the black teen is sitting next to me at the council. -- black team is sitting next to me at the council. we made a request. attention had been switched to the electric current measurements. they started to do the mixture of the cryo-sitr. -- stir. all of a sudden i get a series of calls from my controller. the first point is there needs to be a computer restart. the second says a radar problem.

then i hear from the lunar module but there is a problem. within mission control lettnothg made sense because the controllers data had gone static briefly. many of the parameters did not indicate anything we had seen before. down in the propulsion area, the controllers saw a lot of jet activity. we then see they fly the space craft to an altitude where we can commit date.

-- where we can communicate. they made no sense. the trading kicked in currening. they started to to restore some of the functions that appeared to be lost in the spacecraft. i have written about this event. it was 65 hours. we wanted to look at the data to see what happened at the time of the event. i went down sort of a false stracke. i thought we had a glitch in the

circuit. most of the problems have been resolved. many that have remained are focused on a single controller. they have the system you need to stay alive in space, they have power, but electrical, heat, water, basically everything they need to stay alive abandone. very quickly it looks like we have lost one of our fuel cells and possibly a second one. we have a tank that is starting

to increase the pressure. they're trying to put these pieces together quickly. in the meantime, a new problem is occurring because we are approaching the problem. some of these cells have been shut closed. we have the ability to control the space -- these are used to control the space craft attitude. there is a problem because they have to go through the process. this is probably about 60-90 seconds. it is chaos in this place. we don't have the slightest clue what is going on. this continues in an unresolved

fashion. jack says, is anything that we can do, is anything that makes sense? i call the control team and this occurs just at the time the crew is calling down. they have some kind of chilled or shock. all of a sudden and status every crew calling, i become more selective in this process. this is something else, we don't understand it. we started to look into this and

get more people in their. it took situation because the situation has become more and more desperate. the first oxygen tank is shot, the second one is shocked. they come to me and say, flight, i want to shut down the fuel cells. we think much this.

this is not going to stop the leaks. i agree to advise the crew that we're going to shut down. the crew agrees to shut the fuel cells down. this is probably the point in the mission where everyone has realized that we are in survival mode. we are lucky to come home.

i say, chris, we are in deep shit. we are looking in the problems and the flight control business. whatever problems were occurring here. we have come to the conclusion that we had an issue on board the spacecraft. our job now is to start the evacuation from. at the same time, i am faced with a series of decisions that are all irreversible. at the time the explosion

occurs, we are about 60,000 miles from the surface of the moon. . and of the other option was to go around the moon. it would take about five days. they were now at the point of

making the decision -- which passed are we going to take? i got the feeling that said do not use the main engine. do not jettison the lunar module. that was all i had was a gut feeling. in the flight control business, you develop some street smarts. i think every controller has felt this at one time or another. lundy had the same feeling. by trajectory people are scared out of their wits that we're going to execute this, because it is very late in the trajectory to make this kind of competition. swing this mission around the front side of the moon is very risky. mai systems guide -- my systems guys want to get home as soon as they can because they know are -- they know they are in deep trouble. it was nothing more than a gut feeling. we spent -- we spun the mission

around the moon, rather than come around the front. this then puts us on the trajectory path that we have to start rapidly coming around for. we talked briefly to the group. i do not have much time to say why we are doing this. they were willing to follow whatever direction we were giving them. in the meantime, we now have the crew moving over to the lunar module, starting the power-up process. glynn lunney's team has come up to the speed, to the point where we can hand it over to them. my job is to get off shift and come up with the game plan from here on out. as soon as he hits the consul, he is immediately challenged. the final fuel cell is now dying purity have to get over and -- the final fuel cell is now dying. he has to get it over to the

lunar module computer. it is all pencil and paper. we would have killed for a pocket out later. the data transfer have to be absolutely perfect. as he was doing that, i was walking down stairs, trying to figure out which direction to go. whenever we came up with had to be -- we had to come all with an answer in hours and days. it would be outside designing and we had to come up with the answers. we walked into the room. my team is down there. it is loaded with my controllers and backroom people. this is the data room. it is a room that is used only when there is trouble. you can sense trouble in this room. there are two overhead there are two overhead television monitors, one >> people can spread out their records and start going over them. we were in the day room.

we were going through the analog recorders. all of the difficult problems that we faced, the salemme of data retrieval. it was literally hours. we would look at a printout of the preliminary data and to we would see that. -- until we would see that. we could make a copy of the television display that a controller was looking at. we have pieces of paper and the controllers have been watching the life blood drained out of this. about all there was. our job was basically to try to figure out what on board the spacecraft was still usable and to come up with the game plan to get them home. by now, we had made a decision that we're going to go around the moon. i made a brief opening speech

because i have a lot of new players who were starting to show up from the engineering community. we have astronauts who were reporting. it was obvious that the team was much larger than we really need at this stage in the game. i needed to focus on the most immediate problems. throughout all of this, it was emerging -- we kept hearing one voice as we were going through the evacuation in the lunar module cerna. they had started telling us about the problems we would have been accomplishing an alignment using the lunar module optics of the spacecraft's were still docked -- while the spacecraft were still dr. together. it was a principal concern of myself and lunney.

with this background information, can we afford to power down the space shuttle? can we get to the point where it could very easily stretch this? the game plan broke down now into three distinct phases. one is, come up with a set of master checklist's that we could use to get the spacecraft from where we were, around the moon, and then back to earth. i assigned one of my more trusted controllers who had been with us since very early in the mercury program. he became the model for the systems engineers that we used in mission control. he was given the job to be the individual who would maintain the master set of checklists for the remainder of the entire mission. a new controller had joined us

and he was given the responsibility to sit on top of all consumables and resources available on both spacecraft. he had absolutely veto authority over any checklist entry. they were almost welded at the hip. the third one was a guide to figure out how to turn the lifeboat into a survival vehicle. one of my other controllers got that. these were the three key individuals. i told these three people to look around the room and anybody that they did not think they needed for the next few hours, to send them back to the consoles and get them out of there so that we could focus the smaller team. we did a black or exercise that listed quickly -- a black board

exercise that quickly listed the issues that needed to be worked and who would work them. the power guy came and said, gene, we have to get powered down immediately. i said, i will work on this. we have to figure out -- we have to expect the navigation system to continue drifting and we have to find some way to realign it. we gave phil the responsibility to come up with ways to use it. i started getting ahead of myself. one thing that was giving as problems was that this explosion that had occurred had set a cloud of debris around the spacecraft and black -- and froze particles of oxygen. we normally navigated with stars and we could not see them anymore. we could just see the sun, the

earth, and the moon. phil was given the responsibility to come up with techniques to check our spacecraft attitudes or maneuvers and those kinds of things, using only the sun, earth, and moon, and to continue to refine the techniques of aligning the navigation system on board the lunar module once we did have that. i took my team offline and tried to bear out ways to cut down the return trip time -- tried to figure out ways to cut down the return trip time. there was no way we would make five days. we needed to cut it down to five days or -- for days or three days. we started moving in several different directions. one team worked a power profile. another group worked on navigation techniques. a third group was integrating all of the pieces. my team picked up responsibility to figure out data -- a way to cut a day off the return trip

time. we set up a formal ties. we set up working areas down in the control room proper. it was amazing how presidents of corporations would respond to these 26 or 27-year-old i have been charged. that was one of the real miracles oof mission control. the relationship between program manager, designer, flight controller, it all warranted absolute and pure trust. once a person was given responsibility, everyone back to them. once decisions were made, you never second-guessed those decisions. this process continued for the first 24 hours. my team came back on console to execute a maneuver. it goes back to apollo 9 when we did a lot of testing of lunar

module when two spacecraft or doctors together. as soon as we recognized we had to perform the maneuver to speed up the journey, that was the set of procedures we called back to. we updated the procedure is based on the situation at hand. my team came back on console. we executed these procedures. we increased our velocity of return by almost 1,000 feet per second. we change the landing point from the indian ocean to the south pacific. we said the aircraft character -- carrier iwo jima to the landing location. with the maneuver behind us, we could power down for the first time. the power level -- you can explain it very simply. it was the equivalent of 200 watt light bulbs in your house, about one-quarter of what today's light bulbs used. that is what we had to do to get the crew back to earth. once we started this and got into this power down process, we

had only one major management flap. he needed to get his crew to sleep. he was very forceful about one in get his crew to sleep. i said, we're going to keep them up and wait until we get the spacecraft into thermal control mode. they wanted to power down even more. i had to tell them that we're not want power down completely. what we have to do was -- what we had to do was rotisserie-type maneuver. the only light we had was the son. it took quite a while to do this. the first attempt was unsuccessful. they were crossing -- grousing that we could solve the problem later. i have the same no, that is not the way we're going to do business. -- i had to say no, that is not

the way we're going to do business. there were emergencies all the way through the process of returning to earth. our trajectory was flattening out. we did not know why. we had to correct that. the crew was suffocating that. we had techniques of using chemical scrubbers for the air. from the standpoint of the command module, and the lunar module, as we were approaching the final phase of entry, the procedures were not coming together quite as nicely as we would have liked. the crew wanted to see how we intended to accomplish this final landing. the basic problem was a command module, are reentry vessel, that only had about 2.5 hours of live line. we had the service module, where the explosion occurred, that was basically useless. we had the lunar module with the patches through the small

tunnel. that was our lifeboat. we had to come up with the game plan to move this entire stack into an attitude where because that -- separate all three pieces of it would not collide upon entry. the crew had to evacuate from the lunar module at the very last moment. they had the power of the command module, get its computer initialized, separate the pieces, and this was the game plan. we did not really get all the pieces put together and get and verified by the simulators until about 10 hours prior to the time we needed to execute this plan. the crew was quite concerned that they could see that earth continuing to grow and the windscreen on the spacecraft. they still did not have the game plan in hand. we kept reassuring them. this is not -- this was about the time that dick came in and said, you're going to have a plan. cool down.

he had the magic of being able to work with the crew. they worked with us. those were the real pioneers of space flight operations. they set the mold for everybody else from that day on. we got the procedures up to the group. jack swigert have a command model procedures. fred haise have a lunar module. -- jack swigert had the command module procedures. fred haise had the lunar module. there were caught and coveralls. it was very moist. -- there were cau andotton coveralls. fred haise had a very high body to a richer and the shakespeare he had all urinary tract infection -- fred haise had a very high body temperature and a urinary tract infection. ken mattingl andyy had been

instrumental in looking at troubleshooting. the voice of mission and troll -- joseph kerwin during the final hour -- joseph kerwin was the voice of mission control during the final hour. his control was absolutely superb. he was a mentor, a teacher, a tutor, disciplinarian -- the whole 9 yards. at times, i almost felt he was on board the spacecraft, placing their hands on the switches and keeping them going. the bottom line was, we continue to have many surprises. we had to do another emergency maneuver. one of our three command module batteries failed at about the time the parachutes were due to come out. at that time that we landed, this issue was still in doubt. the final thing remember about this mission was the reentry period.

the mood in this room was becoming very mellow. when we got ready to jettison the lunar module, we started speaking sentimentally to the lunar module. thank you, you were a hell of a good spaceship. you did not even know the world was out there at the time. we were so focused. it came time to express our feelings. again, the entire world is listening. mission control is going to admit we are emotional. jack swigert finally says, all of us up here want to thank you guys down there for the fine job you did. that broke the ice. we got a few attaboy s from lovell and haise. then we went to black out.

that is the time when communications to the spacecraft -- we could nail when it started and when it would finish to the second. each controller, during blackout, it is a very lonely period. the crew is on their own. they are left with the data that you gave them. each controller is going back through everything they did during the mission. was i right? that is the only question in their mind. you hear the electronics, the home of the air-conditioner. you smoke a lot. somebody lights up a cigarette. you drink the final cold coffee and still soda that has been there -- stale soda that has been there. every eye has been on the clock on the wall. when it counts down to zero, i tell kerwin to call.

wef@ call again and again. we are a minute from when we should have heard from them. there is a little bit of doubt coming into the room that something happened and the crew did not make it. in our business, hope is eternal and trust in the spacecraft and each other is eternal. we keep going. every time we called the crew, we are one minute and 27 seconds from when we should have heard from the crew before we finally get the call back. a down range aircraft has heard from the crew. almost instantaneously from the aircraft carrier, we get a sonic boom and radar contact from you agena. -- from iwo jima. uc the spacecraft under these three red and white parachutes. the motion is so great that every controller is giant may

crying. -- is @@@@@@@@@ @ @ @ @ @ @ @ @ >> you can never express an emotion until well after this is over. the emotion, you can hear it in the voice of the people. then, these guys have the warm air of the south pacific. you will jima is circling -- he will jima is circling. -- iwo jim is circling. then you have the helicopter. it is only one that is accomplished that we can start this internal celebration. the celebration always started with cigars. i do not know what they do today because you cannot smoke

emission control. -- teams recovered their crew members against long odds. start with the cigars. nobody in mission control was going to speak. we had some darn fine cigars. we went through mission control to the back room and the offices and laboratories. everybody had their mission cigar to light up at the same time that we did >> bob fully provided by the cigar institute of america. -- thoughtfully provided by the cigar institute of america. >> then he unlocked the doors because they have been locked. the real heroes start pouring in at this time. the faults in the back room who gave us at hand when we needed them. the final phase of every mission, the final celebration,

is to pass out an american flag. we had the flag that we passed. we started this tradition when we set our first american -- second record. it was the record when we rounded the two spacecraft the first time. since then, there has been an american flag in hand of every controller at the time of touchdown. this is just spectacular time for us. i do not think anyone will ever forget those final moments. these are always something. while we wait for the crew to recover -- the backup crews and the capcoms always develop some kind of parity on what happened during the course of the mission. and this was a parity that was

taken off after a very short set of comments i made during the misison. -- th emission -- the mission. he said, i think it is an instrument -- instrumentation flight. he said, we have to do something about that. they took these three segments of words and intersperse them with spike jonze. we had some gospel singing. we had president nixon. interspersed these on a tape. we had to listen to this thing over and over again as we drank the beer and smoke is a more cigar's -- smoked some more cigars. that was the kind of system in those days. i do not think any more people in peacetime has ever come together in a similar fashion.

