i tend to focus on the fact that the problems that mexico confronts are enormous problems, and we could focus on mexico's potential. we could focus on and what mexico has not been able to do, and to a certain extent, we should. . >> pension reform is something we have not been able to deal --

deal with effectively in the united states. these are huge problems. even a modicum of progress in the context of divided government, welcome to democracy. this is how democracy's work. they do not make a grand, sweeping advances like nafta. or health care reform because only a dictator can do that effectively. i don't want to oversell mexico as having made the progress of the two, but i think there is room for cautious optimism about what mexico has done and can do in the future. >> that is assuming that mexico is a normal democracy. the u.s. and mexico are on a part and as mexico cannot pass reforms, it is because of divided government. i don't buy that.

in a normal democracy, you don't have the sort of veto power that can be exercised over the political process. >> it would be interesting to ask and how many other chemical societies -- in equal societies this is more the norm. >> of course. then we are talking about oligarchy/democracies. >> we can go into the numbers. >> but let's add to that. >> would and we trade the mexico for today for the mexico of 20 years ago? >> without a doubt, now. . >> our vice-president has qualified health care as a bigf- ing deal, it became water down.

it was very much a compromise of a compromise of a compromise. you have the final word. >> on the domestic consideration which is obama's big promises and little follow- through and the trucking issue -- this is a big issue. where is the u.s. policy here? depending on who you talk to, the energy bill was already dead before immigration came up. thisztp was a way for gramm to about out. -- to bow out. obama's problems seem to be that he is playing to the center and there is nobody at the center. this is a big issue for our domestic issue as we have seen the health care and other things. it will be a big issue with our relations with countries like mexico who are hoping for big changes. unfortunately, our policy and

parties seem quite divided and unable to come together on little things. trucking should be a little thing. i have to put myself in the cautiously optimistic side. are there huge problems in mexico, yes? look at what happened over the last 20 years and to be in the middle class in mexico before, you need to have a government job. that is no longer the case. we have seen per capita income increase. inequality is still there.. one way of thinking about the middle class is that usually we think about it in marxist terms if you are a worker or. we then pick to the middle class is. they are the professionals in the middle. being a middle-class person can be defined as being a consumer. what we have seen in mexico and the united states, frankly, but

mexico and the last 15 or 20 years is a huge explosion of consumption options. whether you like wal-mart or not, the fact that you can buy a lot of things at decent prices in mexico, you may not be earning that much more by your capacity to live a higher quality of life has increased significantly. when i go to mexico city or other cities and even rural areas, sometimes i see mexicans as optimists. that is because you go around mexico and there are lots of one story houses but everybody has rebar up for the second story. they think they are going to build a second story so they put up the wire to build that. the next question is, can there be an opportunity for mexicans to build bat second floor? >> we could carry on further but i see your hand up and

others. hopefully, our panelists can stay around but i want to thank all the panelists. thank you, denise for suggesting this. thank you all for joining us. a round of applause for our panel. [applause] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010] >> a reminder wednesday to watch the white house state dinner for felipe calderon. it starts at 6:00 p.m. it on c- span 3. thursday, he will address a joint meeting of congress. live coverage of that starts at 11:00 a.m. eastern, on c-span. more hearings on the response to the gulf of mexico oil spill

today at the senate homeland security committee. we hear from john at thjanet napolitano and lamar mckay, the president of bp. there will be a rally for republicans and democrats in pennsylvania. the special election to borrow is for the remaining term of the late representative john murtha to start earlier this year. you can watch both these events tonight at 8:00 eastern on c- span. >> defending the united states against cyber attacks, tonight, home and security deputy under secretary of the department's work with the pentagon and white house in the role of private side -- separate security. that is on c-span 2.

cspan, our public appears content is available on television, radio, and online. you can also connect with us on twitter, facebook, and youtube and set up are scheduled alert e-mail at c-span.org. >> the cato institute recently held a public policy forum right issues. you will hear scholars discuss the global economic situation including the future of the financial markets and the obama administration's approach to combating terrorism. this is just under one hour.

>> i could not be more proud to work here with my colleagues. you will hear from many of them this morning. i hope you are proud of the role that you have played in making sure that a strong and intelligent boys for liberty, peace, and civil rights is available in washington, where all too often it is not. let's move right along with the program. we have a number of different speakers. our first speaker this morning is yellow and norberg. he is a senior fellow here at cato and a writer who focuses on globalization and individual liberty. he is the author and editor of several books exploring liberal themes. that is liberal in the european sense. his book originally published in swedish has been published in over 20 different countries.

he is the author of a," wendy -- when mankind critical world." he is also the co-editor of the classics of freedom in 2003 which is available in swedish and online at his website ^ johan's articles appear in international newspapers. he is an international presence for the voice of liberty and the cato institute. prior to joining us, he was that a political ideas that a swedish free-market think tank from 2003-2005 and served as a senior fellow for the brussels-based center in 2006 and he received his master's degree from stockholm university in the history of ideas please join me in welcoming johan norberg. [applause]

morning to you all. i hope you all had a good night last night. as you all?;. know, the hangovs not a problem. the party was that relates to the topic of my speech here about the next financial crisis. we are reminded that the recession is not the problem. the boom was the problem. all the bad investments that we've made when we thought that the good times would keep rolling and rolling. that gives us a clue as to why the markets are a little bit turbulent right now. we never really did solve the problems that led to this crisis. we never really lived with a hangover. instead, we tried to take another couple of shots of

tequila and get on with it. hang over the weekend believe in is not a good election slogan. the thing that will solve the problem, we will deal with it and build a bridge and get on with our lives, that is much more popular. that is why i have written this book on the financial crisis and there is a film called," overdose" will be screened on monday about these problems that we are still living with. we may see that the worst is yet to come. the recession is time to rid ourselves of bad investments. the bad investment we did in the mortgage market, the bad risk we took on when we thought there were good risks, the recession at the time for creative destruction, to make sure we dismantle the bad companies, the delta busman's, and make sure

that work, labor, resources are transferred to more competitive businesses that can create jobs and products for the future. that is not what we did pretty government in the united states and europe and all the world have tried to protect and bailout that investment. in the mortgage market, in the car industries, the banks, and the financial markets, we are still living with them. we are living with those bad decisions and that will have a tremendous effect on growth in the future. worse than that, we are also creating new bad investments in the market. just as we encourage new baubles and the housing market -- new bubbles in the housing market, we have created new baubles by lowering interest rates more to almost zero percentage. for almost everything seems like a good deal until interest rates move back to their normal range.

we are creating new bottles everywhere and. when the interest rate is low, you are not interested in holding capital, you want to borrow other capital and create leverage so that you get some return. that is what is happening right now. you might think this is not a good i'd deal to hold capital a bank account because there is no rate of return that is exactly why no one does. stock and resources, that dream apartment, just about anything out there on the market -- we will see a bull market even though it is far ahead of the long term profits of the industry spread we see that especially in the emerging markets around the world right now. b(iswhen the central bank or the treasury department or the government steps in to bail out

practically all the bad investments we can see, we create more moral assets in the market. we reinforce the interpretation that financial bets are one-way bet. if it turns out all right, you get to keep the profit rate if not, you can past losses on to the taxpayers. if there is one quote that sums up the problem of the fiasco we have seen, it is one of the head of deutsche bank said," no, i'm not worried about a fall in asset prices because i think the fed is our friend." if there is a problem in the market, they will supply more liquidity so prices will stay up. they will bail us out here, that is what is happening now. it is not just a fad that is our friend, the treasury department, the european central bank, it is governments all over the world. they give us another shot of

tequila, lower interest rates, more taxpayer money, more and bigger loans to deal with the rest we already took gone. as a banker told me recently, the times are great because people are borrowing again. the interest rates are so low. that is pretty short term. what about when they begin to climb? then, the government will step in as they did the last time. that is great for some time. a crisis that was at least partly the result of too low interest rates, too much debt, too many bad investments, and a safety net for the financial industry that too many financial risks are being dealt with with even lower interest rates, even more debt, even more bad investments and bailing out the ones we had. it has a stronger safety net for

the big institutions. no no lender will be in doubt they will be given the money back from the tax payers it the worst happens. the solution is the problem. that is why we had a problem in the first place. as a burden smith says in our film," overdose," we are back to where we were in 2003/2004 when week said it is great. there was a sigh of relief because we were out of the worst times and the worst storm has passed. we of low interest rates and a lot of stimulus that has helped. the difference this time is that now we have taken on much, much more debt. no one has paid their debts after this crisis. bizarre policy scheme has

happened where the next institution with a larger pocketbook steps and then takes on that debt. when they cannot pay it, the next person does. when we had european banks and european companies ready for bankruptcy, the european states, governments stepped in and paid for it. now the european governments are in trouble because they took in debt. the european union stepped in with a $1 billion with a $1 billion bailout package. the federal government can step in and take on fannie mae and freddie mac. who will save the united states? who will save the european union? we can sweep the problems under the rug for a while but soon it will be so big that we will need another rug. in the end, we will need it really, really big rug.

we are focusing now on greece. we are focusing on portugal, the countries that seem to be the most shaky for the moment. they are not alone. the british government faces a budget deficit that is almost breach. -- almost greek and the american public debt will have the same level as portugal. that is just beginning. then we have all the unfunded liabilities for retirement, for health care. if we are not going to reform the system then we will have to pay in the european union and the united states about 8% of gdp of the whole year to deal with that. that is f. obamacare does not add a single care to those

liabilities. the problem with socialism is that sooner or later you will run out of other people's money. right now, we are running out of our children's money and our grandchildren's money. for the moment, it might feel safe especially if you have a reserve currency like the dollar. people are still interested in buying something like a sovereign debt for government debts but that is what they said at lehman brothers, as well, on friday, september 12. the markets were still interested in lending them money. they still believe in them. it took lehman brothers 158 years to build the credibility. it took them one weekend to lose it when people understood that they would not be able to put their financial house in order. to sum up, we have tried to bridge this recession. the bridge that we build was so expensive that we will have problems when the growth rate in the future -- it will be a

problem to build something more out of this bridge. it is a bridge to nowhere, in other words. i am an optimist by nature and because of my historical studies. probably because i realize that people always make mistakes. we make horrible mistakes in every generation and yet, we have created the richest civilization ever. we will probably be able to deal with these problems. to put it into perspective, the reason why lester was so horrible is because it was only the second best year in mankind's history when it comes to production of goods in history. we all thought it was going to be the best year. all the prognosis was built on that. we can do it. we can deal with the -- these problems but it takes a lot of creative destruction. it cterritory investment and

hard work and reforms to make the economy more healthy. as thomas edison said," opportunity is missed by most people because it is dressed in overalls and looks like work." the road to recovery is missed by most people because it is dressed in overalls and looks like work. if we can get thisrnp message through about the difficulties this time but also about the possible solutions, the road left to travel on, then we can do it but time is of the essence especially with these that we are building now. time is not working in our favor and the clock is ticking. so was my clock, so i am done. thank you. [applause] >> we have a few minutes for questions that we will try to provide for each of our

speakers. wait for the microphone to reach you and speak up. who would like to start? ñi>> i understand that on monda, you will try to avail us of what you think the next economic crisis will look like. could you give us a preview of that? >> well, i'm just telling you that you better sell now. this film will look at a couple of different scenarios. the problem is that we see bubbles in so many places and so many categories of assets in so many countries. we don't really know what will of the largest effect.

the most dramatic story now is the one about government debt. and how we never really dealt with the losses in the financial sector and in many big companies around the world. governments just took the debt over and now the market is saying that the government's look like the bad deals. greece could have started this crisis last week. i don't know if you know how bad things were last week. it was not just great. it is not the government, it is told european banking system. who owns the ground? ? it is the banks. does the germans and french banks. what happened last week was that we saw a post-lehman brothers story. banks began to lose trust in one another. they stop lending to one another in europe. with the european government

said was that they will give themselves a bailout. when the germans accepted that, $1 trillion, that is too german and french and other banks. greece is tiny. it is the tiniest of countries. if it was an american state, i would not have heard of it. the problem is that this continues with portugal, italy looks like it is in bad shape if we look at the total debt. if it begins in one of these countries it will continue with others. in great britain did not have the track record that it has, we would have seen the same problem in great britain. we really need politicians who are ready to explain that we will see some difficult years ahead. we have to plan and how to deal with this and regain the confidence of the market. i think government debt of the biggus story now. i also think that the margin market bubbles is an incredible

problem. there is a lot of capital on the markets but we have been worried about western countries. merger markets and how this crisis really showed that they are in good health. in a way that is true. they made bad decisions, as well. at least they have the money so they can spend a lot of money for some time. a lot of resources have been going there and have built bottles in their asset markets, their real estate markets and everywhere. they are beginning to on wind here and there. the chinese government decided that they would be the mover of the world's economy last year by having a command and control lending spree, telling banks and local governments to keep lending to anything. just build and land. they are starting to deal with

that now. we talk about this gargantuan stimulus package and china but now we are learning that it is not just this stimulus package, it is also local governments and banks who lent about eight times more than the entire stimulus package over this last year or so. now, they are telling them to back off. all the things they have done to make their bags healthier in the last decade, we have relented that is what they are saying. -- are about to ruin that, is what they are saying. we have these bubbles and debt and we have to deal with them precisely at the moment this bridge is about to come down a little bit. that worries me. [applause]

>> our next speaker is dan mitchell who is a senior fellow at the cato institute and a top expert on tax reform and supply- side policy. you probably know him as a strong advocate of a flat tax. it is a strong voice in those discussions. he is omnipresent to the media promoting those ideas and supplied by it -- a supply-side economics. he was a senior fed -- fellow with the heritage foundation and an economist for a center and the finance committee. he served in the 1988 bush-will transition team. he was director of fact and budget policy for citizens for a sound economy. this articles can be found in most major print outlets. he holds a bachelor's degree a man and a master's degree in economics from the university of

georgia and a ph.d. in economics from george mason university. he will talk to us about america's impending financial disaster. let me introduce to you dan mitchell. [applause] >> thank you. of all the tricks -- of all the introductions' i have fat, that is the most recent [laughter] i only have 10 minutes to talk about a topic that takes 10 hours, america's impending fiscal disaster johan covered some of that. i hate going after him. i have an annoying new york accent and he has that very suave, european, danish, maybe swedish accent. i have an important topic to talk about. let me throw out a couple of numbers to give you a sense of where we are now. what but now -- when bill clinton left of us, the federal government spent 18.2% of gdp,

our economic output. . the federal government was grabbing 18.2% of what we made and taking that. we thought bill clinton was a big government and make it after eight years of bush, with republicans in control of the house and senate for 3/4 of that time, what happened? the federal budget virtually doubled from $1.80 trillion to $3.50 trillion. we went up to about 24% of gdp. that was an unprecedented increase. obama comes into office, promising hope and change, and what does he do? he gives us exactly the same spending policies as boys. bush gave us a so-called stimulus in 2008 that did not

work. obama gives as a stimulus in 2009 that did not wear. obama gives us a government run health care, bush gave us a prescription drug entitlement that made my job easy because i went back into my papers and crossed out bush's maine and rhode and obama's and i pretended i was working hard when all i was doing was changing names. the sadness we have seen in the last 9.5 years is actually the tip of the iceberg. if you go to the congressional budget office website, which i don't usually recommend, and to look at something called their long run budget forecast, they do something going out 75 years. the government forecasters do not even get next you're right so take it with a huge grin of salts whether they are right. a lot of it is based on demographics. what do we have in terms of its settlement programs and what is going to happen to the american

population, how fast is the aging, nominate younger taxpayers are coming into the system? if you look a long run 75-year congressional budget office forecast which is probably wrong but we do not know whether they are too optimistic or not, they estimate that federal government spending which today is around 25% of gdp, by the time we get out to 75 years, it will be between 45% and 67% of gdp. that is just on the federal level. that will be consumed by federal government spending. that is just the federal level. you add in state and local governments which right now is about 13%, it will be higher overtime. you can say we will be between 60% and more than 80% of gdp consumed.

even johann's, a country does not have more than 60% of spending of gdp. i guess we will be eating fish. we will all be swedish. what does that mean? if we have a federal government that big, consuming that much of our economy, it almost certainly means we will have an end -- a huge tax burden. i want to tell you what comes along with this impending fiscal disaster which will be a value added tax. this is our armageddon battle. we now have to look at what they will do to finance this giant government spending that is coming down the pike. if you look at the evidence from europe, they put in value added taxes oftentimes claiming they

were replacing inefficient national sales taxes and oftentimes claiming they would reduce or lower or get rid of other taxes, oftentimes clamming this was not a plan to increase the burden of government spending, it was a plan to make the tax system work better. all the rhetoric we are seeing out of the obama deficit reduction commission and people like paul volcker and the politicians on capitol hill, they are making the exact same arguments we saw in europe 25, 30, 40 years ago when the value added tax was first put it. what does the evidence show from europe? if you go back to 1965, before your pad value added taxes and you look at the oec data about the size of government and what was the size of the tax burden, you will see that government spending and taxes of the share of gdp or maybe a couple of percentage points higher than what we had in america at the time.

since 1965, government has gotten bigger in america. the tax burden has increased in america. in the grand scheme of things, not that much. we have gone up a couple of percentage points of gdp. we moved in the wrong direction but in some sense, that is a victory. we have government in check, relatively speaking. in europe, government spending exploded and the burden of taxes went up along with that. if you look at some of the claims of the value added tax proponents, this was a better way of raising taxes. what do you say we look at income tax rates? what do you see when you see the share of gdp in europe? they have gone up, knocked down. since the mid 1980's, the taxes have come down but the overall burden as measured by share of gdp in europe have gone up. it with a value added tax in america, i can say with 99.9%,

but is that we will see exactly what happened in europe. there'll be a bloated federal government that will happen that will be matched by a new, disturbing efficient tax collection system known as value added tax and we will be in a position where there is no fundamental fiscal difference between america and europe. there is a reason why today america is about 35% richer than western europe. there is a reason why today that america is about 40% richer than europe when looking at measures of average individual consumption. that looks at disposable income. we are richer and more prosperous than in europe because we have not made the same mistakes that europe has made. we're now doing that. the bush-obama policy of big government are a down payment on this entitlement tsunami that will sweep over america and the

value added tax is a way of letting the politicians know, go hog wild. go ahead and spend to your heart's content. if that happens, it will happen over the dead body of the cato institute. that is my pledge to you. thank you. [applause] if anybody has a question, raise your end. i am told i have to get off the stage but i will be happy to hold corporate and questions? did i depress everybody too much? ? there -- >> what about repaying the money that was lent by the government? david sent out a good blog about it and i thought the advertisements were outrageous. >> the question is about general motors running an ad saying that they pay back the government.

that was one of the most despicable dishonest things i have seen in washington. the ceo of general motors in effect lot worse than a politician. they did no such thing. they accessed a different pile of government money and moved it over to supposedly pay off another government liability. it did not change the total amount of money that taxpayers were involuntarily forced to put into general motors. it did not reduce the federal government's ownership of general motors. it did not reduce the giant subsidies to the united autoworkers. it was a spectacular level of dishonesty and it shows the dangers of going down this path to corporatism, crony capitalism or a big but government and big government -- where big

government and big companies climb into bed together and you get really nasty offspring. >> you said it is 99.9% certain, but we could we do another experiment for a moment? what we actually eliminated the income tax and corporate tax completely, every tax lawyer would lose their job, and replace them by a 22% value added tax? is that a more efficient way? >> there is no question that a guy you added tax per dollar rates is less destructive than the current monstrosity we have known as the internal revenue code. a value added tax is a single rate consumption based tax. it is just a flat tax collected in a different way.

one is done when you spend it and one is done when you pay it. i fantasize about a world of a single rate consumption based tax. if i'm allowed to fantasize about. 01% chance to get rid of the tax, i would rather have the tax system of the cayman islands but certainly one single rate consumption based tax over our current tax system would be a big improvement. here is the problem -- if we were to go down that path, you have to make sure that the income-tax is buried 6 feet under the ground in a wet lines -- lead-lined concrete box so nothing can spring up again.

you can't just repeal the 16th amendment. you remember it -- we met -- you may remember that and 8095, income-tax was overruled by a 6- 5 vote. we got rid of the 16th amendment, i have no doubt we would probably have the supreme court ruled in favor of the income tax. we would have to not only repeal the 16th amendment but we would have to replace it with something so ironclad that even justice sotomayor would not be able to say that it is unconstitutional. we would have to have strong language and that very strong language would have to pass by 8 2/3 vote in the house and the senate and it would have to get ratified by 3/4 of the state's. what are the odds of that? we cannot even pass a balanced

budget. yes, late at night when i and tossing and turning, i will fantasize about this world with no personal and corporate income tax, no irs, and a constitutional amendment, but in reality, it will not happen. we have to stop the value added tax and save america from becoming a welfare state. we all are already halfway there. we don't want to go further down the path that we want to save america. >> the argument is made that because corporate tax rates are lower, most of our industrial competitors that somehow they are being more efficient. the fact that they are paying at every stage of production, how do those systems contrast? are we at a disadvantage? >> we are at a disadvantage in

the sense that european nations have lower corporate tax rates than we do. every single european welfare state, even johann's sweden, has a lower corporate tax rate that america. the average corporate tax rate in the european union was 24.2%. we are 35% at the federal level and almost 40% when you add the average state taxes. we're shooting ourselves in the foot. that is one layer of tax. when you factor in personal income tax, corporate income tax, capital gains tax, you could have a gun taxes hit four different times. you want up seeing we have marginal effective tax rate on capital income, sometimes of more than 80%. yes, you don't have to be a expert to realize that that is penalizing american productivity and competitiveness and hurting american workers.