>> did that old gang ever get together for reunions. >> we have one coming up. we get together every five years for some type of reunion. i think they're all together into frequent -- too infrequent. two or three things have done a lot to help us in the most recent years. the apollo 15 -- the apollo 13 movie has done a lot to bring back some recognition to really great people -- people who stood tall when times were short and odds for long. i think john glenn's flight help us bring to gather some of the -- bring together some of the joy of living and working as we did. that has helped. now that the coming celebrations for the anniversary -- we will have a lot of 30th anniversaries.

we have flown here. i think that is bringing it back together. let's -- it is good to get people back together. >> we have stopped with apollo 13. the apollo program was cut short. nonetheless, there were others that were pretty important. what was your role during the 14, 15, 16, in 17? but it changed. we were at the point of having to move -- >> it change. we were at the point of having to move engineers. i had this during my teams out more and more. we literally had our feet in between apollo and skylights. at the same time, the flight directors had become a very valuable commodity. many people who caused the mercury, gemini, apollo programs to come into being or retiring in been the programs. cliff charlesworth was one of the first to go.

we were looking at how we could apply some of the technology to other problems. glynn lunney left. he picked up another program at the time. it is now the next generation of our involvement, trying to involve the russians as our space partners. all of a sudden, i found myself short of flight directors and having to bring new people on board. it was a mentor, a teacher, a tutor, the same as kraft had done in early days pretty stretched our assets, -- in early days. we stretched our assets. we standardized. i would launch the apollo 15, 16, 17 for both the earth and the moon. the other flight director still remaining work gerry griffin who

handled eva's. then we handed it over to be frank and britain would do the landings -- to pete frank and griffin would do the landings. we wanted to use the diminished resources but keep the quality as high as we could. 14 stands out because it was probably one of the most famous things that's griffin -- it is one of the things that i remember him in. as we were getting ready to go down to the surface of the moon, he had -- we had recognized the indication. when my other controllers came up with a software patch -- one of my other controllers came up with a software patch. we executed a software patch with no more than two-hour shelf life from the time we recognize the problem and the time we started down to the surface of

the moon. we executed a very complex procedure onboard the spacecraft to pass the software to ignore the aborts which during the startup phase. once it was properly settled back at the switch, then we re- unable to -- we re-enabled. the mission control team knew the limits. they could do no wrong. there was no problem to scoot up -- too tough or too difficult. i remember apollo 15 because of a heavy penalty the crew paid. with the rover extending the service operations and the surface time, their fingers were hemorrhaged. they became dehydrated. by the time they finished their

eva's and we lifted them off, they got into the lunar orbit and glynn lunney was on control at that time. he had the darndest time trying to get the spacecraft -- it had been getting ready for the separation of two grew spacecraft. in the equipment transferred over into the command module, getting the integrity checks, i was sitting next to him very we were getting ready to take over the shift. the crew was having mental lapses and blackouts. we would clarify the instructions about the different checks. the separation maneuver did not get off on time. it was like we had lived in a time warp. after the mission, we found that, due to the crew's dehydration, we ended up with the severe past -- with severe passion -- with severe

potassium deficiencies. this was characteristic. to prevent this in future missions, we spiked orange juice with potassium, because we tried to find ways to back off on the timeline. this added to the famous orange juice rebellion on board the spacecraft. we had some problems with the thrust control mattingly was to execute it pretty came around the back side of the moon and it did not get -- mattingly was to execute it. we came around the backside of the moon and it did not get executed. approaching mission 17, it was a series of go for broke things that we and the crew would do to keep the missions going to accomplish our objectives. the missions were becoming more and more difficult.

it was a super bowl class, elite, world-class team in crisis management. to put it bluntly, we were at the top of our form. we moved into a 17. it was with a degree of melancholy -- i do not think there is any person alive who led worked with the loaner program and these missions -- any person alive who had worked with bill lunar program and these missions -- it was the end of the era as like control. i needed to find a way to inspire the next generation to go on. it is equally as exciting as it was going to the moon. i had to convince them of that. it was a traumatic period of great change as an organization and personally. the final thing that gerry

griffin and i decided to do -- all previous flight directors -- they were in the console one day and the next mission they were not there anymore. lunney, charlesworth 0-- they had gone out this way. it was determined that we would not go out this way. a spectacular based artist was sitting in front of me at the console, sketching the crew. he would look at the pictures on the television screen and in 6 d seconds -- 60 seconds, he would have a sketch of them. we went to the coffee shop. i was interested in the legacy. i wanted to leave a different legacy than the one my predecessor had established, the

legacy of the flight director. i wanted to leave a legacy in the broader sense -- a mission control itself. i asked bob to design us and insignia for mission control -- an insignia for mission control. i said i wanted to talk about the commitment that led to the flight controller's pin, which will seat several places in mission control today. it represents the commitment and team work of the programs. the discipline, because once we failed in july 4, we got into -- failed in chairman 94, we got into a series of arguments about the mission -- failed in gemini 4, we got into a series of arguments about the mission. arguments about the mission. we basically were

-- we have to remember that we are always accountable for what we do or what we fail to do. we never stop learning. basically i sketched out the elements that i wanted to be representative of mission control. he agreed to go do this. ivan came back again and launched the crew of the surface and we were in lunar orbit. both griffin and myself handed over to the next generation our responsibilities. he had been my faithful when men for so long griffin handed over to another man and we stayed in the room for the remainder of

the mission and watched our new flight directors. that is the ending of the program for us. >> it was not really the ending of the program for you. a by now, you had moved on to management and it was the end of your flight direction, but on the other hand, there were still flights to be flown and spacecraft to be worked with. you just mentioned a couple of them. >> . . say -- gene kranz, you really cannot believe what you are saying. skylab was as exciting to me as apollo ever was. skylab was a different type of focus as a leader and team. we had -- the apollo missions were all short, around 10 days or so.

it is one thing -- a team together and do all the rent -- it is one thing to keep a team together and do all the right things or just 10 days. it is another thing to do it for the better part of a year and to hand over hundreds of problems every shift without a glitch. to have these people all respond to loss of control because the moment is holding the attitude freezes up and a whole stack system starts tumbling. to recover from a massive short in one of the power distributors that is scattering solder balls inside the spacecraft. to learn to repair and replace things in flight. to go back to brute force mechanics to fix the space systems. skylab started off in a top fashion. flight control teams literally fought, took over ground

command, and fluid by ground command -- flew it by ground command. we were manually firing the jets and thrusters. i was one of the plotters. the flight directors called me into action. i sat in mission control for a year every day. we would plot external skin temperatures. we would deduced the location of the sun and figure out where to maneuver so we could find the proper balance between keeping sun to generate power versus the minimum temperature to keep everything on the inside from frying. we flew the spacecraft using simple blocks that way for the time until -- plots that way until the spectacular engineering team could, with ways to replace -- could come up

with ways to replace the thermal shield we have lost. they took pete conrad, paul weitz, and joe kerwin to install this stuff on the eva's -- i think they were the most wild we had done since the jim and i program -- since the gemini program. we sat 12-hour shifts every day for a year. we were absolutely delighted when the flight director would call for us to sit down and console and take a shift. there was one time that was really funny. it was anecdotal. at the end of the first skylab mission, several flight directors went over to receive awards. they flew them over.

myself and pete frank carey the time frame while they were off getting their awards -- carried the timeframe all they were getting their awards. they took a look at what we had done and threw it out. they started from scratch. the other thing that was neat, was chuck lewis had been suffering from stomach problems through the final mission, until the required emergency surgery. two weeks prior to the end of the mission, i was recalled back to my flight director duties. i sat his shift from the time he had the surgery until the mission was over. i covered the jim and i -- the gemini, apollo, and skylab. >> could not keep the old war horse off. >> once you get into this business, i was a figher pilot.

when you left the cockpit, you realize that you had lost the one thing in life you treasured the most. you also recognize there is a thing in life called progress. you have to move forward. it was the same thing with leaving the console of the flight director. any flight director says it is the happiest time of his life. my job now was to continue building the team and the championship practices that developed the count -- that developed that caliber of the team for the skylab and the soil yuz. that became my job. >> what do you remember about astp? >> it was the enigma of the entire program. i found it very difficult to believe that we were abandoning

skylab, a very functional and usable space station to commit resources, a launch vehicle and spacecraft, to go after a purely political objective. been made a big deal about working with the russians and -- they made a big deal about working with the russians. we had done that as early as upon gemini program. i could not believe we were giving up an extended mission in the skylab for purely political objectives. i have never been a politician. i did not focus as well as i should upon the broader set of political objectives. there are many constituencies. what i would say is -- there is a variety. the one that is most important is getting young people --

giving young people a place to go, a dream to have and hold onto, and to move into the future. that is the most important legacy of space. if it takes political objectives to do it, so be it. >> you were not happy with the decision to send our first space station -- that introduced a whole new plausibly, did it not? you're looking at the difference between a mission and nothing that stands up their day in and day out. >> skylab was probably the most productive era of space flight in the history of the program. we had four major causes of science -- astronomy, astronomers were on board the space station. we had marvelous relationships with major laboratories and observatories that were interacting with the group in real time. -- the creew in -- the crew in real time.

we always continued the scientific process in an unmanned fashion with ground control. we had medical experimentation where we continue to learn about man in space. we continued to probe the very unknowns about how long and how people will man would be over an extended time. we continue to press the envelope from a standpoint of crew performance. we found a lot about the psychology of having a crew in space. we found out about the ability to communicate with themselves and their families, developing camaraderie between the control team and the ground -- and the ground. the earth resources was one of the most magnificent experiments that with our reform to -- that we had ever performed. we had a pubes passes to a second-by-second basis -- we had

to compute these passes to a second-by-second basis. the motions seem to be doing things we did not understand. we had a series of corollary experiments. we ran furnaces. everybody kids about making ball bearings in space. there was a reason also appeared we were trying to develop manufacturing processes. we needed to find out what happened when metals melted together in an zero-g environment, in a perfect vacuum. i considered the abrupt termination of skylab, after only three transmissionsmanned almost heretical. we give a very rapid process of learning for a mission that was

purely political. it made no sense to me. >> do you see a relationship between the fact that the russians and the united states are together and their objective is to build a space station? a modernized version of what skylab once was? >> i believe that the process of working together internationally is incredibly important. i guess i am an american. i believe in america for americans. i do not believe that we have a businesslike relationship that is going to allow us to continue to work in space. you have to have a set of ground rules of an operational nature, technologically -- you cannot set a game plan that is totally political in nature. it is not going to make sense to the participating countries. i believe the problem that we have with the international

space station is that nobody in america is really understanding what is going on there. why are we doing this? we of the very poor job of selling this program? -- we have done of very poor job of selling his program. it will go the way of skylab and a lunar program. you cannot just walk out after the mission is over. you have this massive device up and earth's orbit that has to be brought down in a controlled fashion. again, it is a horrible waste of financial resources within the united states, russia, the participating countries. the fact is that we have to come to a business like a set of agreements with the russians, as we did with the other purses many countries in europe, japan, and canada -- and we have not yet established that kind of relationship. we continue to make excuses for the financial problems. we continue to make excuses for

the lack of delivery. these were recognized in the early days of the program. financial problems are not going to go away. technological problems are not going away. but we still want russia as a partner. we have to set up a game plan that is going to work for the next five, 10, 15 years. >> is it possible to establish such a game plan? >> there is enough in space for all participants that yes, we can establish such a game plan. we have to move beyond what i would say of the national -- almost ethnic relationships for building a relationship in russians versus americans -- we have to look into what is good for our nation in the broader sense. what is good for our industry and our scientists? we have to move beyond the boundaries. we have to have a better framework and we have now. >> one thing we do have today is the work forkhorse.

the space shuttles have flown an immense number of flights very successfully. >> i love the shuttle. it is magnificent. i look at the shuttle as glass hurrah of the mercury, gemini, and apollo generation. it is a device that was founded on the principles and carries forward the characteristics of very strong leadership. basically, if you take a look at how this device came into being, it is probably the most advanced, technologicalsystem that has ever been built -- technological space system that has ever been built. people do not receive the second

-- the recognition that they should have for the commitment they made to americans and the world's space capability. >> do you believe that the shuttle was an instrument that was built by the most gifted technologists, leaders, and managers that ever existed within the space program? i think this get that aid to the american people, the american public, the space business -- this gift that they gave to the american people, the american public, this is business, is never fully realized and recognized. it is the space system that has a broad range of missions. it has demonstrated itself to be applicable to accomplish every one of its objectives. unfortunately, it has not achieved the economy that was intended. the economies are not being achieved principally because of

political limitations put on the program. at the time of the challenger accident, we were one of the world's premier launchers of satellites from the shuttle. we had carried a majority of the department of defense satellites. we had done payload operations for laboratories for many countries in the world and provided a research laboratory for people in the united states wit. with the stroke of a pen, it was decided that we were unwilling to risk human life to deploy satellites that could be as well deployed on an unmanned spacecraft. we lost sight of our objectives. we were after continuing the operations of the premier launcher within all space systems of the world. we were also trying to make the launch your economically -- to launcher -- the launcher

economically feasible. we accepted a placebo for the loss of the challenger crew. would say we went the wrong way. >> do you think that -- it was originally conceived as something that would be all things to all programs. perhaps that was asking too much. >> i would say yes and it prepared i would not equivocate. -- i would say yes and no. i would not equivocate. it could deploy. it could retrieve. it was a platform for eva's. it launched satellite systems. you name it. the one thing it did not become was the economic workhorse we had expected it to be.

that was part of the process within the nation that we were using to sell programs to congress. i do not think any operator ever looked and said we will launch one of these guys every week. no matter how good your space system is, really, it was not that way. the technology was not quite there. it is maybe a generation earlier in these things where some of the early transport prototypes. you have to put this in the context of today in the future. -- and the future. it is essential to maintain these technologies so that we're capable of protecting and providing for our own people before we start worrying about the peoples of the world. in order to take care of the peoples of the world, we need a strong economic base ourselves. we can see that today.

as the economy sinks and rises, we have a stabilizing influence. we provide the funds. to do this, we need a stable and robust economy ourselves. to do this, we need to continue to develop very new and very advanced technologies. to do this, we have to find difficult objectives to go after. this is that forcing function for tough technologies. space is through the last frontier for the development of very new and advanced technology. we have been living, basically, on the technologies of the 1960's and 1970's and the shuttle that were developed through star wars. there was a tremendous communications revolution. we ought to figure out where research and development is going to come from. i have concern that we're not investing well in our nation.