what do we do about it? some politicians are saying that as a good reason to do a value- added tax. they will do that and lower corporate taxes. don't believe for a second. even in the unlikely possibility that they did it, it would only be in the short run. what to politicians do about tax policy in america? what motivates them? income redistribution. how many times have we seen this? we always make sure we are penalizing the producers and not for drawers and investors. -- producers and the entrepreneur hours and investors. it with a value added tax, you'll see the politicians in washington say that this will tax court and middle income consumers.

they want to balance that out. they will bend tax the evil, that rich people. if we get a value added tax, that will be the political mechanism that will lead congress to increase tax rates. will that help poor people? no, they will pay higher value added tax and will have a weaker economy because people will not have as much incentive to save and invest. every economic theory known to man, they all say the same thing -- you have to have capital formation. the marxists and socialists have an idea that government can do this saving and investing. we have seen with fannie mae and freddie mac that that does not work well. you have to have saving and investment. what is it in our tax system that is subject to the most discriminatory and punitive taxation?

it is income that is invested. those of the taxes that will go up along with a value added tax because heaven forbid, we don't maintain that existing distribution of tax the income class. the class warfare mentality will cause america to continue down this slippery slope to welfare stateism and that terrifies me and that is why we are fighting against it. thank you very much. [applause] >> as you can see, a number of our policies that are quite passionate about the policy area they work in and what they do. dan exhibits his passion a certain way and our next baker does so in a different way. chris preble is the director of fallen parsee -- a foreign- policy is here. -- the director of foreign

policy here. chris cares a great deal about what he does. he is a productive member of the cato institute team. his most recent book was published by cornell university press and documents the cost of the american military power and propose a new strategy to advance national security. another of his books deals with how the u.s. must end the occupation in iraq. this is dennis kucinich's a favorite book. chris has published over 100 articles in major publications.

he is on television and radio and as one of our most popular speakers in the national press. before joining the cato institute in 2003, he says -- he taught history and the was a commissioned officer in the united states navy and as a veteran of the gulf war. he holds a ph.d. in history from temple university and will talk to us this morning about america's approach to combating terrorism. please welcome the in welcoming chris preble. [applause] >> thank you, gerry. thanks to all of you for coming today. mentions that he hates going after johann. i hate going after dan mitchell. he is known as being funny and dynamic engaging even when the subject is depressing. i have to say that he was less

funny today. maybe that is because the subject is really, really, really depressing. that is where we are. i am always dealing with a pressing topics. today is no different. as we approach nearly a decade of aggressive u.s. policies to combat terrorism, the results that these policies should obtain still elude us. americans do not feel as secure as they killed a should be nor do they feel that their lives and liberties are well protected. instead, terrorism is very much with us. new attacks remind us that terrorists continue to seek to do us harm. meanwhile, the nation's politics remain in thrall by the specter of terrorism. alarm is an and fear it make any reaction to terrorism seen a

viable and politically palatable, including reactions that spell american blood. -- that spell american blood. --than spill american blood. the struggle we are did engage in to address the problem of terrorism exists for good reason. policy makers, the media, and the public lack a strategic understanding of terrorism balak, therefore, an awareness of inappropriate responses to it. terrorists have many motivations. we should not assume that they all approach these issues in the same way. there is often a common strategic logic. understanding this can help to reveal some strategies to

dissipate their efforts. consider the obvious, terrorism is political violence. that is violence that is politically motivated, directed at civilians, primarily, and typically used by week, not- state actors. the intent is to raise the cost of that state's policies and to convince that state to take actions that ultimately harm the state and help the terrorist group. they also hope to increase their power. their goal is to elicit a response. these are very weak organizations by their nature. they count on a very strong country like the united states to lash out and respond in poorly directed or misdirected ways. many times that violence is directed in a part to play at the communities in which those terrorists operate in hide.

by doing so, they elicit additional support and draw new records -- new recruits from the group. we know they have these great ambitions. they lack the means to achieve them on their own. on last -- unless their target of a particular state alters their behavior in ways that will not be to the terrorist benefit. this is the central theme of a new book that just came out i coedited this with my colleagues. the central organizing a team of our book is that by addressing terrorism dispassionately and confidently, we can take control of security and drained power from terrorism and make it

effective. that is pretty ambitious but we think it is doable. this project is kind of the culmination of a three-year initiative that we have funded by the atlantic philanthropises. we have organized meetings. the book draws on many of the people who participated in the initiative from the outset. it includes chapters on a whole range of different subjects about home last occurred spending, communication strategies, thinking about the nuts and bolts and the root causes and some of the misconceptions about what drives people to engage in terrorism and the first place. -- in the first place. terrorizing our cells documents the ways in which this climate of fear mongering that we are

existing under today exacerbates the threat to prin. terrorists get their name for a reason. here is the corn. --fear is their coin. they see the way in which our actions have been so self- defeating. they brought needles wars and wasted well. we explore the strategies in this book. we want to undermine support for our support and build support for constructive ones. the specifics that we go into in the book document what an effective counterterrorism strategy would look like. it would provide absolute defense against all attacks. that is impossible a government

that is trying to protect everything is protecting nothing. they are not as common as they're made out to become a terrorist will bide their time and seek opportunities to staged erratic at tracks. -- to stage a dramatic attacks. we can see what can be prevented and recover well from what cannot. we have to prioritize counter- terrorism strategy must include policies to infiltrate terrorist organizations, shut down weapons of mass destruction, surveillance is essential, we can rely on technologies to do that in an efficient and local way that does not undermine our liberties. we also need to take reasonable cautions against certain sectors of attack. we need to think about this carefully. the federal government can

secure thousands of bridges, sports stadiums, airports, bus stations, subways, shopping malls, nuclear power plants, on and on. think about all different things that we could classified as critical to infrastructure yes, federal government assumes they have the ability to do these beliefs. they feel they are well suited with dealing with these challenges. in many cases they cannot. one last thing because i am running out of time. policy makers who promise perfect security are committing leadership malpractice. likewise, threat exaggeration is demonstrably harmful. and bring to fears about terrorism should be a political liability, right? the ultimate outcome we should seek is a political climate in which fear mongering is partially absent and people are punished at the ballot box for exaggerating the threat that is posed by these weekend

individual groups. -- week and ineffectual groups. if we decide information -- if we disseminate information about their attacks and dial down the rhetoric, that will help. in conclusion, the approach we have seen here in washington since 9/11 is counterpart -- counter-productive and should be abandoned. policy must be receptor on the idea that a response to terrorism does most of the work of terrorism. carefully measured responses to by terrorists of the strategic 2 terror -- to terrorists are the best way. they are not powerful.

instead of overacting to remotely possible or impossible apocalyptic scenarios, the nation should address real threats while exerting the confidence and resilience be fitting a great and powerful nation like the united states. a new world of communication makes information essentially available instantaneously will convey this confidence very quickly and terrorists will learn that their approach cannot be successful. to the extent that we can say we have truly defeated terrorism, it will occur when we understand that terrorism cannot defeat us. thank you very much. [applause] garry was very good with the cue cards. that means i have lots of time for questions. i would be happy to take questions. >> you say the number one cause

of terrorism is injecting your troops in another country. is that one of the prime causes of terrorism? >> bob said that and he has been a participant in our discussions from the beginning. in fairness to our work, we have focused on this concern going back to the late 1990's. the simple fact is that pap;e's evidences almost incontrovertible. the presence of foreign troops on foreign soil and foreign troops perceived to be of a different culture, religion, outlook is particularly conducive to generating support

for terrorism, including transnational terrorism. not terrorism director of the troops themselves but terrorism directed at the country from where the troops come. i think that bob is right. it gets interesting when you consider the way that people who have not lived under foreign occupation themselves do sympathize with their brethren in some odd sense of the term. that is how you could have -- you can have british citizens born in the u.k. but whose parents came from pakistan, for example, percy some kind of oppression by a second order in effect. that is where the urge -- interesting work is being done, to take his initial insights and

apply this to second and third generation terrorism we have seen. . . >> democrat crist and the pennsylvania -- then rally for republican burns.

the special election tomorrow is the remaining term of the late murtha who died earlier this year. you can watch but the vince tonight at 8:00 p.m. eastern. the supreme court nominee kagan is meeting with senators and a dance of reconfirmation hearing. learn more about the process and the court and c-span's latest book. pages of candid conversation. it provides unique insight about the court. it is available in hardcover and also as an e-buck. -- e-book. >> today obama signed a lot into effect that is named after robera reporter. this event is about five minutes.

>> hello, everybody. i am very proud to be able to find -- to sign the pearl freedom of the press act, a piece of legislation that sends a strong signal about our core values when it comes to the freedom of the press. all around the world there are enormously courageous journalists who eggcrate risk to themselves are trying to shine light on the critical issues that the people of their countries face, who are the front lines against tyranny and oppression, and obviously the loss of daniel pearl was one of

those moments that captured the world's imagination because it reminded us of how valuable a free press's, and ho -- press id reminded us there are those who go to any link to silence journalists around world. this act sends a strong message from the united states government and from the state department that we are paying attention to help other governments are operating when it comes to the press. it has the state department each year chronicling how press freedom is operating as one component of our human rights assessment. but it also looks at countries' governments that are

specifically condemning or facilitating this type of oppression. it singles them out. it subjects them to a the gaze of world opinion. often times without this kind of attention, countries and governments feel they can operate against the press with impunity. we want to send a message that they cannot. this legislation in a very modest way, i think, puts us clearly on the side of the journalistic freedom. i want to thank a congressman in the house and senator dodd for his leadership, and the family who has been so outspoken and courageous in sending a clear

message that despite the annual's death, it is a well- informed citizenry they can make choices and hold governments accountable. i am grateful to them and legislative leaders to help to pass this. it is something that i intend to make sure our state department carries out with vigor. with that, i will sign the bill. there you go. thank you, everybody.

>> coming up at about 1:30 p.m. eastern we will bring you back to the white house for a briefing with robert gibbs. the live coverage will be here on c-span. until then we will show you a discussion on the new housing numbers released last week which show a decline in foreclosures for the first time in five years. book. >> "washington journal" continues. host: lawrence yun is the president of the chief economist of the national association of realtors. news is that home foreclosures are down nationwide. that is a good gn. what about the housing market

itself in terms of sales? are people able to get back into the market? guest: thank you for having me on your show. we have seen the buyers back in the markeas a result of the tax credit. prices are stabilizing and increasing in markets across the u.s. consumer markets are experiencing a price decline, but once there is stabilization we can anticipate the foreclosure rate to help out. the foreclosure situation is still unacceptably high. we have a long way to go back to normal but it at least appears we are going in the right direction. host: is it too early to tell the impact of the new home buyer tax credit? >> it iso longer available. -- guest: it is no longer

available and i would have to say that it was a really successful program, bringing in in our calculations roughly 1 million additional buyers. creating a huge reduction in inventory. making a price swing of about 5%. in some markets where there was a small decline there is now stabilization. host: people in the pipeline still taking aantage of it, but basically ended,looking three months out what does it hold for people coming into the market without the benefit of that tax credit? what do you see the market looking like? of guest: the hoing market has got to get back on its own feet. this maye the perfect timing in terms of when the tax credit expires. what is needed for a sustainable recovery and job creation over

the past few months, it needs to continue for the remainder of the year into 2011. the other factor -- given tha prices are stabilizing, that translates into an increase in consumer confidence amongst home buyers. usually in economics people come in and buy. housing, prices declining, why buy now or later? with that those prices removed, it will increase customer confidence in the marketplace. host: lawrence yun is here until 8:30. we will take your calls on housing and home foreclosures. for democrats, 202-737-0002. for republicans, 202-737-0001. for dependents 202-628-0205. we will get to your calls momentarily.

in terms of inventory, housing watch reports from last wek rights that while the rest of the economy is moving on from the great recession, the housing backlog is still filled with property that has entered the foreclosure process. is this a good thing to have these extra properties available? guest: from the past lending mistakes still dealing with distressed properties, the interesting figure is the mortgage delinquency amount. people that are 30 days late. these people that are entering the pipeline is declining. people are undergoing foreclosure from all of these past lending mistakes going through the system. there is a program from the federal government to affect the

process in a short sale, giving financial incentive to the lenders and homeowners to expedite short sales. host: how can a first home buyer -- how is a new home buyer today different from the beginning of the recession? guest: there is a much higher percentage of new home buyers in the most recent cycle. we have seen 57%, historically it is 40%. it is a combination of the tax credit and the fact that prices have declined so much in some markets that people that were priced out during the boom recognize a great opportunity to step into the market. these days people that are entering now have to financially qualified, a big difference --

half the financially qualifiey,- have to financially qualify, a big difference. host: what is the average down payment? guest: many first-time buyers are relying on fha, they require 3.5% down payment. some people might say that that is low. what we are finding is that if people spend within their budget in a way that leads to good long-term performance, veterans of the long term programs find they a the best performing loans out there. mortgages with large down payments have higher rates of delinquency. host: what percentage of

mortgages today are backed by the government? guest: 90%-95% are matched by -- backed by fha or fannie and freddie. we cannot leave it at this high government level. at host: historically, what should the number be? guest: about 50%. some people have classified fannie and freddie as private organizations in the past. we now know they have government backing. host: let's hear what the housing market is like from our viewers. first, independent line from texas. caller: yes, i am from tennessee. ok, with all respect to mr. yun,

i have been in my house for two decades last month. it is not paid for yet. i believe we are on a sinking ship. you talk about a compound fracture, i have compound interest. it is an open wound to this economy. things are not going to happen very fast because compound interest on these loans for these houses we need, the ho interest is bleeding us dry. it is not fair to pay those kind of prices for a simple roof over your head. therefore, i see you not selling any houses anytime soon on a sustainable basis. host: can you tell us the interest rate on your house? caller: 6%. guest: most of the defaulting on our adjustable rate mortgages.

people that got into the market with a teaser rate that readjusted to a much higher level. that got people into trouble. today because of the resetting benchmark rates, though libor rates and the funds rate -- very low -- for summit will be less painful. the people who took be adjustable rate in contrast to a 30-year fixed rate, those take on greater risk. furthermore, the different regions of the country have different cycles. country have different cycles. tennessee, that part of the region was the last market to go down. it is struggling to get back up. we have seen other areas turning around already on an upward path. tennessee was one of the last markets to go down and it could be the last to come out. host: frank, northridge. republican line.

go ahead. caller: good morning. i appreciate what you are doing for realtors and for the public. as a realtor, and i have dealt in bank foreclosures for 25 years, i think that the incentive given by the government', $9,000, that is a good thing that should have been continued. we are not out of it yet. especially in california. fortunately our governor has given an incentive of $10,000 to new buyers. we need to continue to keep the market firing a little bit. we still need that $9,000 incentive to the buyers. guest: the $8,000 home buyer tax credit has been a very

effective program. given the large u.s. budget deficit situation, we must understand that this program cannot last forever. right now it looks like the housing market can get back on its own feet. but there is still uncertainty out there. in the state of california there is a state tax credit on top of the federal tax credit. the gentleman is correct. there are places in california where houses have tumbled by 50%. those people are deeply under water. it may take many years for them to fully realize the price action. what people are realizing now by purchasing at much lower prices, the question is what about the people that purchased at the peak? this is where the lender's need to recognize tt one of the key ways to reduce the default rate

is principal production. what about the neibor that paid in cash? a very comprehensiveroblem. . . i don't know the specifics, but it is a fixed dollar amount. it is first-come, first-served. when introduced by the governor it was already tapped out within a few weeks. host: here is the front page of the atlanta paper. the metro prices plunged in 2009.

here is a look at "the washington post" -- healthy signs. fort valley, ga.. this is milton. caller: good morning. i have worked in construction and things like that. when realtors are involved in the building a home and putting $50,000 in labor and materials, when that same house's turn around and sold it is sold for $150,000. those people did not drive a nail or build a foundation, yet they triple the prices. it is amazing how the prices of material and labor in constructing a home -- and it is turned around and sold for profit by people who do not do anything as far as the building is concerned. the building is

concerned. guest: the construction industry has taken a big hit. the overall home sales have fall been 30% from peak but new home construction has fallen 80% s that is a huge reduction. and it is a new home construction that is the general big driver of the economy as people hire construction workers, buy materials, it generates the secondary spending. but that has halted. it is stabilizing at a very low level so we need to see bounce back in construction. we have high inventory so we don't want to add additional new holes where there is an oversupply. but among some builders realize there is a market opportunity and they see buyers that can sell their home and they are having difficult times getting construction loans from the banks and can't build homes. as i do my analys in looking at the u.s. population growth, how many new homes we are

constructing we may potentially encounter housing shortages situations two or three years from now if the building activity remains at this low level. host: even with the glut of foreclosed houses you think this could be an issue two or three years down the road? guest: one looks at the population growth and how the formation has been suppressed. when the economy comes around it begins to rise proportionate to the economy so you will see more seeking their housing unit whether for rental or ownership. but if the housing construction remains oppressed i think that the distressed s the first to bd but afterwards there could be lack of housing. host: where is the biggest growth going to come from, single family homes, town homes? condominiums? guest: in terms of the mix of homes, we have seen trends

toward more urbanized areas whereities are trying to revitalize the walking communities. the multifamily housing unit near transport stations. so there could be a shift toward more multifamily constructions. but americans have the desire to have green grass in front of them. host: let's go to glen burnie, maryland. caller: i'm a realtor and i have a comment about some of the statistics that are out there about the housing and a question about an f.h.a. mortgage. to give national housing statistics and forecasts and even state statistics is very misleading andt create problems in areas that are not as distressed as others t. is like giving a national weather forecast. there is no way a guy on the tv

a guy can give a national foreca forecast. you can't say this is whathe housing situation is in the united states because it is not even a state issue or county issue. the zip code stats you gave would be more indicative. i happen to work and live in an area that has not been impacted nearly as much as other areas, yet the people in my area think things are worse because they keep reading in the newspaper stats put out not oy by t national association of realtors bu by news media bus it is sensational to say how bad it is. host: during the housing bubble did prices in glen burnie rise as quickly as the rest of the country? caller: yes, we had increases 20%, 25% per year was typical four or five years 2001 through 2005. then people don't realize that what started the collapse for us

when katrina hit and gas went up people started having a little problem and in marylan it was a unique situation the gas and electric company announced after katrina hit the increase wod be 72% in electric bills and that was the tphebnext punch in stomach. then the national enomy went to crap and that was the next one. so, it is different in offensive area. and to give national numbers is very misleading for one and can be damaging for areas that are not impacted as much as other areas and gives people an impreson that things are worse than they are. i do have a question for lawrence yun about f.h.a. mortgages. maybe he can get an answer for this. f.h.a. mortgages are the only ones that we you pay them off and refinance or go to closing that you have to pay interest once the first day of the month ts you have to pay interest for the full month, which means the banks could be raking in up

to 30 days of extra interest and it is costing millions and probably hundreds of millions of dollars a year to consumers. why is that set up that way and why does the national association of realtors not put the campaign out to get the money back to the people? guest: first, the analogy on the national weather and local weather forecast is a terrific one. i love that because without a doubt all real estate is local. there is so much variation between local communities. from the national data, just like the dow stock mart one reports the dow and individual stocks there is a different movement but from is a national figure. for some companies they need that national figure, for example, the u.s. government needs the national figure to compute g.d.p. as part of the economic activity. some of the large firms, whether it is a lending firm or the brokerage firm, want to know

what the overall lines are. but we emphasize these are the national figures and there is a tremendous local market variation much different from detroit, say, to dallas, texas. we emphasize those points and hope the media picks that up. on the f.h.a. i'm not quite clear on the question but i will check it out. you may be referring to the insurance premium for people who take out the f.h.a. mortgages. there is an insurance premium to cover potential default among some of the borrowers. the f.h.a. program since its inspgs never requested a single dime of taxpayer money. the reason is the insurance premium was able to cover defaults in the f.h.a. but that is more of trying to balance the risks versus the availability of mortgages. but if you are saying somehow the banks getting the whole

month of interest on a single day, that is clearly not fair and we will look into that to assure that, ifhat is going on, something is not right. host: next call indianapolis. carol, good morning. caller: good morning. i just have two questions. i want to know do they get a separate check for the $7,000 for the taxpayers? and if that is true i would like to know how much money times the one million people that have gotten new homes, i want to though how much that comes to. guest: the tax credit program, one would get it from filing their income taxes. so normally for april 15 people final their tax and say i owe theovernment $2,000, for example. they say they purchase a hem and qualify they say here is $2,000 that i will pay the government

but since i have a home i have an $8,000 credit. so on net i will get $6,000 become from the government. now, there was a one million additional induced buyers but in tes of the total people that purchased it is closer to four million people. so, four million people getting the credit, we estimate that as about $30 billion at the $35 billion price tag for the u.s. government. but this spending for the u.s. federal program has been a big success from my perspective because it stabilized prices. so consider, $30 billion to serve for $1 trillion and a housing wealth which is mostly for middle-class americans. i think the program is usually successful. host: pa., good morning. caller: thank you for the

information. the realtor who called then was excellent. i have a simple question. i hear the constant hammering away at fannie mae and freddie mac. i have read several places that a corporation named countrywide was responsible for 80% of the bad loans. you're the expert. is it true or not? these fox news people keep hammering and regurgitating. guest: fannie and freddie do not directly original loans. it would be companies like countrywide, bank of america that originated them and then sell to fannie and freddie. fannie and freddie made a mistake, looking in hindsight. then he was greeted at the time

of the great depression. freddie was greeted later. their job was very simple to pass along the low borrowing costs from the government to consumers. -- freddie was created later. in the mid-1990's, they pursued other activities besides the very simple role. they created a gigantic hedge fund and added on the housing market. if it had turned out well, it would have been a huge profit for the shareholders and managers. if it failed, and we don't have this -- then the taxpayers are on the hook. we recommend they have played a critical role in bringingg interest rates down for middle- class americans, and we recommend they get back to that role without worrying about the investment area. host: a message by twitter.