>> you may have answered my final question. it is one for you. you have been responding wonderfully well to everything i have asked you for the last few hours. it could be that i have not asked the one question that the illicit what gene kranz wants to say. with that in mind, it is all yours. >> i wish that, as a nation, we could set our sights much higher. i believe it is essential to have a national purpose. it is essential to maintain the pioneering spirit that made this country great, the spirit that he past century, that got us through world wars, and allow us to move into a leadership role. it was an passionate leadership role throughout the world -- it was a compassionate leadership role throughout the world. it allowed us to step up to the challenges of the cold war.

it is a challenge that took the country to the moon. it took us into space. it is a preeminent force in space. in the process of doing this, we've rekindled the pioneer spirit of the people who grew up in the depression and came to adulthood in the 1960's, carrying space through the 1960 through the early 1990's. i would like to find a way to sufficiently challenged a new generation of people to get them out of the i mode into the we mode, to make them want to do something rather than be something. i would like to give young people the same dream that we had. i would like to find our nation unified -- the world's unified in achieving common goals. i believe that space provides us -- difficult programs like mars provides us with those things. unfortunately, we do not have the national leadership we need. we do not have a united states

congress that really recognizes the need for this country to continue to grow and invest in our needs. we cannot have leaders capable of stepping up and taking a difficult position and articulating why we must do something. i am not interested in something for gene kranz. i am interested in funding for my children. i am interested in something for my children's children. we are the only nation in the entire probe that is blessed with the types of freedoms that we have -- in the entire earth that is blessed with the types of freedoms that we have. with so many different ethnic groups and types of people. we're capable of doing these kinds of things. we must continue to force our leadership to grow. i was privileged and proud to be part of the years when the leadership flourished of mission control. there is not one flight director who ever left year was not

inspired to do something else, to do better. that is important for us to communicate, not only to people here at johnson. people will look at these tapes. the people of the nation, this very magnificent world that we live in, they need to look closely enough span.org.

>> this is c-span's "america and the courts." up next, supreme court justices stephen breyer and clarence thomas on the court's budget request for 2011. they spoke before a house appropriations subcommittee thursday about the budget and a number of other issues including cameras in the court and the diversity of supreme court law clerks. the court's budget request for fiscal year 2011 is $78 million. it's a 5% increase over last year.

that's the day that a man named jack roosevelt robinson stepped on a baseball field for the first time and in my opinion, in the process, integrated not only baseball but integrated america. and we honor him today throughout major league baseball. and i thought it would be fitting to honor number 42. by the way, a good story in "the new york times" today about mariano rivera of the yankees being the last player to wear number 42, and your favorite committee chairman is quoted in this story. >> and what is the -- if i may ask, the yankees' record so far? mr. chairman? >> you're out of order. [laughter] also, i would like to note before we begin this hearing that there has been a change at the court which has special meaning to the court, to the american society in general, and to me personally because

sonya sotomayor comes from the south bronx, squat that i represent, the area that -- from the area that i represent, the area that i was born in, the island of puerto rico. so of course it's -- it was a special time to see her become part of the very procedures and very honorable court. this morning, we gather to hear about the fiscal year 201 budget request for the supreme court -- 2011 budget request for the supreme court. we are joined by two distinguished justices of the supreme court regarding its appropriations request for the upcoming fiscal year. as we do so at a time when the court's longest serving member, justice john paul stevens, has recently announced that he will retire when the court finishes the work for the summer. i know that i speak for every member of this committee when i ask the justices here today to pass along this subcommittee's appreciation and thanks to justice stevens for his decades of service to our country.

these annual hearings are a rare and important tunalt for our two branches of government to interact. congress of course has constitutional responsibility over federal spending which includes appropriations for the supreme court and the rest of the judiciary. although i always have some concern about asking the third branch to come and testify before us, these hearings provide a valuable chance not just to help us understand the supreme court's budgetary needs but for the nation's highest court to discuss issues affecting the judiciary as a whole. hopefully our two branches get to know one another a little better as well. meeting the needs of the judicial branch is a priority of the subcommittee. the courts have a vital role to play in our society where the rule of law is a core principle. we need to be sure that the courts have the resources they need to dispense justice with reasonable speed and care as well as proper regard for the

rights of defendants and litigants and the needs of society. and at the same time, we must also exercise due diligence in spending matters and balance competing needs. in some years, the percentage increases requested by the court have been substantial. as have those of many agencies. as we put together our plans for fiscal 2011, we face a more austere environment for nonemergency spending. we look forward today to a discussion of the budget needs of the supreme court as well as a broader conversation about the federal judiciary. as a whole. our witnesses are justice clarence thomas. and justice stephen breyer. both of whom have appeared before the subcommittee previously. in fact, i think justice thomas may be on his way to setting a record for appearances before the committee. we'll have to put up your number. [laughter] justice thomas was nominated to the court in 1991 by the first president bush after serving as

assistant secretary of education for sism rights, chairman of the equal employment opportunity commission, and as a judge on the court of appeals for the district of columbia, among other positions and we welcome you again to the committee. and i say that with great admiration when i say that you've been here so many times before us. to share with us. justice breyer joined the court in 1994. as a nominee of president clinton. before that, he was a professor at harvard law school, staff member, for the senate judiciary committee, and judge and then chief judge on the court of appeals for the first circuit. we welcome both of you today. we're glad that your previous appearances before the subcommittee were plenty enough that you agreed to return for repeat performances. thank you for joining us today. and now i would like to turn to my colleague and my ranking member. >> thank you. welcome, justices thomas and breyer. i really appreciate so much that you've come before us today. an independent judiciary trusted and respected by all

citizens and committed fairly and expeditiously resolving difficult and controversial questions is a fundamental institution for our nation. although the supreme court budget is not large in comparison to other federal programs, i'm pleased you're here today. and recognize the importance of your testimony and appearance before the subcommittee. outside of the confirmation process, which we have no opportunity to participate in, which should be quite interesting this year, today's hearing is one. few instances when the supreme court and the legislative branch interact. and it is in my opinion a worthy interaction as we recognize and appreciate and respect the prerogatives of each branch. i look forward to hearing from you both about the resources necessary for the operation of our nation's highest court as well as any thoughts you all might have regarding our judiciary system as a whole.

as a -- as the witnesses are aware the federal deficit is projected to be $1.6 trillion this year. and the congress is going to have some difficult spending decisions to make, not only this year but for many years to come. but please note that i'll work with chairman serrano to make sure you all have the necessary resources to fulfill your constitutional duties. thank you all. thanks, mr. chairman. >> thank you. by the way, that question about the yankee record, is that because the cardinals are having a better start? >> the cardinals are doing phenomenally well. knock on wood. >> there is always september. >> that's what happened last year. so but for now, i'm enjoying it, you know? >> justice thomas and justice breyer, the floor is yours. your written testimony will be presented in the written record and proceed to make whatever oral statements you want to make and then we'll have some quells. >> good morning, chairman serrano, mrs. emerson, members of the committee. justice breyer and i are pleased to return.

we will pass along your kind wishes to our colleague, justice stevens, and we will certainly miss him. a wonderful man. we have with us today a number of members of the supreme court staff. we have the clerk of the court, mr. bill souter. we have marshall pamela talkin. and the counselor to the chief justice, jeffrey maneer. and make sure i'm looking in the right direction. and we have our public information officer, kathy arberg. and our acting budget manager, bonita akers. as i said, we are pleached to be here -- pleased to be here. we have submitted a statement for the record as is our custom. and you're right, mr. chairman. i may well be the longest serving member of this committee. i think it like 15 years now.

and maybe i'll get off for a good time or good behavior. but the court's budgetary needs, as you've indicated, arear alluded to, are tiny but we understand this is a period of austerity. and we have as in previous years, been very serious about our responsibility to review our budget needs. and i family size the word "needs." we do not look at this as wants or a wish list. and in the years i've been before the committee, we have only asked for what the court has needed. in some years, in my opinion, we haven't even asked for that. the largest request as you remember was actually had to do with the modernization project which is simply a matter of keeping the building from falling down around us. the budget request as in previous years is in two parts.

it's the salary -- we have the salary and expenses, which we will -- justice breyer and i will address. and we have the building and grounds, which the acting architect of the capitol, steven ayers, will address. but on that, on that latter category, let me make a couple of comments. one, and i'll be brief, the modernization commenced in 2003, fiscal year 2003. and there's some confusion about the year simply because the first portion of the modernization actually had to do with the construction of an annex which is an underground facility. and that was necessary to handle the portions of the building that were going to be occupied with construction. initially, or changed. with respect to the completion date, we had some initial slippage in the early part of

the modernization project. since then, it has been timely. it is scheduled to be completed this summer. and with the closeout tists finishing early next calendar year. with respect to our salaries and expenses requests, that portion -- our total budget this year, request, is $77, 758,000 for fiscal year 2010. that's an increase of $3,724,000. 5% increase. now, 70% of that increase is nondiscretionary. it's mandatory. it is basically what is required to continue operating at our current level as we call this, it's an adjustment to our base. it's increases in salary, mandatory, and increases in

benefits, that are mandatory. and there's an additional $173,000 that's simply in there for inflation to cover inflationary increase. last year, we asked for an increase of $799,000. in addition to those base adjustments. and we did that to hire personnel and to get the appropriate equipment to bring the -- our website in house. that has been an early success. in the first two weeks, that system, that the website has been up. we have had 25 million hits from around the world. as you remember, from our early discussions in the early years, we were ecstatic about one million hits in a month. and we only see -- it's been well received. and universally praised. and this allows us now to make adjustments. the things that we talked about early on.

and if you visit it, you'll see it's a much better site. things that used to take several hours to get on-site changes that could only be made within a matter of hours or not made at all, are now made in a matter of minutes. three to five minutes to put something there. as i indicated last year, though, there's one area where we would probably come back this year to ask for some increase. and we do this again with some reluctance. but recognizing that in all candor that this is a need. it involves the security area. i think in parting last year, i was asked whether there was one area in which i thought we would have additional needs beyond the technical area. and i said it would be security. what we did is we had our security personnel do a complete review of our needs.

and flair suggestion or their request which was pretty well documented was that we needed 24 additional police officers. and the reason that you need the additional police officers is the opening of the building after the construction, we will have more pedestrian traffic. and in addition to that, we will have in the entrance to the building, an underground entrance, that was closed and did not need to be policed in the way that the other entrance was policed. that will require additional police officers. we've also have additional needs at our command center. now, rather than coming here with a request as required or the personnel or security people ask for, we're going to ask for half of that. we're going to ask for 12 rather than the 24.

and make due with that. but as i indicated, that is a request that our security personnel feel pretty strongly about. that again will result in an $886,000 increase in our nonadjustment to the base request. with that, mr. chairman, i will just simply respond to your questions at the appropriate time. >> that's fine. >> that's the first time he's ever agreed with me. [laughter] well, that's not the first time. >> i agree with him all the time. >> my first question would be one that you touched on but i just wanted to get a clarified, so you believe that the amount of the modernization project will be completed on time this summer. >> well, on time, as is

currently projected. not from the initial -- we are a year behind. >> yes. i'm talking about based on last year's testimony where you would said -- you said summer. >> it's expected to be done this summer with the closeout activities drifting into the early part of next year. >> and what would those closeout activities be? >> i think it's basically we've got some grounds on perimeter work to do. we also have some cleanup to do. removal of construction trailers, etc. those sorts of things. >> overall, how would you characterize the court's experience with the modernization project in terms of adequate budget, resources, disruption, if any, to the court's operation? >> from my perspective, i think it's been spectacular. there's -- on any big projects, we have a choice. we could move out of the building as in essence rebuilt it. and you're talking about

plumbing and wiring, structural work. heating and air. and some security issues. now, on any -- if you look around town, many people evacuate the building in order to accomplish this. we chose to stay. and they've had to work around us. now, there have been glitches. there are -- things weren't perfect. but i would characterize the resources, the handling of this, from my perspective, is excellent. recognizing that there are imperfections. >> as ditch as it must have been -- difficult as it must have been to have this work going on while you were there, i felt it was very important and symbolic that you would stay. if i was a bad standup comic, if you move, where would the protesters know where to go, right? >> they would figure it out. >> but there was definitely a need for the continuation and

i'm glad you've -- you chose to do it that way. a question -- you said you could really use 24 officers but you're going to ask for 12. will that -- you aren't going to get too many committees asking you why you're asking for the lesser number. they actually applaud that. so you feel that the 24 was maybe too much of an ask or are you being nice to us because of the budget problems? and you actually think you could do with 12? >> we've managed to -- we've not asked for any increase in security personnel since 2006. and we have managed to do with what we had. or what we have. we try to do that before we come to this committee. now, we would like, we think the appropriate number is 24. it's a comfortable number. it's a number that is -- gives us some leeway.