here is jim from being coover, washington. caller: good morning. a couple of comments. vancouver, washington. caller: i wanted to make a couple of comments bore i get cut off. first i would like to say this gentleman seems to be well informed and i really wish you guys had him on last year. hello? host: mr. yun has been on severa times with us, jim. caller: i'm kind of an old fashioned kind of thinker and what i think in terms of buying a house i look at my annual income and tithe that by three and figure that is the house that i can afford. that is really good common sense. i kind of saw a lot of that going through the roof. i worked in the air force the past 10 years and i had people yelling at me if you don't buy

now you will never be able to afford to. and i thought they are telling me i can afford a $2,000 and i'm only making $40,000 a year. then when the interest-only loans came out i realized this is at the top of the pyramid scheme and i tried to tell my friends that and a lot of my friends in the military are being told they didn't have the credit to get a better rate but they could get there and in a couple of years it could be transferred over to a better rate once they had a better established credit rating. i saw ts shell game and sure enough i was right. but i just wanted to say i think maybe the federal government shouldn't have bailed anybody out. i think they should have let it all crash and let the market fix itself bus every time t market gets involved the market never does quite fix itself.

there are a lot of people right now who are out there who could ford to make their payments and they are walking away basicallfrom their mortgages because they are taking too much of a hit and they realize it. guest: the common sense, the income to price ratio or price to income of three or four times, those are good metrics. and if the lending had abide bid that we would not see this problem. but that metric was thrown out and one of the problems was all these people on wall street that were doing the technical analysis and they said somehow that they could create a utopian society with subprime mortgages and that was based on somehow the prices always ring. we know that prices do not always rise. one of the financial market reforms which we're very supportive of ishe reform of the credit rating agencies, because the moody's, standard & poor's, they sell the sprime

mortgage products and they are of triple a quality and all the money floated into the mortgage companies and for the mortgage companies there was a financial incentive to originate the align independent of the income ratios. so, it led to this condition where we didn't have t norm checks and balances. checks and balances are consumers want to buy a home but the learned would say show me your income and documentation. let's make sure that the ratio is well witn the norl rate. that was bipassed. -- that was by passed. host: the forr country wiwide facing legal action. how have theurvived as a mortgage lender? guest: the bank of america purchased countrywide so the burden of all the bad mortgage origination from countrywide is on bank of america. the specifics of the c.e.o. i don't know if there was any

specifics to mislead the market or consumers. i don't know that specific. host: we go to roanoke, virgin. katherine. a republican caller. caller: i want you to know i just love c-span. i have quick question. host: go ahead. caller: i want to knowhy an f.h.a. loan takes six weeks to two months to go through. especially this day and age with internet. guest: the f.h.a. perhaps need to adopt the latest technology platform to originate those loans much faster. i think one of the reasons is in light of the fact many bad loans were made during the bottom years, people are looking over the documents much more carefully and going through the process. and also the appraisal rules have made it a little longer in terms of trying to move the system through. that could be one of the hiccups

in the system. but you are right, in today's high tech environment where we can use the computer to send quickly that things should be a hrelittle faster. host: call from oregon, a call from peter. caller: i have a tough question four. i'm a citizen lobbyist in oregon. i represent manufactured home park residents. currently we have a huge sacred cow which involveshe mortgage deduction, the interest deduction. and it represents about $600 billion every four years. and, given, that we know that over 70% of tt goes to people who own homes and make more than $100,000 a year. my question to you is this. why don't we stand that on its head and if we are going too

that kind of subsidy, represent the people who are under $1,000 because we know home ownership makes good sense and economic sense, and that is my question. thank you. guest: the mortgage interest deduction was in place when the income tax was created in the early 1900's. so it has been over 100 years. through that the budget situation has always been able to manage the mortgage interest deduction so you cannot blame the current situation on that. furthermore, one cannot blame the mortgage interest deduction for the housing bubble because it has been in place a long time. the mortgage interest deduction was in place because fundamentally i think americans believed owning a home is preferable torenting, other things equal. we want to have successful ownership policies so people who are not yet qualified need to save for the down payment and

wait. plus t ability is providing more to own their home. from a societal point of view what one finds is various academic studies show families of tkwl circumstances, one is a homeowner, one is not, and their children do better on test scores, there is less incidence of juvenile delinquency and lower teen pregnancy. so something about owning transforms some of the mentality among families. perhaps they are thinking 30 years out rather than trying to think week to week. so, there is a large sociel benefit. so this $600 billion you mentioned the past four years, yes, that is a tax break for the american homeowners, yet it is providing a tremendous societal benefit externalities. host: tampa bay, jerry on the

independence line. caller: how do you to, mr. yun? i would like to ask you a few questions and see if you agree with me. firstly i presume you are a licensed broker. and during both my college years and during my college training we were taught that new constructi construction, the entire enomy depended o new construction. how does that rk? of course, you have cement that goes into a home, you have wood that goes into a home, you have a tile roof that goes into a home or you have a vinyl roof that goes into a home. you have tile floors. people tend to buy new furniture that goes into a home. people tend to have cement for the driveways and new lawns are landscaped. new construction is, would you

agr agree, tied to our entire economy? first of all, would you agree with that statement? guest: well, all the past economic cycles that the u.s. economy underwent was generally leby the housing. if the housing market went down it dragged the rest of the economy down. when it picked up it brought the economy become out of the recession. so, the housing is a big driver of the economy and no doubt as you mentioned, hiring of construction workers, buying lumb lumber. so all the secondary impact to the economy. furthermore, one thing that is left out in inour equation is the housing wealth. if the housing wealth is stabilized that is a source of stability for many americans and they feel comfortable purchasing an automobile or purchasing cloth clothes. soheir financial stability is another driver of the housing market and how it interacts.

host: jerry, do you have a follow-up? caller: yes. what i'm trying to say is without a viable new construction industry, new construction, this economy will never recover, it is not going to recover. with an unemployment rate that is not paying a living wage, here in florida we are in a situation where we have -- well, nationwide, would you agree, mr. yun, there is still somewhere between two million and five million foreclosures to be resolved? guest: this area could be about 2.5 million foreclosures which would match last year. next year could be less but that is still higher than normal so we have a ng way to go in terms of the foreclosures that need to be absorbed. host: just following up on

rry's comments, a tweet. following up on the construction being the driver of the economy, a front page article in yesterday's "new york times" wrote about the housing construction industry on the rise in las vegas, nevada. home prices there are down 60% from 2006 and one of the steepest stkaepbts -- descents. there are 9,500 sitting empty. builders are putting up 1,100 homes and they are buying lots for more. focusing on las vegas in particular, can you tell us what is going on there? guest: the new home construction area in areas like las vegas has tumbled at about 90% so they are at rock bottom and they are beginning to increase somewhat. but it is still a very low

electrical of activity. but it is up to the builders to recognize that some of the oversupply inventory needs to be absorbed before the builders can kick into the market system. there are always buyers just like there are buyers who say i want to buy a new car only, i don't want to consider a used car. there are people that say existing homes are fine but i really want to have my own tastes, my own features in the new homes so there will be buyers who are lking for the new home construction. and from the rock botm levels it is only one direction where it can go, which is upward. but still the home billers need to very cautious about where to build. but as i mentioned earlier in the program, some of th host: a couple more calls. here is steve from windsor, new york. caller: good morning. when you were talking about the

man who just called it -- he was talking, mentioned jobs as important -- that i was going to follow up on. there was one other thing. i knew a person who was constructing homes in 1970. he went into the business, was building 10 homes per year until 2006. during 2007 and 2008 he was not able to sell that many every year. he is going out of construction. the point is, he told me it cost about $40,000 to build a home today. he was selling the homes for up to $300,000 recently. that is a very big increase in the press. people were willing to pay it. he made a lot of money, but cannot sell homes now.

i checked on my home's price for 2006, and it was $240,000. i have heard stores where people would buy a home and say well, you can afford that, even though it is way above your wage. host: we only have a minute or two. guest: for many small builders it has been a difficult cycle. now with the market appearing to stabilize, hopefully this provide some opportunity with the construction loans. now that banks are making decent profits, they should look into the areas where they do normal business, lending for construction loans, jumbo loans, second home purchases. that is a private market with no government backing.

i believe there will be more lending into non-government backed, purely private sectors, and hopefully this will turn things around. host: he was the second one to mention the cost between building in the sales price. and a large increase in price. is that percentage much different than it was 20 years ago? guest: the builders will respond to the profit margin. during the down turned a profit margin disappears. but now some buyers are re- entering the market and are willing to pay the price. we are returning to the normal level. we are far from being normal, but things are improving. host: one quick call from florida. caller: you are talking about people buying new homes and getting themselves in debt?

we built our home. it ttok us five years to pay off the property we are on now. but then we paid it off, went and got a market, and got home. we got a mortgage and built our home. we put $150,000 in building our home. our bank, we have been dealing with tm since 1994, talked us into doing a refinance. if we had said like we were we would have been fine. but the refinance, predatory steering, our payment went from $1,300 to $2,700. they didn't explain that. it was a 30-year fixed interest rate at 5.25. that washe end of 2007. right now currently i don't know if you realize it, 500,000 homes in florida are clogging up our court systems that are in foreclosure. it is not only people that bought homes but people like me and my husband in our 50's that

refinanced that we were not told about the the debt ratios. they said no problem. they called us in and sign this, initial, initial. they didn't explain that we had a bloon or an adjustable rate. guest: one thing that we need to get in this, the financial market reform and transparency. we need to assure what stkaourpls sign they fully understand. because one thing in the footnote and as you know signing the document particularly for home purchases or refi are so many pages to sign it can be easily overlooked. we need to assure there is a >> and you can see "washington journal" every morning here at 7:00 a.m. eastern. this is a live picture. we're waiting for today's press briefing.

on capitol hill the senate is returning. then about one hour later they will continue work on a financial regulations bill. over 100 amendments are offered and harry reid is expected to file a motion to limit debate. if that happens, the final bill could be passed later this week. while we're waiting for the briefing to get under way -- there is the two-minute warning. we spoke with a reporter about financial regulations earlier. >> we're joined by stephen sloan from congressional quarterly.

what are some of the key changes? >> one of the most surprising was from dick durbin. it basically allows the federal reserve to limit the fees that debit card issuers can charged to retailers for processing transactions. >> that is one of the number of an immense considered over the past week. how are the changes to the regulations bill -- what will it do when it comes for the final vote to the floor? >> that remains to be seen. it depends how the changes are perceived. it could make it harder for

people to decide how to vote. if the amendments seem to be making the bill more extreme -- it has the potential to affect how people vote. >> what did you mean by your statement in this article the? >> there is frustration over the process. the democratic senator from north dakota had an exchange with chris dodd on thursday porky expressed from duration -- on thursday where he expressed his bill, that it was not allowed to get to the floor. chris dodd it countered by saying he understood the position of dorgan, but that he needs to get the bill moving. it cannot be weighed down by everyone's amendment. >> what will we see next week

is? >> one important one fulwill be from sheldon white house. it would allow each state to set a cap on excessive interest rates charged by credit card companies. it is something the financial industry will fight hard against. we are seeing the tied shift and the direction of an anti-bank sentiment. this amendment might have seemed far-fetched at one time, but could gain support. >> what can you tell us about the latest timetable senator reid has for the bill is arce's they are expected to file cloture motions on monday. -- for the bill? >> they're expected to file cloture on monday. the vote may not happen until wednesday.

we're still thinking it is something that can happen by the end of next week at everyone gets their ducks in a row. we will vote tuesday through thursday of next week, and could still vote on amendments friday. >> an update on the senate financial regulations bill. thanks, stephven. >> we spoke with mr. sloan last friday to get that day. the senate will gavel in at 2:00 p.m. eastern on our companion network, c-span2. we're waiting on robert gibson and the press briefing. -- robert gibbs.

a senate hearing will get underway at 2:30 p.m. on the gulf coast oil spill. a coastguard official and janet napolitano will be speaking, followed by the president and share of bp. he is back on capitol hill after appearances before other congressional panels last week. senator joe lieberman chairs the committee -- >> good afternoon.