but we can have a minimum or baseline number of 12, make it work. so it would be not a luxury but a better and more practical and more flexible number to have the 24. and i think most agencies would come in and ask for the 24. but as i've said, we have never, in the time that i've been coming here, ever asked you for more than we've needed. we've been very stringent. particularly during chief justice republican quist's tenure -- rehnquist's tenure. he was very strict about what we asked for. >> one last question. these 12 new officers, just curious, do you select them from an existing lawen format force -- law enforcement force? are they totally new hires or get transferred from capitol police or somewhere else? >> i think in the past, we used to take quite a few people from

-- say the district police force. metropolitan police, and from various agencies around town. we normally now hire new people. and we send them off to our federal law enforcement facility down -- and training facility down in brunswick, georgia, which probably is excellent. merely because it's in georgia. and so it's normally an entry level job. and we've had good luck with keeping them. we've had very little turnover. in the early years we had quite a bit of turnover and that got to be a problem. but after you reach parity and benefits and salary, and retirement, that's pretty much ended. >> let me ask you one last question before i turn it over to ms. emerson. the court has requested $6.3 million for 2011 to finish roof repairs to the court building. is this request part of the

court's modernization project or is this something new? >> that's separate. that's on the buildings and grounds category. that's on the architect of the capitol. and we'll handle that. but that roof, that's a part of the maintenance, the roof is an old roof. it's the original roof. and this has been an ongoing project. and this -- i think .3 million is to finalize the repairs on the roof. it's the final phase of that. but it is not a part of the modernization project. >> i think you spoke about this in the past. forgive me if i'm wrong. but i think you said that part of what we wanted to accomplish, not just to make the building more workable for everyone, but also to make it easier for folks to visit there. the tourists that come to. do you think we accomplished that? >> i think we have. we could always debate around

the edges as to margins as to whether or not this approach or that is the better approach. i think we all have different opinions about that. but i can remember my own first venture up the steps of the supreme court. and i was overawed by it. and it is a national treasure. but it is also a building where we work. and i think we have managed to maintain that balance. both as -- in the modernization project and into the additions. there are going to be new things such as the new film -- i think there's more art work there. i think the building is maintained in an excellent fashion. so the answer to that, i would say, is yes. also on the website, i think is an opportunity to see more of the building and more of what we do on just the ability to

show what's there without actually having the physical intrusiveness or disturbances that you would have. is outstanding. so i think there are a number of opportunities to do that. and i think the building, and you've been there. and it's a fabulous place. to work and to visit. so i think that we've accomplished that. justice breyer may have a different view of that. >> do you have a different view of that? >> i'll wait to see what happens. i would like to see -- we had at one point, i think, about a million people a year coming through. i think that's good. i think the numbers dropped a lot because of the construction probably. and i hope we get back to a million. or more. i think it's important that people go through that building. it's their building. they ought to know about it. >> thank you.

ms. emerson. >> let me ask a combination, modernization-security question, just back related to the 12 officers. given the recent events, the i.r.s. building in texas, the shootings at the las vegas courthouse, and at the pentagon, think that shows that we perhaps -- perhaps not need heightened security at some of our federal buildings, and obviously you all are high-profile. building. and so in order to try to assess -- you're being very kind by asking for 12 officers. but have you all had any additional security threats over the last year or so that might give us reason to think 12 new officers wouldn't be enough? >> without getting into too much -- too many details in an open hearing, one of the

reasons for the request is actually to -- we have individuals who work on one person, actually, now, who actually do the -- work on threat assessment. and we are going to upgrade that because of the volume. >> ok. >> and without getting into the details of it. but it is -- we understand the importance of analyzing those threats. and remaining current and following up on that. >> so -- but within the new modernization project, you have -- you'll have a new police command center in the building, correct? >> well, that's already -- we have -- >> you have that already. >> yes. >> and what about the additional entrances to the buildings once the modernization is completed? how many additional entrances will there be for purposes of security? you know, in other words, we have three new entrances and we only have 12 new officers.

is that -- >> we'll have enough officers to cover the entrances. >> ok. >> but the point is that as i said, it would be sometimes you can have things that are adequate. >> right. >> that you can get through the process with. and then sometimes you can have a little more. and what we try to do is not to come here before this committee, particularly now, in this austere period, and ask for more than we actually need. >> and justice breyer mentioned having -- hopefully once the modernization -- modernization project is complete, more visitors will come. and so that's important, too. in fiscal year 2010 we funded the $3 million building and grounds request for perimeter security. has the architect of the capitol implemented those security improvements as of today? >> we are in the final phases.

we have one side of the building to do. >> ok. >> and that will be done after the construction. >> all right. >> is done. >> but you think it will be on schedule and within budget? >> based on everything i've heard, yes. >> ok. that's good. let me switch subjects. according to your budget submission, in 2009, there were 88 cases argued and 84 cases disposed of by opinion. back in the 1970's, 1980's, early 1990's, there were well over 100 cases arc you'd per year and disposed of -- argued per year and disposed of by opinion of the court. so one could ask the question, then, is the court less efficient than in previous decades? or it could be other factors. so i'm just curious, can you describe how the court, number one, decides what cases it will accept and do you consider this decrease in cases argued

compared to earlier decades to be significant? just interested in your thoughts on these trends. and whether you expect it to continue in future years or not. >> well, first of all, with respect to the future, i don't know. i think each of us, when i went on the court in 1991, we had about 120 cases a year. i like that number. some members of the court may not agree with it. but i think 100 to 120 will be good. but the question is, what's in our pool of cases? and the 8,000 petitions we get each year, each member of the court goes through those petitions, i do it usually on the weekend. you go through 200 or 300 that come in that are filed or that are received during the week. and you make an assessment. and what you're looking for is whether or not it's a federal issue that is substantial or

significant. and then you have other problems, whether there's some -- we call them vehicle problems. in other words, there's a jurisdictional problem or some other reasons you can't take the case. then we go to conference. and we do that individually. and we show up, and we cast our votes. four votes in the case is of course the cert petition is granted. i don't know why the number has gone down. people have had different theories. i suspect that there's been a change in our -- to some degree in our mandatory jurisdiction. it's verlly all discretionary now. -- virtually all discretionary now. there may be courts of appeals are agreeing more. i simply don't know. there haven't been until recently or hasn't been comprehensive legislation. that would produce the kinds of

cases that would fill our docket. i asked that this be looked into before. and i don't know anyone yet who has more than a theory. i see nothing, no documented reason yet for the trend. and i thought i happened to find one but to this date i haven't had that substantiated. >> thank you, justice thomas. justice breyer, you look like you want to say something. >> i think it's a very good question. i'll try to keep it to the two-minute version. the 10th graders i like to talk about this because it helps them understand what we do. and i make a couple of points. justice thomas likes to have evidence. i used to be a professor. and so i don't need any evidence. i like theories. [laughter] i try to point out most law in the united states almost all of it is state law. federal law is about 3%.

and that's the law of house by you in congress and the constitution. and we only handle federal cases. and justice thomas very well said which federal cases? the basic rule is that we're there really to work out differences among other judges. if all the other judges in the united states that handle these questions are in agreement on what these words mean, why us? jackson said that. he said we're not final because we're infallible. we're infallible because we're final. and no one knows what that means. and we don't have the last word because we're so brilliant. we are of course brilliant. [laughter] but only in the sense that someone has to have the last word. so if they all agree, why us? and if they disagree, then we have to work it out. so there you have the basic criteria. now, why is that criteria ended up with fewer cases in the last few years?

here's where i bring in the theory. and it's a very old theory. you can read it in 1584. in montain, this king was so stupid he thought by writing a lot of laws he was going to reduce the number of lawyers because he explains everything. doesn't he know every word in a bill is a subject for an argument? in court and a decision? so i think what's happened is our diet has become like edpa, erisa, and that's because if we go back 10 years, those are the laws you passed. and now i gather have passed a law with 2,400 pages. and if you have passed a law with 2,400 pages, they probably has a lot of words. and i would predict as a test of the theory, that three or four years today, no one is ever going to ask us again why we have so few cases. >> that was a good answer. thank you.

>> mr. chairman, i always begin my statement, when the chairman brings up the subject, i just want to begin by saying go sox. that limits my time. >> is that white sox or red sox? >> red sox. >> red sox. you have three minutes. [laughter] >> you got to stick by your principles. and it's worth it. i have a couple questions. in looking at the request in terms of salaries and expenses, it says the sum reflects an increase of 5% over the appropriation for 2010. what does that represent in terms of percentage increase of salary? for staff? i didn't know whether the 5% meant a 5% increase was 5% was including salary and benefits and the increase was less than 5%? >> 5% is the increase of the

overall budget. and the increase of the salaries are merely -- it's less than that. it's whatever we have, cost of living increase, plus whatever in-grade natural promotions that are required. but beyond that, they're not arbitrary increases. and it's not 5%. 5% is the overall increase. that's the -- for example, if we are required to increase benefits, because of the benefit package, the -- that goes up. if you're required to pay into whatever you're required to pay and additionally into retirement systems, that is increase. >> justices, if you could get back to us on what that means in average in terms of the salary increase for staff, if you don't have that figure available. >> he says it's about 1.4%.

>> thank you. and i appreciate that frugality. all our staff are facing the same kind of difficult economic challenges as well as people around the crinlt. and appreciate your efforts to keep your budget reflective of the economic times. i do want to say that i hope, continue to hope this year with the longer term in mind and the broader issue of judicial salaries that we can delink judicial salaries from our own which i think has been -- and also has not served us we'll or you well and particularly hasn't served judges well. but that is a topic for probably another discussion. i wanted to raise an issue that i've been stud egg for some

time -- studying for some time and feel increasingly strongly about and it may be a difference of opinion. justice breyer and i have perhaps discussed that in the past and that's the issue of cameras in the courtroom. is there any -- any plan in the works to change the pilot or in any way increase the use of cameras at the supreme court? >> mr. maneer says the judicial conference is considering a pilot project. i guess i'm favorably disposed toward. >> and that would be a pilot project in your courtroom? >> it wouldn't be in our court. >> what's that? >> the judicial conference is not -- does -- our court, has to do with the lower court. >> let me raise the issue your courtroom. and i'll share my thoughts on that and be interested to hear your own. i would think probably of any courtroom within the system,

appellate courts, both the court of appeals and the supreme court, would be probably the best situated for cameras in the sense that you don't have the same kind of jury issues that you might have at the trial court level. you have the ability of the judges to consider whether counsel are playing to the cameras. and i would think particularly at the level of the supreme court, that counsel would be very circumspect about playing too much to the cameras given that if that's not the disposition of the bench, it wouldn't help them in their advocacy. and i think that this is one of the few areas of public sector that remains free of cameras. and we're still using sketches and audio tapes, which seems anachronistic. i think the change is

inevitable. but i would be interested to hear whether you would contemplate a pilot in your own court or why the dynamic is so much different with an audio tape versus a videotape? >> the answer is i think i don't know. i know perfectly well what the arguments -- i think i know fairly well. a long time. the arguments for and against, if you bring courtrooms into the -- cameras into the oral argument, there's a big plus for the court and for the public. i think they'll see that we do our job seriously. we don't always get everything right. but we take it very seriously. people are well prepared. the lawyers are well prepared. the judges are trying to think out problems. they're difficult problems. and for the public to see that, i think would be a plus. so why not do it? the concerns are not i think totally the ones you've mentioned but the concerns are if we bring it into our court,

we are -- and if it's in our court it is likely to be in every court including criminal procedure where there are separate problems raised as you know. juries, judges, witnesses and so forth. a second problem is will understanding be promoted if you can only show the oral argument which is 1% of what goes on? and people relate to what they see. much more than what they relate to what's in writing. and we're deciding cases that we have results for 300 million people and only six of them are in front of us. and we have to worry a lot about what our ruling will do to the 299 million, etc., that aren't there. and so will there be misunderstanding about that? and the third, which i think is minor, but it's possibly there, it's not that the lawyers and judges are anybody would act

up. i don't think they really would. we just had the canadians in a visit to us. and they have it in their supreme court. it's worked out all right. but there's some concern about what -- we have a group of people in our press room who know how the court works. and when you read what they say, you know it's being written about by someone who knows how the court works. that isn't always so. the cameras don't always have the time. and will there be misperception given? you can take those three worries i've listed and say in your own mind, they don't stack up against the plus. i can understand that. but our jobs are those of trustees for this institution that served america well. and there is no going back. i think there is no such thing as an experiment on this in the supreme court. you have to decide it. and that's why i think what's needed is a comfort level that

by giving a comfort level, it may come sooner rather than what i tend to agree with you on. inevitably later. now, how to get that comfort level is a long, complicated matter. i've always said it will involve studies and serious studies, not just one's promoted by the press. serious studies of what's happened in different plachese. and when i say that, everyone goes to sleep because if you mention the word "study" that's a good somnorific. but i think something like that is necessary. i like these pilot programs. even in other courts. i think there are things to be learned. and i think eventually we'll get the comfort level but i think we're not there yet. >> if i can engage a little bit on that. because i think -- you mentioned three different points, probably the most substantial being that, well,

people could misunderstand because the case only ostensibly applies to the litigants in the court but it affects millions. there's in my view far greater chance of misunderstanding if the public isn't able to see. there's far greater i think opportunity for people to be suspicious. outcome or misunderstand the process or misapprehend the process. they don't have the window into the court's workings that would be provided by actually watching. and so your first observation i think is the much more compelling one. which is -- it would be beneficial to the court because people would understand what it does better. it would be beneficial to the public to gain that understanding. and i think that clearly trumps any risk of misunderstanding which is always going to be present and is more present when things are done less visibly than with more visibility. is that the tapping of the gavel? >> the nine-minute gavel. >> ok.