>> robert, why is the white house pressuring democrats to back off the [unintelligible] attempt to bring back glass- steagall? >> i do not have anything on that. i'm sorry? >> is the white house opposed to reestablishing glass- steagall? >> i don't have any information on the amendment, but i'm happy to look at it. >> in the running statement, is there anything that changes the administration's posture on the whole nuclear question for iran? >> look, let's look at the totality of what this proposal is. you certainly have my statement that they're shipping their low- enriched uranium out would be a positive sign, progress. but understand that the proposal

does not appear to address tehran's recent announcement of increasing enrichment to 20%. the reactor was used as a direct justification. that in and of itself would make them non-compliant with obligations and responsibilities. first and foremost, this proposal should be submitted directly to the iaea to evaluate, fine print and all. so the international committee can take a look. but it does not change the steps we are taking to hold iran responsible for its obligations. that includes sanctions. >> [inaudible] >> not at all.

>> [inaudible] >> the white house directly has. the state has been in touch with, and certainly, i have no doubt that our representatives at the u.n. continue to work through this. >> you're not concerned this will unravel the whole deal? >> nag, there are certainly steps that would be progress. what this proposal signifies is less than they agreed to last october. the words and deeds of the iranian leadership rarely gone side. so, -- rarely coincide. so, before -- the international committee has to see the proposal in detail before it can make a final determination. >> they suggested a small paws

and the sha centsuse in the san- suggested a small pause in the sanctions effort. >> no, we continue to work through the security council and the other agency. we will hold them accountable not only for words, but for deeds. there will have to live up to their obligations or face consequences, including sanctions. it also mentions a concern about the 20% in richmond. done as a justification of their unwillingness to except this last october, that was used as justification for increasing in ranchman. that itself puts them in non- compliance. >> will the president speak to

world leaders? >> he spoke to president medvedev late last week. but i'm not aware to any phone calls made today. >> give the president speak with leaders of either turkey or brazil? >> no, i believe the state department has been in contact, but the president has not spoken directly to them. >> just the fact that iran appears to be agreed to something, even though you want more information to pass through iaea, isn't this a step in the right direction? . .

>> we still have concerns about the overall thrust of the nuclear program, and certainly the 20% enrichment is something that, as i mentioned a minute ago, president medvedev and others have great concern about. >> the chief lobbyist has expressed concern about the pace of getting there early. he claims that the administration is slow in moving in this direction as far as the black issue. it has to do with race.

is there any truth to that at all? >> i think that precisely because they should not have anything to do with race is exactly what the president is involved in this issue this is a lawsuit that dates back to the late 1990's. there is a separate case that includes native americans who sought and of the case was settled with discrimination with the department of agriculture dating back many years. the president's approach to this is not based on at the color of skin but on what is right. >> [inaudible] >> we are very involved, at april. representatives met with staff working on this in the west wing in order to bring this -- >> the reason why i asked this there was a written statement

showing strong support. many have said that the president could have declared an emergency designation for them to get their money -- >> again, understand that if he had done that, that was objected to last week in the senate. >> but nancy pelosi said early on that things have happened -- >> that seems like a hypothetical. >> the administration was supposed to come back and find something to attach the money to -- >> that is something that the president and the team here continue to work on. >> [inaudible] >> in what respect? >> in terms of the rest of the world -- >> in afghanistan we committed three times as many trips as the bush administration because we believe that is the central

front in the war on terror. >> you think so? >> i don't think there is any doubt that afghanistan and that region of the world presents the most significant danger to our homeland in terms of the possible planting of attacks and possible providing a safe haven, if taliban were to come back and control costs -- they were before 2000 -- were to come back and control us -- they were before 2001 and 9/11. as you saw last week, we're working with any partnership with the government of afghanistan to secure the area and ultimately turned over to them to provide peace and security for their people. >> why don't you change your position on glass-steagall?

>> i don't have any information on the amendments that may come up. i think that is and what the treasury department is doing on financial reform and the way the banks are fighting us, i am not sure that that's been lines up with what is going on in terms of financial reform. chip. >> the bad news is the would be pre -- with bp, refineries -- two refineries are ofponsible for well over 97% all flight and safety violations in the united states and the past few -- all flagrant safety violations in the past few years. does the president still have confidence in bp, and should he?

>> well, i would have to look at the particular report. i have not looked deeply into penalties for refining. i would say that there is no doubt that, as you heard, the president talked about on friday the failings of -- there have been failings of corporations and companies -- transocean, halliburton, and bp, all pointing fingers at each other. and walking away from the responsibility that must be taken in this instance. but there is no doubt that there was a feeling of government in the regulatory approach -- a failing of government in the regulatory approach, which is one of the reasons that secretary salazar began reform at mms when he took over, and that is what the president and secretary solace or believe -- and secretary salazar believe

this department should be split. >> and a statement on friday, where the president denounced finger-pointing, whbut he then pointed the finger at the bush administration -- >> i think the president was clear that there have been failings at a government level, and certainly, those include i spread my guess is that you guys did stories in the previous -- those might include us. my guess is that you guys did stories and the previous decade on the failings that mms, which is what caused the secretary to go in and reform that. >> but you said ever since we came into office --

>> no, i think i was pretty clear on that but i don't think there's any doubt, though -- i don't have a story line, but i guess that your network and others did stories on mms, which is what caused the secretary to begin that reform upon taking office in 2009. >> one other question on a different topic. there is another state dinner this week. have all procedures been corrected and change, whatever needs to be done to make sure kind oft have the security problems we had? >> we have. >> could you elaborate? >> i will not elaborate security procedures but that will tell people how to figure out how to evade them. >> on mms, is this a firing or

-- -- again, idon't don't have my black berry. >> no, i understand -- >> whenever you guys are asking questions of your blackberry -- >> this is administration decision -- >> i will check on it, either when i get my black. here or -- when i get my blackberry up here -- >> we know what you'd have a black area there. -- we don't want you to have a black. -- to have a blackberry up there. at what point do think the government will know how much oil will be spelled? bp does not have the answer. where are you getting your information? >> no one does productions on a whole host of -- look,

obviously, satellite imagery of what is come up. we know that through the use of dispersants that they are also investigating the degree to which we may have a oil underneath the surface. i know there has been reporting on that today. the president said on friday -- and i think that admiral allen said on friday as well -- that our response was for a catastrophic event. -- we do noty this deployed a 5000-barrel-a-day response for a 10,000-barrel-a- day accident. it has always been predicated on what he said was a catastrophic event. >> you guys are skimming this oil but where is it going?

-- you guys are skimming this oil. where is it going? >> what is taken from the insertion to goes up into a tanker, and i assume the tanker and the skimming -- it collected i don't know how many million gallons of oil mixed -- it gets separated. elections, doow's you accept that any of them have any bearing on the president's political standing or agenda or things like that? >> we will, i assume, get chance at a later on tuesday or wednesday to talk -- he to do what does it mean -- >> you are waiting to see the results to tell us what it means? >> it will be hard to tell you what it means until i know the results. >> but it says something, obviously, they go one way.

a referendum on the president, he has done well -- i think it is fair that the democratic primaries -- >> what the value would you give my opinion if i told you i know if it did not add to the cali with the results? i hate to be picky -- if it did not actually correlate with the results? i hate to be picky -- >> the president hasn't endorsed the two incumbents, senator -- the president has endorsed the two incumbents, senator lincoln, senator specter. >> i don't think is making is to say that based on the election results that we do know, it has been a tough year for incumbents. everyone noticed that a senator from utah at reelected six years ago with 70% of the vote got a quarter of the convention vote

to be renominated. we will get that chance to look at a whole host of primaries tomorrow. my guess is -- look, you of that interesting races in places like kentucky as -- you have got interesting races in places like kentucky as well on tuesday night, when we get results, or wednesday, we will talk -- talking about what they mean. >> the president is traveling tomorrow? >> look, i think we in pennsylvania and arkansas have done quite a bit short for both candidates. -- have been quite a bit for both candidates. >> use at one point that the deadline for iran was the end of flat -- you said at one point

that the deadline for iran was the end of last year -- >> just in fairness, i think our government and the governments involved said that iran had a year-end deadline to change its behavior, yes. >> ok, fairly recently, you said you thought sanctions could be moving by the end up at spring. i am not sure when you to find spring -- >> when do you define the spring -- >> kind of at the end of may. are you still aiming for around the end of may? >> not to get cute about one at

spring starts, but i think we're making steady progress on the sanctions resolution. >> and the president hope to get on his desk by the moral day -- by memorial day -- >> there is a reason to believe that the senate will conclude its business by this week it and we are hopeful that the bill is a strong piece of legislation and changing the rules that govern our financial system. obviously, the next steps will be working through the differences with the house. i think we will have the bill to the president's desk someone shortly. >> like when? >> robert, christina romer said yesterday that any terms of the challenges -- that in terms of the challenges -- will that be a

part of the president's message tomorrow? >> he will speak about investment by the recovery act greatly expanding business and is going to hire several hundred people. i think that what christina romer spoke about were many of the things that the president continues to believe need to happen -- sending legislation to capitol hill to increase small business lending, the housing retrofit plan that will create jobs. all those things that the president and economic team believes needs to happen even as our economy improves and is on a positive trajectory. >> police say anything else knew about -- will he say anything else knew about -- >> not tomorrow, no. >> the federal reserve says the