i'll wrap up. i shouldn't have made the comment about the red sox. i also think that the slippery slope point that if you do it in the appellate courts you must do it in the trial courts isn't necessarily so. and there are different factors that work when you have a jury and when you don't. and finally, the fact that the print media may be very good and very professional and you have less control with the electronic media, that's true in our profession as well. a lot of what we do is in writing. a lot of what all government bodies do is in writing. and i don't find that a compelling reason not to go forward. at the end of the day, i think you put your finger out and said, we just have to decide. and i don't think a study will give you a comfort level. i think the only thing that's going to give you a comfort level is by taking the plunge. and i also think justices, this is inevitable.

and if it is inevitable, we might as well plunge forward. and i appreciate the chairman's indulgence. thank you, mr. chairman. >> thank you. the gentleman brings up an interesting issue. one that the chairman since his days in the state assembly has dealt with. cameras in the courtroom. my concern, just on the record, is one that will probably get me badly spoken of tonight on some talk shows. but it's precisely the fact that both on the left and on the right, it will be evening talk shows, not the news, but the talk shows, grabbing clips from that day's supreme court proceedings and saying did you hear breyer? what a jerk. did you hear the question he has? did you hear thomas? oh, my god. >> you didn't hear me. [laughter] >> did you see them there? and that's my concern. and i'm sure that the desires for full disclosure people are going to say tonight that what

am he for covering things up? but i wish there was a way that we could -- let the public see more and not just invite people to treat the court the way they treat us. >> there is a difference, and -- >> sure. >> and sometimes overlooked. but i think it's an important one in the nature of the jobs. your job is to -- write some words on a piece of paper. those words tell people what to do. or what not to do. but they don't tell you on that paper. they don't say why you wrote the words. that's not the nature of the job. so obviously there's an inside story that's not on that paper. a judge's job is different. a good appellate judge, the ideal is you write not just the words. you write the reasons why you wrote the words. and if you're honest and good, they explain the real reasons why you wrote the words. so in that sense, the process is quite different.

and it's a process that does take place much more in writing and much less even in conversation among us. than say a job like yours. they are different. but i can see your concern there. and of course it's something that worries us. >> mr. chairman, if i could jump in with one quick point. >> go ahead. >> mr. crenshaw is just a gentleman he'll allow me 30 seconds, please. no one is suggesting that your job is the same as ours. but i am suggesting that the public would benefit from a better understanding of your job just as it benefits from a better understanding of ours. people watch your arguments and listen to your arguments because they -- they find the questions that you ask shed light on sometimes your on thinking and shed light on the issues in the case. and i think the more the public has a chance to see how thoughtful and probing those questions are, i think as you -- as your original comments indicated, it's good for the court and good for the public. and i yield back, mr. chairman.

>> mr. crenshaw. >> thank you, mr. chairman. i might make the observation that today's hearing is being televised. and one thing is irrefutable. when you put members of congress on television, they tend to talk longer than they do when they're not on television. so i don't know if that's true to the supreme court. but we've kind of seen that over the years. let me just say that i've looked at the numbers, listened to your testimony. the budget requests are certainly reasonable, modest increase. the building is pretty much on time and on budget. you're asking for 12 instead of 24 additional security folks. so i don't have a lot to quarrel with in terms of the budget request. i just have a couple of questions that i'm curious about. number one, how does the court decide who comes here to

testify? is that an opportunity that everyone seeks and that you have done such a good job that you are invited back? or is it because you draw strauss and you come up short -- draw straws and you come up short every time? >> well, actually, it's probably a combination. but if you bear with me one minute, i would like to just address the question of the increases on the 5% increase that mr. schiff asked for. and that is they -- the proposed increase for 2011 the members of the court is 1.4%. that's the mandatory increase. and for the court personnel, it's 1.4% also. so that shows that it's different from the 5%. that's the overall budget. and they're unrelated. with respect to who is -- i was asked when i -- in my early years on the court to

participate, be part of the budget committee. and that meant that i came up here as a part of that and testified. i don't know how that selection was made. except when the chief justice asks you to do something, you normally try to be positive and be a part and help him out. i think it's good for the courts and good for the institution to be asked to do these things. and i think it's like anything else. you get used to it. and you know the process. and they like that continuity. especially with a new chief justice. and he asked that we participate in this. and i think it's -- we -- i think i speaking for me, i enjoy this. i know -- gotten to know the members of the committee. and i think it's good for both institutions. >> you do a great job. and i'm glad you're here. let me ask you a more serious question. that is, as we get ready to kind of watch the nomination

process of a new justice, the discussion about diversity will come up. ethnic diversity, racial, gender diversity and you all don't have a whole lot to do with the selection. that's something outside your hands. but you all do select clerks. and i was just looking at the kind of list of the clerks that are served on the years. and it seems to me there's a disproportionate share of clerks that come from either harvard or yale. and i look out in the audience and i see some young people that might aspire to be a clerk "f"'::z:jzd"jzz")'j:z

court all over the country. and i would be concerned about it. but i'm not -- think you have elections for that. that's up to the president. with respect to the selection of the law clerks, i tend to

hire from a very broad pool. i have a clerk from harvard and one from yale this year. and one from utah and one from notre dame. i really donalt -- don't see it as a negative when a kid's number one or the top of the class, the pool may not be as deep at some of the other schools. but there is a pool nonetheless. but others, it's an individual thing. i hire my own clerks. and i have my own criteria. and i'm certain the or members of the court have their. -- have theirs. and with that may go their comfort league moving beyond the ivy leagues or too far beyond them. >> one last question. i've always got two bright people in front of me today. and when i was reading -- i

read a case and i can't remember the case and i can't remember the justice. but the statement was that versatility of circumstance often marks definitiveness. does that ring a bell with you and was that felix frankfurt and i wondered who said that. i need to go back and look that up. >> google. you should google it, yeah. you can google on your blackberry. >> i'll do that. i once googled a quote by jonathan swift. and there was a book called "confederacy of dunces." and interestingly enough, i just googled that. because it was based on a quote by jonathan swift who mr. schiff knows who said whenever a true genius appears on the scene, you will know him by the sign, the dunces all form a confederacy against him. so i'll go google that quote. and maybe i can find out who said that. [laughter] ms. emerson.

>> thank you, mr. chairman. >> thank you. ms. lee. >> thank you very much. good morning. let me just say -- once again, how delighted i am to see -- it's a rare opportunity that we have a chance to interact with the judiciary. so thank you for being here. i want to follow up, and mr. crenshaw, boy, he asked my question. but let me just follow up a little bit and take a little bit -- in terms of how i would like to see this -- your answer a little bit more in terms of broader answer. first of all, i started here on capitol hill as an intern in the early 1970's. became chief of staff. then went to california and ran for the legislature. and now i'm back here. and it's been very difficult. and i've seen some progress in terms of women and people of color. in these key positions.

not enough. actually, we have -- and to the speaker's credit we looked at diversity on capitol hill and we're not where we should be in terms of reflecting the diversity of our great country. now we're in the midst or in the final stages of the census. and of course we know based on the previous census, we're looking at 15.4% persons of hispanic descent, 12.8% african-american, 4.5% asian, 1% american indian. and so i know that the courts want to strife -- to strive to be representative of the american people in terms of your staffing and law clerks. but we have to ask i think each agency and each branch of government to really look at how it does reflect the diversity of our country. and harvard and yale are great law schools. they're excellent institutions. however, we know that there are few minorities attending these law schools.

and so i want to find out if you have an actual concerted effort to identify law clerks from schools like howard or texas southern or even in terms of regional diversity, bolt hall in california. how do you do this and is there a way we can look at what those numbers are currently? and secondly, just in terms of -- i know your budget is a relatively small budget. but if you do contract out any of your activities or services, in terms of vendors and projects, and if you do contract these out, do you have any information as it relates to women and minority-owned vendors and how you're doing in that respect if you do have contracting program? i know i asked this question last year. and justice thomas, your response was the law clerks reflected or you thought they

reflected -- >> the pool that we -- that's the pool for us, all of our clerks are virtually all with rare exception come from the court of appeal. so you start with the court of appeals. that's our base. and you select -- and then it's individuals after that. but i know of very few clerks who have not at least clerked at the court of appeal. some clerk more than once or clerk at various levels. so the clerks that you're looking at, you should -- you look first at the court of appeals, what does that look like? then you look at what we pull from that. now, i have to admit, i have a broad base as far as the law schools. and probably the broadest as anyone in the court with the exception maybe of justice stevens. and so there are quite a few in the pool. the reality is that it is the

-- it's a hispanics and blacks who do not show up in any great numbers. >> they don't show up, why? >> well, you look in the pool. >> so how do we increase the pool? i would hope that -- >> well, i don't think it's up to us to increase the pool. the pool comes from law schools and from other judges. .

>> those who show up are inclusive of the populations. >> but what you look at is what is the pool. >> but what is in the pool, has to do unfortunately with your decisions on the supreme court. that have shut out many people of color in these institutions. so we go there, we could have a healthy discussion about some of your decisions. but i think we would want to see a broader pool. >> i think people want. >> and you help develop it. >> i think that we should have people from all over the country on the court. and as i have

indicated it would be towards one region of the country. >> but justice thomas, i am trying to see how to change that. you don't want to see a supreme court extrematory defactor. and that is what happens. >> i think you broaden the areas you look. like many of us do that. i don't think we have the capacity to change other federal judges' hiring practices. >> you don't have the capacity. >> to change other judges' hiring practice. >> wouldn't it be good to say that you would like to have a diverse law clerk in this country. >> i think they know. >> they may not know that. but that's what you all want to see. somehow you need to communicate

that's what you would like to see. rather than taking who will show up. because we know who will show up, especially from harvard and yale. >> i would say this conversatior is not as inidate as you may think. i came to the court 15 years ago and i was surprised of the numberw1- of minorities and peo of color of hispanic background. who were law clerks. i would say in the last 15 years there has been change and i think it's not as difficult as people might think. and i think once you establish credibility in the areas that think, i don't have a chance. no, you do have a chance. i can't say that, but know people that tell other people and then gradually yeah, i do have a chance. and get in the pool. whatever the pool may be.

like anything else when you hire you have to do through networks and contacts. that's at least part of it. and i have seen that change. so i don't think i have had a huge problem in this respect. not perfect. but not the kind of problem that i think you might be thinking of. >> well -- >> i think there are quite a few in my office of quite diverse background and i have told the chairman, i have even, mr. chairman, have a law clerk of ponce, and i don't finish that's part of puerto rico. but if you are, you are special. >> mr. chairman, i would ask to see the report of ethnic, gender and regional diversity.

is that possible? a current report so we can look at that. >> this is a very important issue for us and the committee and has been for me. i can understand what the justice is saying. and maybe it's not their all to say, send me this person and that person. >> i understand that. >> no, in view of that, this committee asked the judicial conference to give a report. and the report that came back was pretty pathetic of the numbers at that level in their courts. so what this committee wants to continue to try to do, to apply pressure, if you will, where the pressure needs to be. at those low levels to make sure that the pool increases. our information is that it's not happening, and i intend for this committee to tie what we do to

an understanding that they can't come every year and ask for a lot of support and continue to give us those numbers. >> yeah. >> and then they can look at a pool that is more diversified. >> sure, i have seen those numbers, and i hope we get an updated report. and i think, mr. chairman, there should be some intent or the supreme court justices make a statement, this is something we would like. you can't say send us a diverse pool but it would be nice to see diversity reflected and you can do that. >> i agree with that. >> and ask that you do something about that. >> i agree with it. >> thank you very much. >> and for the record, i want to state that if she asked the question i was going to ask. and justice thomas, you and i

have discussed this publicly for a while. this is still a concern. and i add@@@@@@@ @ @ @ @ @ @ @ , r states. you but have to speak to people, there is a problem, and unfortunately every year when you come here, it's the court that takes the brunt of the questions. and in fact i agree with you, but in addition to the pool being a problem or inspite of the pool being a problem. if the court were to say we need this to change, we would begin

to see change. and i have nothing against harvard or yale, but there are different places around the country that can provide good folks. now whenever we have you before us, we try very hard to speak only to budget issues. but we can't pass up the opportunity to touch slightly on other things. but if we honor the long tenure of justice stevens over the next few months, i can't notice that we lose certain unique characteristics of the demgraphici is his or others, justice steven was one of the last to serve in world war ii. and the last justice with supreme court confirmation

hearing was not televised with other things. as we begin to lose with justice stevens, we must look forward to absent of any philosophy. are there any experiences legal or otherwise that you believe that court will be well served by a new justice. and secondly do you think of having all the current justices of judicial experience at the federal court of appeals helps or hinders the cites at the court levels? or do you feel that the court will have at the state level as justices. or at the state level. without getting into philosophy what best serves the court in

your opinion? >> to all the above, mr. chairman, i would say yes. i don't think it matters as much. i think what the experience is, as long as its experience making decisions and hard decisions. just as it helps us if someone is from a different part of the country. and it helps us if someone practices law or maybe talk a particular area or prosecuted or defended in a particular area. a trial judge versus an appellate judge. mr. white was a wonderful judge, a world war ii veteran, and he wasn't a judge but an attorney general before coming to the court. just an excellent member of the court. so i think all the above works. what we look for, those of us

who have been there fair while. someone we can get along with, who will an honest person, a person who will be conscientious and i don't think we have discussed how a particular person will vote. and that's the way we operate. i don't have a formula for what a judge should actually have. i like the way the court is. that people come from different problems and different perspectives and with a different background. i think it's helpful to have that sort of mix. so, and i think that most sitting judges learn in doing this job, it's a humbling job. simply because the only people

who have ready-answers are the people who have no authority to make the decision and no responsibility to make the decision. those of us who have to make it, have to be more cautious. and have to be more humble about our ability. so i don't think any of us would say to you, we have a formula for what the next member should look like. just as long as the person is a capable, good person. >> i think in respect to what you are talking about, you should keep in mind that the job, and why it's a better job for an older person in a way, is sitting in a room. that's how i spend my day. looking at the word processor. yeah, sometime us forget and i am there all night. you are reading and writing.

to do your homework, you can have a job for the rest of your life. and you need to think not just what those books say and cases say, that's part of it. but you would have to have what i would call a certain kind of imagination. you have to think beyond the room and you have to have a realistic imagination so you understand what the impact of this decision will be on those people. i can't give you a magic touch stone to tell you whether you have that kind of person. i just tell you that the nine people that are there, try as hard as they can. and sometimes they succeed and sometimes they don't. but it's that kind of imaginative experience of others that really makes the difference

in how you write those words. >> it's interesting, justice thomas, when you say it's a humbling experience. i will tell you a quick experience i had. i represent as you know the south bronx and a lot of immigrants and a lot of folks with english the second language and poor folks and with little education. and even explaining on a daily basis after 20 years in congress, what congress does, it's a daily routine fornñ me. when sonia sotomoya was being considered andaá: everyone knew this was huge. this was big, that was

important. that was the coming of age for the community. and it became something where everywhere i went, you better be sure this happens. yeah, i spoke to -- it's a done deal. but the importance, i have told you in the past, much to the dismay of some of my friends on the left, that i feel uneasy for having a hearing for the supreme court. because of the respect i have for the court. i don't always agree with the decision, but i have a respect. it's humbling and the public understands the importance of what you do, and the bearing it has on our country. we always thank you for your service and tell the other search. >> thank you mr. chairman. and it's always an honor being here. you and i have been at this together for a decade and a

half. >> i am glad to hear you don't think that a judge has to be on the court. because i am not a judge. >> you haven't asked that question. >> really. >> we are abating that one, giving you an option. >> so the last three justices appointed to the supreme court were 55, 56 and 50. last retiree, 90. some have referred to becoming a justice or appellate judge as taking the veil. and i am just curious. do you all think that it's good for the court to have these

younger justices serve term that could be easily 40 years in length. curious. >> well, you are talking to a person that was supported in his 40s. i guess i am an extreme example of your example. and i can say this and let me answer it this way. i am very pleased that i had the opportunity to work with members of the court that had long tenures. each brought something unique, they had a view of the law in the job that had is different and had more depth to it when those of us show up in the first two or three years. they have been there. to hear justice stevens talk

about being there in the early days and with stewart. and what the decisions were. and having sat on so many cases that now form the precedential of our jurisdiction. i don't have a magic formula of how long judges should be on courts. if it was 25 years, i would be close to done. and would move on to another phase of life. but it's not that. it's a life-time appointment in this country. and i see from my perspective not necessarily for me, but i see some advantages to it. and some disadvantages. but so far i simply do not see

in serving with members who were in their later years, i just hadn't seen all the disadvantages. they have been wonderful colleagues to a person. >> i appreciate that, justice breyer. >> i don't know 40s, i don't know what that number is. and you dismissed holmes service but it's important that they be long-term. and the reason i believe that, because you will have different members appointed by different presidents. and while presidents think they make a huge mistake why they don't choose someone that agrees with them. ted teddy roosevelt nominated holmes, and on general philosophy there is more of a

correlation. i came to this court, i was a judge in new england. i grew up in san francisco, i spent a lot of time teaching. and i thought my god, i have seen a lot of people i have disgredi disagreed with and i think that's a good thing, there are 300 million people and there are 900 points of view. every race in this country and religion, and they have learned how to live together under law. and our greatest perk, benefit is that we get to see that. it's a very good thing that i serve with people that don't always agree with me. sometimes they might, but who don't always agree with me and have different points of view. i think you ought to serve at least long enough to pick up some that. >> i appreciate that.

and let me ask something that may be a touchy subject. i am not trying to put you on the spot but this is a big decision with vacancies at all levels. are we having a tough time retaining judges because not cost of living dx%t5%ses. >> yes. not only are you having trouble retaining some of the ones who are on the bench. we are beginning to see push-back or resistance of being nominated by some of the best talent. but that's just part of the reality. but i would like to take a brief second to touch on one aspect of the diversity question. i think mrs. lee had a good point. one of the things that you run

into when you visit law schools that are not the ivy league is a sense among the@ is absolutely right, that a lot of our hiring. there are only four to each of us a year. there is no system, we all do it individually. it depends on the people you know. so if you know more people, say at the university of georgia or

george mason or other schools, you have a tendency to rely on their advice about a young person applying. and it's individualized. the broader that net is and the more changes you have of bringing individuals in who are now excluded on a large scale or significant scale. >> and i am grateful for you saying that. i look at my husband who is a brilliant attorney, who got in two schools, university of missouri and yale. and chose to go to university of missouri to prove that he could prove to be a better than yale lawyer. that's silly and risky. but i think it's important to move beyond the ivy leagues. because there are so manyro pee that can't afford to go to the

ivy leagues schools and they are brilliant. and i am glad to see the sensitivity of bring in more diverse schools. >> this reminds me of a thought i have so often, we are a people that love our country. we love our system. and we should. it's the greatest system in the world. we love our democracy and we should, it's the greatest in the world. and we love is so much that we impose it on other people. but we don't care about the people that run the system or the people that make the judges decisions. it seems like a lot of americans think this runs by itself.

there is this incredible contradiction, i guess, but healthy, that we love where we are going and the roads get built by themselves and the hospitals run by themselves and nothing but a computer. let me ask a couple more questions, and this one bear with me. there has been some confusion as for the supreme court's requirements of cases involving the death penalty. my understanding is that generally the supreme court only requires four votes to grant this, that allows that case to be reviewed by the court. and it's my understanding that the court has not made exclusive their cases involving the death penalty. although many scholars say that

the court needs a five-person majority. and this could involve the court to grant the death penalty for a particular individual but not stop an execution for going forward. it would be possible to get a firm explanation to grant the stay of execution in capital cases. and do you think that cases discussed on the article where the supreme court heard a death penalty and refused to go forward on the court of appeals. and i apologize if you feel i am going into court decisions. i am trying not to do so. >> i think it's a fair question, the practice has been since i have been at the court, to be

sensitive to this difference of the number of members of the court it takes to grant for, versus the number it takes to stay, any action to be honest. not just an execution. and in the past the reason it rarely comes up is because it's resolved internally with individuals casting a vote to stay it, even if they don't agree with it. so you don't have that inconsistency. and occasionally you may have inconsistent in the underlying merit. there are cases why you don't get the fifth vote, but the normal practice is that five is automatic. >> it's important to see in things like this, it's a very important matter. there are informal ways of working things out.

say the four that want it granted. are also thinking there is an issue here. and you may have enough discussion with the other members of the court, it may be an issue but not a winning issue. and others may test the strength of feeling, and perhaps like you might have in a caucus or discussion. where you try to get things to work out. and normally it works out. and not always to everyone's satisfaction, but normally works out. >> thank you. >> that difference is always there, and by the rarity of the occurrence it works out. and justice breyer's key words of the arrangements that we have many at the court, allow you to

make adjustments as circumstances change. >> just ending here. march 18 we starting hosting the website of the court itself. will be keeping records of the different pages and parts in the site that get hit. and how will you use that? >> now i am not aware of whether or not we will do it for each page. but let me have our web people, our i.t. people report and get back to you. >> and to find out how they are going to use that data. >> yeah, that would be good. if you have a chance, it's www.supreme court.gov. >> i have been there, and i apologize for being a little late today. i was putting on facebook that we were being on c-span. and to make my c-span people

happy, my last question, c-span aired on the supreme court and all justices agreed to be interviewed. and they agreed to be heard from the justices about their work. what other steps have the justices taken individually or collectively to help inform the public with the court's operations and its important reporting of the democracy and the constitutional structure. and i must say i am a big fan of informing the public more and more and more of what the court is all about. because it's so important. >> i think that on what you see, when we started that, this conversation about informing the public. i think of the things we were talking about, making the briefs available. >> right. >> all the briefs are now available. >> a short time after. >> that's right, a joint arrangement of the aba, right after their file.

now with a joint arrangement with c-span, you saw that wonderful presentation, every member participated. and c-span does a particularly good job, because they don't have an angle other than to get it done right. and i think you will see the website, the fact that we have control of it now. allows us to do more and more of this. to do things, for example to work with our historical society and other institutions, aba and other organizations like c-span, to make the court accessible to people that can't get there. we can talk about oral arguments, they are a minuscule of the solution and there is so

much more and more accessible to the public. you will see more cooperation with organizations like c-span and the american bar association. >> i think that's such -- that may be the only single thing we can do in response to your earlier question. and that is why do people in this country not understand what it is we do. and although you, i am sure, and i know we do and i have seen him give infinite number of speeches, we're talking to high schools and i was talking to law schools. and c-span is such a help beyond belief, they put it on. and i think for insomniacs.

>> justice o'connor has been denoting her retirement years. and justice sutter and this is to get to explain to children through a lesson plan what you do. she's got a website and other foundations, and carnegie supports it. and i believe in it and we love that. >> i know when i was there, and to see certain people here addressed in a certain attire for this presentation, it was beautiful. once again thank you for coming before us. thank you for service to our country. as we move forward on this

budget process, we will beg into consideration your requests and you know in the past we have done the right thing and we will continue to do the right thing. >> thank you mr. chairman. >> hearing is adjourned [gavel] >> you can watch this and other "america and the courts" on our website, and join us next weekend for america and

>> we're going to again use the timing system where one minute before the red light comes on, you'll see a light change from green to yellow. it gives you an opportunity to conclude your remarks. your full testimony, written testimony, will be printed in the record. please limit your oral testimony to no more than five minutes. mr. schneider, please go first, following mr. beck, and then we'll proceed with questions. >> chairman eleven and members of the subcommittee, thank you for the opportunity to appear before you today. my name is david schneider. beginning in july 2005, i served as president of washington mutual's home loan

business, which originated prime mortgage loans. in 2006, i was gin the additional responsibility for long beach mortgage company, which was wamu's subprime lending channel. before i arrived at wamu, its management and board had adopted a lending strategy for the coming years. i understood that its strategy was intended, at least in part, to reduce wamu's exposure to market risk, that is, exposure to interest rate changes. wamu planned to do so by shifting the assets it held on its balance sheet away from market risk or credit risk. for example, by holding more adjustable rate mortgages. this strategy was called a higher risk lending strategy and would have been implemented through the bank's asset and liability committee. alco made decisions on which loans to hold and which to sell based on those loans, risk-return profiles and other relevant issues, including the

type and geographic locations of the loans wamu already had on its books. although wamu intended to change its business strategy, market conditions soon caused wamu to go in another direction. as house prices peaked, the economy softened and credit markets tightened, wamu adopted increasingly conservative credit policies and moved away from loan products with greater credit risk. wamu's increased documentation requires lowered ratios and curtailed underwriting exceptions. my team also enhanced their broad detection program. during my time at wamu we reduced and making all-day loans and option arm loans, all-day lending ended in 2007. option a.r.m. loans decreased by more than a half from 2005 to 2006, and by another third

in 2006-2007. wamu stopped offering option and a.r.m. loans altogether at the beginning of 2008. i was asked to address the challenges this business presented. during that year, i changed long beach management twice. as i became more familiar with long beach mortgage, i concluded that its lending parameter should be tightened, so across various loan products, we raised fico scores, lowered ratios, established maximum loan values, increased documentation requirements, and program detection to prevent fraud, and in 2007, eliminated standard income lending. as a result, the percentage of approved long beach loans that were based on full documentation increased every year i oversaw long beach. and the percentage of loans was combined ratios 90% decreased

over that same period. more broadly, wamu eliminated many subprime products and then stopped originating subprime loans entirely. as a result, wamu's subprime lending delind by a third from 2005 to 2006 and by 80% from 2006 to 2007. when i began my job at washington mutual, my goal was to evaluate and prove our home lending efforts all respects. as market changes began to change, my team and i worked very hard to adapt to the new conditions and at the same time address the challenges wamu faced. during the time i was president, we acted to reduce the size and associated risk of the home loan business. specifically, we closed its broker and correspondent lending channels and closed long beach mortgage, limited number of high-risk loan products, and bolstered quality control through tightening credit standards, improved the

underwriting tools, enhancing fraud detection and prevention, and curtailing underwriting exceptions. i hope this brief summary has been helpful, and i look forward to your questions. >> thank you very much. now mr. beck. >> mr. eleven, dr. coburn, members of the subcommittee, my name is david beck. from april 2003 to december 2008, i worked at washington mutual bank. in early 2005, i received responsibility for the capital markets organization in washington mutual's home loan group. second half of 20 06, as part of mr. schneider's changes to the management at long beach mortgage, i was given responsibility for long beach's capital markets organization. i will use these brief remarks to had a highlight a few aspects of wamu's capital markets organization. wamu capital corp act as an wonder write of transactions generally involving washington mutual mortgage security, wamu exceptions corp. generally one of these two

entities would sell loans into a securitization trust in exchange for securities backed by the loans in question. they were sold to a wide variety of institutional investors. the portfolio managers making the decisions for these typically had long term, hands-on experience creating, selling, or buying mortgage backed securities. in addition, there was information about the sold, including the data on the performance of similar loans and the conditions in the housing market. wamu also bought and sold home loans. they helped to close the loans by whichever wamu entity owned the loans. typically these were sales of wamu-originated loans, although

on occasion, wamu capital corp did sell loans originated by third parties. washington mutual also operated a bulk loan con indict, through which it purchased loans that were then pooled into security nation transactions. wamu would underwrite the transactions in the same manner regardless of whether the loans were originated by wamu or a third party. because wamu's capital markets organization was engaged in the secondary mortgage market, it had ready access to information regarding how the market price loan products. we determined the national prices at which wamu could offer loans by beginning with the applicable market prices for private or mortgage-backed securities and adding the various costs wamu incurred in the origination, sale, and servicing of home loans.