pace of the recovery may be slowing. >> i am not familiar with what the new york fed specifically has said i think the president was pretty clear the other day that if you want a job i don't have one, there is still a recession going on -- that if you don't w -- that if you want a job and don't have one, there is still a recession going on. we have seen three quarters of positive economic growth for the first time in more than a year. we have seen four consecutive jobs reports that show a positive job growth, the largest job growth in more than four years, the largest growth in manufacturing in more than 10. look, today is -- next month's economy will be stronger than this month but this year's economy is stronger than last year's economy. we are continuing to make

progress. i think the president is concerned each and every day about our car and the strength of our economy. >> on the primaries in arkansas and pennsylvania in particular, -- does the president have a stake in the primaries like he did in the recent ones in new jersey and virginia and massachusetts that everyone wanted to make about him -- is the less an issue -- is he less an issue in the blanche lincoln race, the arlen specter race? two sides think the have argued about that per se. again, we will have a chance to talk about the results and the outcomes and what they may or may not mean. >> i'm sensing that the races

last year -- the white house insistence that the president was not an issue here. you don't seem to be arguing that strongly -- >> i don't follow you. it is just hard for me to tell you what the results of tuesday meet on monday. i cannot tell you how the nba finals are going to go, because they have not happen. >> i am not asking to tell what the results mean, i am asking what the president feels, whether or not he has something to lose. >> who we support in this two races -- we have supported incumbent democratic senators, and we have done a lot on behalf of each campaign. there are all races all over the country that we will have a

chance to look at from the democratic and republican side. >> you want to handicap the kentucky race, then? >> no, but i am looking forward to the results and analysis of that just as much -- hold on, let me get my -- >> to encourage you to follow up on chuck's question on the resignation of the official -- >> you want me to go now? i will as soon as i -- >> do you not a sense about whether -- at west point at the end of the week, to have a sense of whether that will be anything other than a typical graduation speech -- >> we will get that letter and the week, i should say. -- that that later in the week,

i should say. >> major progress might not be until november -- >> i have not seen that, peter. i think that general mcchrystal brief us at the pentagon on this. the notion of major military operations -- i would have to see exactly what to the right to means about that decision general mcchrystal said at the pentagon briefing at the situation room meetings that this will not look like a battle of fallujah. this is not going to have rushing across the field in id- type moment. -- a d-day type moment those operations in and around 10 for have already begun. general mcchrystal says that this is an operation that is

likely to the dominant our focus through the end of the year. the notion of august or the fall i think in many ways to p-- in many ways would be a false deadline in -- this is going to take through the duration of the year. >> as he agreed to any changes of timetable -- >> not that i am aware of, but i will double check with the people. >> during the campaign, the president was highly critical of the halliburton and no-bid contracts. his exact quotations were -- >> i know the quotations. >> what is the administration's reaction to the news that halliburton has been given a five funded $68 million no-bid contract by the administration -- a $568 million no-bid

contract by the administration? >> on what issue? >> well, yes -- you will give me an answer when i find reports on what it was, exactly. >> we will meet somewhere in the middle on that one. >> i will ask you about -- you did not, i'm talking about primaries, talk about pindell and's 12th district, a special election tomorrow. -- pennsylvania's fuld district, a special election tomorrow. is the president aware that the democratic nominee ran against the health care program and would have voted against that? >> i have certainly seen those reports, sure. >> two questions. "the new york times" reported that "democrats said the white house is not eager to be

embarrassed by having the president make a last-minute visit on behalf of a candidate who goes on to lose, as happened in the massachusetts senate and new jersey governor's races." is that the reason the president has not campaigned for senator specter this month? >> i doubt "the new york times" reported that "democrats is," but -- i don't think peter wrote that did the president, as i answered last week, did not have plans to return to pennsylvania. >> does the president believes that the people who wrote the obama health care bill or justified in exempting themselves from it? >> i think you have heard the

president discussed, and we have pledged that the president -- think that has been dealt with. >> the immigration court in ohio -- >> this is an issue that first came up at some point during the campaign. the president was clear that this is an issue that he was not aware of, and should be dealt with through the necessary legal proceedings. you are telling me for the first time what the decision is. we have no involvement in that. that is something that we have always said should be dealt with through the normal course of how cases are determined. >> looking ahead to ohio tomorrow, there's been several of these at this point. i wonder if you have any measure of whether the president's budget by developing the economic policy for the people has been successful on those terms.

>> well, i think that more and more people, because of economic news, are feeling more optimistic about the direction of the economy. i think that is both a result of -- i think it is primarily the result of the fact as, as i said earlier, three consecutive quarters of economic growth, if you are consecutive quarters of job growth -- four consisted of quarters of job growth, some of which is because of actions the president took on the recovery act. >> eric holder came under fire last week for not having read the arizona immigration law. as the president read the law? >> he asked council to provide him with information on legislation. >> "the decision is not whether

we will ration care about whether we will ration care with eyes open." >> the circumstances about which he is talking about the partition -- >> he is not speaking about the health care reform -- >> right, but what were the circumstances about the quotation that he was speaking about? >> i am thinking -- >> the administration has emphasized reimbursed costs -- the letters to that effect -- are you entirely confident that bp will -- is good for whatever you guys say the money is, and

what are you prepared -- >> first and foremost, the letter sent by secretaries salazar and napolitano late last week and reported on on saturday or attempts to understand the degree to which the responsibility they said it would take an we believe they should take. we are evaluating the response to the letter from eight legal perspective and understanding that we have asked for in the legislation $75 million economic damages cap the lifted retroactively to ensure that the oil pollution act covers the type of damage that is obviously happening as a result of this spill, and that taxpayers, as the president has said numerous times, including last friday, are not on the hook for damages caused by bp or transocean or

halliburton as a result of this damage. >> does the resort -- bullets it that there will be good for the money or -- will it say that they will be good for the money -- >> we will be a guy with a response to make sure that they are doing all that is necessary -- we will evaluate the response to make sure they are doing all that is necessary. >> this may eliminate the ability to drill offshore. are you creating a system that only systematically benefits big oil companies now? >> no, but i think we have to understand that if the project that you are undertaking has the potential to cause the types of damage that exceeds what could or may happen, that the law take that into account.

i think that is, quite frankly, of a series of steps based on common sense to ensure the protections are there for people in the and that's on the catastrophic does happen -- in the event that something catastrophic does happen. there was obviously an objection last week. i think the administration believes that that was -- that the senator was wrong in objecting to that. the only possible way to move forward is to ensure, again, that there are a series of protections to take into account the potential size of the catastrophe. two'm on a find out about white house conversation -- i

want to find out about two white house conversations. one, on halliburton. we have heard the president say that he was very upset and frustrated about what was set on capitol hill, everybody pointing fingers at one another and not wanting to take responsibility. what is the conversation with this white house with halliburton right now? >> i can check to the degree to which council or others are dealing directly with halliburton. obviously, the letter on friday dealt primarily with british petroleum. >> you are saying that there are conversations with halliburton? >> i will check on that. >> talk about the white house's efforts to bring in the civil rights community with respect to elena kagan. there were questions as late as friday on her record on affirmative action.

we understand that the naacp is on board. >> not just on board, they endorsed the nomination. >> but the bottom line, it can you talk to me about what the white house is doing with the civil rights organizations so that they come on board -- >> i cannot speak the -- let me just say this. obviously, what we shared with that organization is what we would share with any organization or her record on these issues. look, we saw it on the sunday talk shows. i don't know if it is a dearth of information or dearth of understanding, but we are happy to provide information on what the facts are. >> would come up with a minute, -- wait a minute, wait a minute -- >>

process --the lynn, i am trying to do that. i am from the south. we do things a little slower, lynn. she interrupted -- just let the record reflect that it is proper that -- it is her that -- [unintelligible] >> i have been dealing with the same frustration for it seven years. [laughter] no, but we provided information. i am happy to get a job and others to talk to you about the process by which they -- get josh and others to talk to you about the process by which they contacted board members and weighed in on our solicitor

general to be the next justice. we shared information via the blog and other places on record on a whole host of issues. many comments you heard over the weekend were inaccurate about her involvement with the military. >> many civil rights organizations came to this white house, and they fell that -- felt that that was the time to have letters on affirmative action and others laid out. they laid the blame on the white house for the delay in the endorsement. >> the white house asked over the weekend that the clinton library speed up production and release of 160,000 pages of documents from our service at the white house. -- from her service at the white

house street letters, right things, e-mail -- white house. letters, writings, e-mails. >> what do you say to the fact that she was one of the ones in the clinton administration at the time putting out more of the civil rights agenda with more teeth? she wanted to water it down. there was a fight over race and she was one -- >> i think the documents will show that she is a strong supporter of civil rights. she was a clerk for for good marshall -- for thurgood marshall, she works for eric holder, and was nominated by barack obama. >> but the symbolism -- >> i don't think the naacp would

endorse on symbolism and not substance. she has a strong record on these issues as solicitor general. >> can i do want follow up first? -- one follow up first? chuck's question about the state dinner. can you say whether there is going to be representative from the social secretary's office? >> let me check. my understanding is that there will be. >> yesterday, greg craig said that elena kagan is a progressive in the mold of barack obama. is that something with which the white house agrees? >> we will leave today's

winehouse press briefing at this point to go to the dirksen -- today's white house press briefing at this point to go to the dirksen senate office building for a hearing on the oil spill. you will hear from homeland secretary janet napolitano and the deputy national incident commander of the west coast corporate this hearing is chaired by -- deputy national incident commander of the u.s. coast guard. this hearing is chaired by joe lieberman. >> nor do we seek to determine which elements of the well failed or who was responsible. those are critically important questions, but other congressional committees, executive branch agencies, and private groups have already begun to explore those questions.

our focus today is on preparedness and response. the preparedness and response of our government and the private businesses in of all to this accident -- and private businesses involved with this accident and the oil spill after it occurred. with the companies and government agencies prepared for a deep blow up like this one? how have they performed in response? those are the big questions that we hope to begin to answer this afternoon. we owe it to the american people to learn from this catastrophe, not only so that we can do everything we can to prevent anything like it from happening again, but also having in mind our focus on preparedness and response so that we can guarantee that if it does happen again, the oil companies and the government will not be left to scurry about trying to figure out how to stop the oil gushing

into the gulf like firefighters trying to extinguish fires already burning and consuming a neighborhood. instead, hopefully they will learn lessons from this spill and will be much better prepared to respond quickly. under the home and security act -- homeland security act and homeland security directive no. 5, the department is charged with coordinating the federal response to major disasters. the secretary it is further charged with coordinating activities of the private-sector and non-governmental players in response to the disaster, and must ensure the disaster information is gathered and disseminated to the public and private sector officials. the united states coast guard is specifically responsible for managing a marine oil spill

cleanup. a host of other agencies of our government -- the minerals management service within the department of the interior, the national oceanographic and atmospheric administration, and the environmental protection agency -- also have critical responsibilities in this crisis. and of course, the private sector companies have enormous obligations under law. in fact, much of the actual cleanup is being conducted by contractors that bp has hired to respond to the spill. and as provided by law, the private companies responsible for the spill will pay for cleanup regardless of who is carrying out the response. we know that the oil companies spill-- companies' response plans must be filed and approved by the minerals mining service or wells and by the u.s. coast guard for drilling vessels

or rigs before any drilling can begin. this afternoon, we're going to ask whether bp as adequate incident management and response plans and placed it at a time -- in place ahead of time to guide their response efforts. did mms require such adequate incident management in response plans? did the plan specifically, the consequences of a blowout, oil and gushing 5000 feet under water? we want to know what plans are in place to guide the coast guard and other agencies in their response. what capability to the department of homeland security, defense, and other agencies make available in the early days of the oil spill? did they act quickly enough? what response capabilities will be made available as the disaster continues?