ours often take an expansive vie when the seller is obligated to repurchase a loan and sellers often disagree. perhaps not surprisingly, these negotiations lead to outcomes that vary from loan to loan and transaction to transaction. occasionally the seller that identifies problems with the loan in the first instance and initiates the repurchase process without demand. toward the end of 2007, the group responding to a prosecute request was placed under my direction. that group reviewed repurchased requests to determine if they presented valid grounds for

repurchase of a loan at issue. when appropriate, the group also made repurchase demand for those financial institutions from which wamu had acquired them. it also created a computer modeling process to identify loans which wamu had sold that might present a repurchase obligation. when this process identified loans that presented a repurchase obligation, the purchase team would afirm actively approach buyers to notify them of that conclusion. in this way, wamu took action to identify obligations. i hope that this very brief introduction has been helpful to the subcommittee, and i'd be happy to answer any questions you may have. thank you. >> thank you very much. now we have grounds of 10 minutes now, so we'll have more than one round. mr. schneider, the gain on

sales numbers for the various kind of loans were based on your, wamu's own bad. if you look at exhibit three, april 18, 2006 presentation that you put together for the wamu board of directors for the high-risk strategy, you'll see on page five is a chart entitled shift so high margins, products, on the left that have chart is information about the gain on sale, which is reduced by the higher risk loans, even part of the chart so that you can see it better. option a.r.m.'s intend 113 basis points. subprime loans earned 150 basis points. so eight times more than the fixed loan. is it fair to say the gain on

sale or subprime loans is much higher than fixed loans because the bank was able to charge higher fees and interest rates, is that basically the case? >> thank you, senator. i think if you look at the gain on sale, there are a number of factors that would have driven what would have been the ultimate sale, fixed tended to have a fairly low sale because it was a highly commod sized product that generally went to fannie mae and freddie mac. subprime tended to have a larger sale, a, because of the additional credit risk that investors would demand from the product. a zaw that mean higher interest rates? >> yes, sir. and option a.r.m.? >> option a.r.m.'s would have higher gains on sales, primarily because of relative, less competition.

it also had most of the risk remained with the borrower, so for the investment balance sheet, it was higher to hold. >> that was the higher interest rate. >> no, sir. >> it was recast as a higher interest rate than it was on fixed. >> it was 10 on the rate environment. >> there's a big site for residential mortgages on wall street. is that true? >> yeah, it was around the around them. >> until then, there was a huge appetite, is that fair to say, for residential mortgages on wall street? >> i would say it was fairly significant. >> it was middle of 2007.

what are daily rate sheets? >> daily rate sheets, mr. chairman, would be what we would post each day for the price of the mortgages we were offering on that particular day. >> the daily rate sheet was put together by capital markets group, and these folks were in new york or seattle. >> the daily rate sheets were distributed from seattle. the information that went into the rate sheets could have come from both new york and seattle. >> was wall street playing basically the biggest role in setting the prices for the nonconforming loans across the country? >> the rate sheets relied on the execution on wall street, yes. >> but basic --

>> as opposed to fannie or freddie, yeah. >> your written statement, you describe long beach as having challenges that were asked to address. what were they? >> senator, mr. chairman, when i first got to long beach, i also saw that report that he had put together. and we took, it over the next several moss, implemented the number of steps to improve the way original nations were operated. i changed management twice, mr. chairman, and then over the course, also eliminated a number of exceptions, eliminated some of the high-risk products, and ultimately decided that the end in the middle of 2007, that long beach was in operation,

that we should shut down. >> and the audit that you saw when you first got there, that 2006 audit, that was the reason as i understand it that you were zod take responsibility for long beach, is that correct? >> it was the beginning of 2006, and one of the primary drivers was the increase in repurchase demands that long beach had experienced, and that was the first area that we looked at. >> then you cracked doufpble >> then they surged again a year later, growth at 13, december 2016, a short story is this is not good. we have a large potential risk in what appears to be a recent increase and request. we're all rapidly losing

credibility as a management team. that's number 13. does that sound familiar? >> yes, it does. >> eight months later, that's exhibit 19. here's what you said. repeat issues, underwriting guidelines established to mitigate the risk of unsound underwriting decisions are not always followed, accurate reporting and tracking of exceptions to policy does not exist. >> what page are you on? >> it's repeat issue, which is page -- page two, page three,

repeat issue said at the top, high risk. >> yes, i did. >> repeat issue, then it says high risk. the next one, number two, high risk, accurate reporting and tracking of exception, policy does not exist. you see that now? >> i do. >> i think it's fair to say mr. chairman that the underwriting group and the group, as well as myself were less than satisfied with the progress we made, this is the reason we ultimately decided to shelve the operation. >> when did you finally shut it down and transfer it to wamu? >> when long beach was shut down, we stopped originating subprime mortgages through

brokers with the business long beach did, i think that was third quarter 2007. >> the vast majority at long beach mortgages, your data shows about 95% were sold or securitized. based on wamu data, the long beach mortgage annual securitization increased more than 10-fold from two billion, $2.5 billion to more than $is the billion in 2006. it was moverage backed securities. now, those are the securitization numbers in wamu's own summary. so subprime securitization doubled 2005 to 2006, going

from $14 billion to $29 billion. long beach at the same time was cutting back on loan original nations during 2006, which means that wamu was purchasing subprime loans from other lenders and mortgage brokers through its conduit and other channels. is that right so far? are you with me so far? >> if you look at the chart, that shows securitization. there are also a number of sales done in 2005, so i'm not sure the exact numbers, and the other -- >> those are based on your numbers. do you have any problems with the numbers you see there in terms of securitization? >> in terms of securitization, i do not. >> why are so many long beach mortgages defaulted? why were they consistently among the worst performing in the marketplace? >> senator, i don't have that market data in front of me. >> but you know that they were

cannotly among the worst performing securities in the marketplace. those mortgages, you know that. do you? >> you look at the performance of long beach, i don't think any of us were happy with the -- >> not happy, but they were among the worst performing. why is that true? >> knowing that's primarily true because long beach tended to originate higher credit risk assets than other sb prime horgenarets. >> i would stop issuing the securitization 2003 while it worked on correcting the problem. is that correct? >> when wamu discovered long beach was issuing a large number of loans, it stopped securitization in 2003 to correct the problem.

>> why weren't security zation ultimate in 2005, 2006, 2007 with similar underwriting problems? that's my question. >> senator, i wasn't there in 2003 -- >> no, why wasn't it stopped in 2005 to 2007? >> i think as we looked at the original nations and the overall quality coming out, we felt that we were given the right disclosures and that if loans proved to be fraudulent or have a problem, we would buy them back out. >> thank you. if you would, would you put up the percentage chart on wamu's product origination and purchases by percentage? a new fairness to your testimony in terms of the declining nature, however, this pie chart represents the fact that the percentages of the original nations of wamu as a

percentage and based on your testimony, what we see is something very different because you can see that each year, fixed mortgages go down and nonconforming loans still are increasing, versus your testimony that says that was not the case, when you came on board, things started to change. so did things change because you made a process to change, or was the market changing so much that you couldn't market those loans? >> those charts are percentage charts, and the average volumes went down significantly. i took it over in 2006.

by the time we got to 2007, 5%, a very small basis. option a.r.m.'s declined to 18% during the time i was there. by the time we got to 2008, option a.r.m.'s were at zero. and then the other arm products would be more conventional, hybrid a.r.m.'s, so those would be sold to fannie mae and freddie mac. so not only were the percentages declining, but the absolute dollars were declining. why was that? >> as we addressed the home loan business from 2005 to 2008, i think there was a general consensus that size of the mortgage business was too large relative to the size of the bank. we wanted to help bring that to the aggregate business down. we reduced the number of home

loans by 50% during that time. >> mr. chairman, i'd like to add, washington mutual executive summary that was put forth and we'll have it available as part of our fannie mae alliance and freddie mac business relationship proposal. aim sorry you don't have this in front of you, but the key to freddie proposal is it provides significant liquidity for our option a.r.m. origination. washington music sold more than $5 hundred billion in loans to fannie mae and freddie mac. how did that affect washington mutual's bottom line? >> we were going through very difficult challenges. i think the home loan business

was losing money. most of the time they were moving aggressively. >> how important was the decision to option a.r.m.'s? would you have been options a.r.m.'s if freddie mac had not been there? >> yeah, washington mutual centers had originated the a.r.m.'s for years. i think it provided another source of electric bidity for the company to sell its option a.r.m.'s by having freddie mac buy them. >> so they were sold for years to freddie mac, right? had freddie mac not been there, would there have been a market -- the last two years before you went on this outside of freddie mac? >> there would have been. >> would it have been as advantageous as the relationship with freddie mac? >> i'm not sure.

are you familiar with this power point presentation? >> i am. >> when and where did you give this presentation? >> i don't know the specifics. i think in preparation, as i recall correctly, this presentation was given a number of times, so i would have given it to folks at staff functions, i would have given the presentation to sales and operating functions as well. >> anybody above you that you would have given it to? >> i might have shown it. >> what did you intend? >> you know, this was done in early 2007. we had gone through a very difficult time, and quite honestly, i was just trying to help improve the morale of the home loan business, which was doing -- you know, i think everyone was feeling badly about what happened.

>> on the second page of the presentation, there's a slide and an organizational chart that has captioned, we are all in sales. were you ever concerned that the heavy emphasis on sales was problematic? >> senator, this presentation was meant to be taken as a holistic view, and what i meant by we are all in sales is my way of serving we have to serve the customer, we have to help the customer achieve their needs and help them in whatever way we can, so that means we all have a part in helping the customer. >> senator, i don't know the specifics of why that decision was made. >> i did not ask you the specifics. i said, do you think it was a mistake to bring long beach into wamu?

yes or no? >> he would say no, because it was part of it. were you made aware ever during your time at wmcc that the loans underwriting the securities were having problems? >> i knew that we had underwriting problems, yes. >> who were the most common customers for washington mutual's mortgage backed securities? >> hedge funds, pension funds, insurance companies,, corporations. >> do you believe that your customers had a full sense behalf they were buying when they purchased these securities? >> i do. >> so you think they were aware of the risk? >> i do. >> if you had to do anything, redo anything relating to securitizing mortgages, how would you do it differently? >> i would securitize mortgages

with more full documentation, the underlying documentation was an important aspect of the performance of the loan. >> were you aware, as you securitized these loans, of the significant problems in the credit risk side of the business in terms of what they were seeing in terms of loan origination? >> no, i was not with respect to some of the audit reports that were referred to in the first testimony. did it surprise you? that's 82% and certain offices were truly unqualified, undocumented loans. >> those are high numbers, but as i looked at that document, i did see that that was taken from an adverse sample from that loan origination center. so those loans would already be identified as risky. they were either first payment

early or payment default, and of those first payment early defaults, i would expect that there would be a high percentage of profit. >> you had said that long beach paper was the worst performing paper in 2006. how were you made aware of these problems? >> dr. coburn, this was an email i wrote, the performance was discussed repeatedly with investors at the conference, so i would have been made aware of

the performance, talking to people in the market. >> did you continue selling similar long beach paper even after making that comment? >> yes, we did. >> did you alter your securitization practices based on that knowledge? >> i can't believe that we did. >> i asked the other panel, and they said investors should know about fraud problems. i also asked if they were owners, should they -- there's also an s.e.c. requirement that requires notification of any adverse, material, adverse factor. were you aware of the nature and depth of the problem with

the significant number of loans that originated that either didn't qualify, had false documentation, or had no documentation? >> i was not aware of the significant documents that you referenced earlier, no, i was not. >> so you were seeing the end results of what had come through, and you were packaging and selling it, and after you received the information that this performance was poor, did you inquire to say, why is our paper performing more poorly than others? >> yes. we did a couple of things, dr. coburn. in the course of securitization before the loans are pooled, there are post-closing reviews, many of which you've seen in this documentation that are done by origination, and their intent is to identify and remove loans from the pool that will come to me and my team that have underwriting defects.

after we received the saleable loan, an underwriting due diligence process is undertaken where samples of loan are taken, both adverse, as well as random, to try to identify any further underwriting defects, have those loans republican moved from the pool, so that when we come to the process of securitization, the loans are all performing, they're current, and loans with underwriting defects should have been removed. now, as you know, and as we've seen, some loans with fraud, with underwriting defects, do slip through. that happens. and it's not a good thing for us ever. we have an operational and reputational problem, and we have a big financial problem as we talked about in terms of repurchase liability. each transaction does have a warrant on it, and the investors can ask us to

repurchase the loans. >> so your ability to sell into the future is dependent on the quality of the products that you're selling today. >> yes, it is. >> ok. >> mr. beck, what is the stated income loan? >> as mr. cathcart said, the borrower does not coument their income on the application -- does not document their income on the application. >> why was that develop? it seems unusual, doesn't it? >> state income loans were remember developed for customers that didn't get a w-2 generally, were self-employed. >> mr. schneider, why was that developed? why did it go beyond that? it went beyond that, right? >> yes, it did, senator. i think what happened in the industry is, if you looked at

performance of mortgage loans, which was the dominant driver performance was the fico score and, you know, income was not, at least in the older vintages, 2005 to 2006, a material driver of performance. i think as we got into 2006, we saw some of those changes, and that's where the industry started to tighten standards and require additional documentation. >> can you think of another place you can go and get a loan without disclosing your income? >> the income was disclosed -- >> no, excuse me. excuse me, where people would just take your word -- i mean, it just seems a foreign concept to me that you could go to anyone and borrow money and they said, what's your income, can you document it? well, i'm just going to tell what you it is and we're off to the races. >> no, senator. >> ok. what type of mortgages were used for wamu?

>> i don't recall any specific limits. >> so basically any mortgages sold -- >> yeah. >> as a stated income loan was resold, was it disclosed that they were made without verification of borrowed income? >> the documentation type is disclosed. >> so in other words, if i picked it up and actually went through the whole thing on the mortgage backed securities, it would say these loans are based on stated income. >> that would be in the prospectus supplement, and in terms of disclosures, senator, it's important to recognize that's not the limit of prospectus of the information that an investor would have. they had access to the loan, which had each loan, and risk character stex on it. as we talked about, they had rating agency feedback, and they knew all the historical performance of the shelf that we had been selling.

so they had a significant amount of information. do you have reason that specific borrowers were lying about their income on these products, senator? >> as we looked at the performance loans and saw early payments, we did see instances of where borrowers were lying about their income. >> did everyone in the management at wamu know that, do you think? >> i can't speak for everybody. >> do you think they were awary of the fact that some stated income was not accurate? at what point did you kind of get worried about this? i mean, the stated income, it just seems like so difficult to understand. i have a hard time dealing with the concept, but then i have a more difficult time as things go on and these things are

growing and the more and more indications you're getting stay that stated income is not working, is there any concern expressed by top management about this? >> senator, i think we were all very concerned about it. we tightened credits in in our subprime space significantly in 2006 when we started to see the challenges, and then we tightened credit standards in our prime space on the option a.r.m. book and, frankly, all lending types through 2007 as we experienced challenges with the performance. >> did you have any reason to believe this was fraud? over the course of the 2 1/2, three years we were there, i think we made improvements. i don't think we were ever fully satisfied that all of the improvements were in place, and we continued to work on it.

>> did you inform prospective investors that were concerned about the internal fraud in the organization? >> we informed of risk characteristics of a loan. and as i said in my previous testimony, we had internal processes in place to remove loans that had identified before we sold them. having said that, some fraudulent loans do slip through, some loans with underwriting defense, and the investor had the opportunity to put those loans back to us. >> mr. schneider, did you happen ever -- i think you said you decided to stop stated income loans. >> correct. >> and when did you do that? tall a it would have been late 2006, early 2007. >> and why did you do that? >> we were not satisfied with the performance. >> so you just eliminated all of them. you didn't go back and just eliminate some of them. you just said, from now on,

wamu will not accept stated income loan. >> at what point, what percentage did you think they were not accurate? >> i'm not sure. >> but it had to be a prepared for you to totally eliminate them as opposed to just saying it was 10%, you clearly wouldn't eliminate all state income. you'd try to identify them. i would assume it would have to be a big number, we're not going to do this anymore. >> well, our expectations on delinquency were will he numbers, so we would probably stop. that was too high for us to even at that level. >> you said you closed long beach? >> yes, sir. >> and why did you do that? >> as we got into 2007, three or four things happened.

the subprime market was increasingly challenged. home prices, we started to see signs that home prices were starting to deteriorate. long beach, as i showed you on the numbers earlier, as a percentage of our business, was relatively small, actually very small. and it simply wasn't worth it required at that point. >> i know you just came in 2005, right? >> you're getting reports, just terrible things are going on down in long beach, i mean, based on the previous panel, it was such a small portion of business, and there was so much problem with that area, i just wonder why you waited until 2007 to close it down. >> my initial charge was to see if i could fix it. >> how would you characterize

wamu's relationship with its regulator? >> we had a positive working relationship, met with them on a quarterly basis. i probably met with the individual regulators monthly. >> you testified that the line was diligent, the leadership did not support their conclusion. did you find that or was that something you just didn't deal with? >> that was not something i would be involved in. >> how did fico scores used? >> that would be one attribute of a loan decision, so we would have fico score criteria, as well as documentation, etc. >> and are they a good indicator, in your opinion, of credit worthiness? >> yes, they are. >> pretty accurate? >> i think it's the best measurement that's available,

give investors an opportunity to understand one loan versus the other, the characteristics of that creditworthiness. >> mr. beck, is that your opinion? >> my opinion is it's one of many risks that are evaluated. it's important, documentation type we talked a lot about. it's about california risk, so there's a variety of risks that are important in evaluating the expected loss on a loan. >> we talked about this, and that he said if they were loans , in the 550 range, did wamu have mortgages that they securitized in the 550 range would you please say? a >> i can't recall for sure, but we may have had fico under 600. and under 600 would be low.

and so would you agree that those kind of loans are almost certain to default, 550? >> i would agree with mike he will lewis that they had much higher expected credit losses than a borrower that's got a 750 fico. >> you'd have to have hands-on management day-to-day with the borrower. did that go on at wamu? >> we put them in a higher risk protocol, which we called them earlier and more often, and worked more closely. >> wheasts the concept of a skinny file? are you familiar with the term skinny file with regard to

fico? >> i am not. >> skinny file is a good file. what is a skinny file, but you dent have any indication of that. >> you have no knowledge of that? >> did you feel any pressure from wall street in terms of generating more mortgage backed securities, in addition to the profit it's profitable, but did you get a feeling that this was something that was very competitive? >> senator, that wasn't a driver of our activities. >> if you look at the results of the mortgage business at washington mutual from the time i was there, we did lower volume and, you know, systematically shut down the business.

>> we heard a bunch of horror stories. a lot happened before you came. when you are showed up at wamu and you took a look at what was going on, you know, you were assigned to look after long beach and the rest of that, what went through your mind? was it like, wow, this is really a challenge, or this is serious? i mean, what were you thinking? how difficult -- i mean, how unusual did you find the situation? it sounds very unusual to me. >> senator, it was a very big challenge. i spent a long time trying to make it as successful as possible. i tried management changes. we changed products. so it was a significant challenge. >> great. thank you very much. >> first on the numbers of origination, securitization, you testified that the option after the r.m. lending decrease bid more than 50% from 2005 to 200 .

your option a.r.m. lending still in 2006 is significantly higher than it was in 2003. and you also don't mention that the major reduction that you'll see in origination occurred on your fixed traditional loan. that's what caused the major drop from 2003. from that point, there was a slightly different story with different mortgages, but the major drop, which you and others at wamu referred to, came in the fixed 30-year loan, and that drop took place when you decided to engage in a higher risk strategy, so you got your lower risk loans, and you started engaging in 2004 in this higher risk strategy, and we saw what the outcome was. but in temples option a.r.m.'s, we'll put this in the record, according to your s.e.c. filing, option a.r.m.'s wered pods.1 billion in 2003, it went

up to $67 billion in 2004, went up to $63 billion in the 2003 level in 2005 and was still was above the 2003 level in 2006. fixed loans went from $263 billion in 2003, dramatically down in 2004 to $77 billion, then $78 billion and $47 billion. so the real explanation here for this shift makes reference has to do with the dropping of the fixed loans. and the increases was pretty steady through 2006, it though it dropped, at you pointed out. >> still it was above the 2003 level. he want to talk about november 2006, make reference to about long beach paper being among

the worst performing paper in the market. this was in november of 2006 and then the controller of the currency, the o.c.c. did an analysis on the highest rates of foreclosure in 200 . so long beach income the top 10 in even out of 10 metro areas. were you aware of these findings of the o.c.c.? >> no, i was not. >> should you have been made aware of it? >> dr. coburn, i'm sorry, mr. chairman, i'm not familiar at all from the document. is this from the o.c.c.?

>> yes. should you have been aware of the o.c.c. findings? given your position -- >> i was not aware of this particular report. >> no, i'm not talking about the report. i'm saying, should you have been familiar with their findings? that's all. >> i can't say. >> this is a november 2005 internal wamu memo called southern california merging markets targeted loan review results. it describes a year-long internal investigation into prospective loans originating from your two processing centers, we heard prior that it's laid out the level of loan fraud. 42% of the loans reviewed saying suspect activity or

fraud, virtually all of it attributable to some sort of employee mall piece ann. then there's additional detail about the investigation, including the percentage of loans containing fraudulent information. it was percentage of downey office, 58%. were you aware at the time of those findings? >> no, i was not. i'm not copied on it. >> should you have been? >> i was aware that there was fraud, as i said earlier, and i was aware that loans had -- certain loans had underwriting defect. and as part of the review, that origination was conducting, at this understood that loans with identified fraud or underwriting defects would have

been removed from the pool loans that i was going to be securitizing. >> you thought they were going to be removed? >> yes, that's what i believe. >> did you check to see if that was true? >> what we did subsequent to that, mr. chairman, is to do a due diligence review separate and distinct by the underwriter. >> did you check to see whether they were removed before you put those securities on the market? >> no, i did not. >> purchasers of these securities are relying on you as an underwriter to provide truthful information. you had evidence of fraud. you knew of it, heard of it, and yet you didn't check to see whether or not the fraud painted securities were -- the defraud stated mortgages were removed. wasn't that your job? part of your job? >> i understood that there was

fraud. >> dent you choke make sure that the fraudulent tainted mortgages were not part of those securities? isn't that part of your job? >> no, it's not. no, it's not. i take your point, right? it's important to not sell loans that are defective. however, the post closing review is conducted by the origination channel, conducted by credit in the origination channel. >> who is that? the post closing review would be conducted by the operations department within the origination channel with the help of credit. >> give me the names of the people in charge. >> well, point you to the prior panel ultimately. >> so it was their job to ultimately check and make sure

the mortgages you knew were tainted were not part of securities. >> yes, the process in place was removing loans that were defective. >> and it was not your job, it was their job, the previous panel's job? >> yeah, i had a separate responsibility. and you never asked if they were able? >> i did not.

>> take a look at exhibit 24. >> fraud problems resurfacing with a gusto in early 2008, an april memo from the wamu corporate fraud investigation and audit section.

it says that one of the mortgage insurers refused to ensure any more loans issued by the loan officer, the loan office. that was the same loan officer who was investigated in 2005. it describes your investigation and states that virtually no actions were taken in response to it. it says in a another review of loans issued in 2007, now reported in the april 2008 audit, found that 6 %. were you aware of this audit? >> what did you do? >> this audit was actually conducted by the legal boot. i was aware of, it but they were conducting it. whenever i found out about cases of fraud, i ask in a an investigation happen. we had no interest in fraud. >> yet it continued to happen year after year after year.

those fraudulent mortgages are included. what action did you insist upon? you're out there selling these securities. >> so in the cases where we found fraud to buy those loans back. >> you found it where people complained about it. >> when you saw that audit, you saw the continuation of fraud year after year, said the 2005 fraud continued, said in to 07 the fraud continued, you're out there selling securities, do you not have a responsibility to make sure, take steps to make sure that that fraud -- so you're not just looking back after someone finds out the security is sold, but that you take action to prevent those securities from being sold? isn't that your responsibility? a take is my responsibility to

handle fraud -- >> and what came to your attention? >> we determined the people who admitted to committing that fraud -- >> did you offer them jobs? >> no, i did not. >> did the company offer them jobs? >> the people we terminated? we did not. >> ok. >> and did you go after the securities that exclude the fraudulent mortgages to notify people there may be? did you take that initiative? >> that initiative was tan by the legal department who was available to address the situation. >> you know that they took the initiative to notify people? are you saying it would have been taken -- >> it was my understanding they were going to look at that time and make the determination. >> whatever determination was appropriate. >> did you find out whether they did it? >> i did not. >> you're out there selling these securities. you know there's fraud in some of these securities. it's your job to make sure that doesn't happen. you say, well, the legal department was presumably going

take action, and you never follow up to ask the legal department whether they took action? i don't get it. but you didn't ask to see it. >> i did not, mr. chairman.