we will also ask whether the government was forced to over- rely on the oil companies' expertise and information here. did the government have knowledge of the disaster independent of what bp was telling it? i would say myself that i have spent, since this accident and spill, some time studying what the law requires of the oil killing companies and our government, and which -- the oil-drilling companies and our government, and what should be on the response plans filed by the u.s. coast guard and the metals mining service for the deep horizon -- and the minerals mining service for the decries and wells. i emerge with an unsettling tentative conclusion and questions i hope can be answered today by our witnesses.

there is one set of witnesses that are not here, and i must say that is from mms. i regret that mms leadership has chosen not to appear before our committee today, because really, they need to be asked the same questions i am going to ask homeland security, coast guard, and bp. mms, as i mentioned, must approve or reject the response plans for the wells, coacwhich s where the accident occurs, where before this could be drilled. i do want to say this afternoon that if appropriate and constructive, our committee will ask the secretary and/or leadership of mms to appear before us at a later date.

here come in brief, is some of what i have concluded tentatively, and the questions that most need to be answered by our witnesses. bp was required to submit an oil response plan to mms. under law, this can be regional or a specific to a particular well or rig. almost 10 years ago, december 2000, bp filed only a regional response plan, and mms accepted it without asking for more. bp satisfied the legal requirements. but the question is, was it adequate? i am sure that mms has asked for more. that plan was most recently revised on june 30 of last year. my first question is, should the government have been satisfied with only at regional response plan instead of one for each well, and one that was filed

almost a decade ago? second, more important, did the government, through the minerals and mining service, require an oil spill response plan adequate to the widest range of possible dangers, including the failure of a blowout preventer? it sure appears that date did not. the response plan, which bp file and was approved by the minerals mining service, as required, it included an appendix which identifies worst case still some areas and proposed methods for responding -- worst-case-spill scenarios and proposed methods for responding. in its plan, bp foresaw such a worst-case scenario for a deep

water blowout resulting in more than 250,000 barrels of crude oil every day. people will been following this crisis know that that is much more than what is actually being discharged in this horrific spill occurring and the gulf today. the estimates range from the low of 5000 barrels daily to the height of 100,000 barrels daily. but here is the problem -- in the response plan approved by the mineral and mining service, bp said it could use booms and skimming vessels and disbursements to count or collect more than 490,000 barrels a day. but that was mostly from the surface, where booms and skimming vessels and dispersants are mostly effective.

as far as i can tell, and know and want ask, those methods don't deal with the enormous accumulation of oil are occurring now under water in the gulf. reportedly as large as it can -- as 10 miles long and wide in more than 100 feet quick pit was that the foreseeable consequence of the blow out? if it was, why didn't the metal and mining service required that the oil company had a better plan for responding to the consequence? finally, and perhaps most important -- in the approve the bp response plans, there appears to be, in the end, total reliance on the block printer -- blowout preventer as the last

line of defense, as if a blow out to prevent it could not fail. but blowout preventers have failed in the past, no where near the consequences of this one, but they have failed. no plans were filed or requested on what to do to control a spill if the blowout preventer in deep water failed, as it did in the current case. so i want to ask why not. what can be done to prevent another failure of it blowout preventer in deep water, or to control the spill more quickly and effectively if it does? until those questions are answered satisfactorily, i don't see how oour government can allw any more deep water drills to be permitted or drill. i say that with regret, because i know how important offshore american oil is to our nation's

energy independence. but the u.s. government has a responsibility for protecting public safety that is more important. that responsibility, i fear, was not fulfilled in this case prior to the accident occurring. the result is the human environmental and economic catastrophe that we are now witnessing in the gulf. senator collins. >> thank you, mr. chairman. mr. chairman, as we began this oversight hearing into what is certainly an environmental catastrophe and what is likely to be an economic disaster, let us also remember what a personal tragedy this incident is for the families of the 11 workers who lost their lives after the explosion rocked and sank the

deep water horizon oil drilling platform nearly four weeks ago. we know when this catastrophe began, but none of us knows what will end. -- none of us knows when it will end a b. oil continues to gush from the well had nearly a mile below the surface of the gulf of mexico. despite recent successful efforts to siphon off a portion of the oil spring from the broken pipe, the waters of the gulf are slowly becoming a sea of crude oil. expanding plume is menacing the fragile ecosystem of the gulf, potentially damaging a vast array of sea life, at the environment, and features of

americans -- futures of americans who live and work among the gulf coast. every day some 5000 barrels of oil are flowing into the gulf. but recent expert estimates place that number as high as 70,000 barrels. hundreds of that federal officials and coast guard personnel and scientists and engineers and officials from british petroleum search for solutions to fix this urgent problem. how do we turn off this fossett of oil that is stuck open nearly -- this faucet of oil that is stuck open nearly a mile under water? we have learned about the challenge and response efforts, but there are still far too many unanswered questions.

we will ask what the government and industry could have done differently to avoid this catastrophe. we will ask how continuing damage to the gulf of mexico can be mitigated, and how this bill can eventually be stopped. as the coast guard, not noted, the technological ingenuity -- as the coast guard commandant noted, the technological ingenuity needed has parallels to the best commission for apollo 13. -- has parallels to the rescue mission for apollo 13. but this time, in a deep ocean environment that is dark, cold and unforgiving. there are some 90 rigs drilling in the gulf right now providing 1.7 million barrels of oil today, or nearly 1/3 of total u.s. production.

according to the federal mineral management service, only 0.7% of the drilling platforms are searching for a while in what is deeper than 1000 feet. yet more than 50% of all leases are in this deep waters. clearly, oil companies believe there is much promise in deep water drilling. therefore, there could be a rapid expansion in this area in coming years. in light of the deep water or ice and disaster -- in light of the deep water horizon disaster, we should examine whether we need deepwater drilling operations in these challenging conditions. until we figure out what went wrong, i believe the administration is correct in calling a pause to the approval

of further drilling in deep waters. mms has the responsibility for reviewing and approving oil response plans for drilling and conducted on offshore rigs like the deepwater horizon. we need to explore what level preparedness mms requires for companies seeking to drill in this hazardous environment. for the coast, to effectively perform its role in marine -- for the coast guard to effectively perform its role in marine environmental protection, it must work closely with mms and the private sector to be prepared for a worst-case scenario. to that end, i was surprised to learn that the current lease has no requirement for mms to share oil spill response plans with

the coast guard. how can that be? it seems to me that mandating concurrent coast guard approval of these plans is the common sense change that we should make immediately. today we will also hear more about the department of homeland security's coordination of the response to the spill. the federal government and the private sector have committed substantial resources to respond to the spill. those efforts will certainly continue. but concerns have been raised regarding the adequacy and timeliness of resources committed to this effort in the initial days of the blowout. furthermore, with the administration's proposed $75 million cut in the coast guard budget, it is a question in my mind whether the coast guard can

continue to maintain sufficient capabilities to respond to this and future disasters along with performing its myriad other missions. surely, this catastrophe should prompt the administration to reconsider the ill-conceived and budget cuts. it is always the coast guard, whether it is hurricane katrina, the crisis in haiti, or the oil spill in the gulf coast region, that is always first to respond. and the last thing we should be doing is reducing the number of coast guard personnel, uniformed personnel, by more than 1000 individuals, as the administration's budget proposes. finally, the private sector must accept responsibility for this failure in modern engineering,

at the liability -- and we need to take a close look at the liability caps to see if they are still adequate. this oil spill, when it finally does conclude, will be recorded as an epic catastrophe whose impacts are likely to be felt for a long time to come. >> thank you very much, senator collins. we will go right to secretary boller totten. -- secretary napolitano. to say the obvious, you have one of the toughest jobs in america but i appreciate what you do every day and your willingness to come before us. the oversight of original jurisdiction over your department for this testimony this afternoon. thank you. >> thank you, mr. chairman, senator collins, members of the committee. i look forward to the opportunity to testify about the response to the bp oil spill in

the gulf of mexico. some of your questions are probably better directed to the department of interior or british petroleum itself, but i will not be -- i will be testifying about what happened, the original response, and the real admiral neffenger is here to answer any questions of a technical nature that i myself are not able to answer, although i must say that i have learned, as we all have, a lot about oil spills over the last four weeks. i want to begin by thanking the men and women of the coast guard, who have been at this event from its beginning. they have worked quickly, tirelessly, in response to what, as senator collins rightly noted, is one of the most devastating environmental

disasters that this nation has ever faced. and i want to express my condolences to the families of the workers whose lives lost in the explosion. it is a constantly evolving situation. the federal government has brought all resources to bear to limit this bill -- limit the spill's economic and public health and tax and make sure that the communities and resources of the gulf coast are restored by british petroleum. dhs is the coordinating agency . this may be the first time that the homeland security directive no. 5 has been laid on a national framework, allowing us to court and it across many agencies and to the concentration and involvement necessary for this spill.

we are working 24/7 in close coordination with state and local partners to make sure that the access and personnel and equipment and the impact speaks of their extensive efforts. first, i would like to give you a quick update on the current status, and then i would like to give you some detail on the original response, because it is of some important interest by many of you. .

deployed within 24 hours or 5 miles of oil, which ever would be sooner.

oil and water have been national response team and for seventeen staging areas are currently set up to protect we have approved the use of up to 70,500 national guard members, more than 1450 are currently deployed. all shipping channels and ports a need arises. the flow of oil. yesterday ppl tenzin another test to contain some of the oil

inserting a small pipe into it, carrying oil directly up to the surface to a collection vessel. as of this morning, bp reports the pipe is recovering some oil and gas. there is no confirmation yet on the rate of flow. to achieve the highest even if this is successful, it mitigate this bispill's impact. we're moving toward a

strategist to stop the flow of oil. bp states equipment for a technique called the top kill, which will pump heavies' liquids into the well and stop the flow of oil. this is expected to start at the end of the week. as i said earlier, the response to this incident began deepwater horizon occurred late aircraft beginning a large salce search and rescue.

we were already beginning to this tragedy. on the morning of thursday, april 22, and the oil rig sank. 700,000 gallons of diesel fuel on board. this prompted the immediate of activation of the national response team. this included leadership from across a bridge across the federal government to the epa and department of defense, commerce and interior. i lead the nrt for coordinating the federal response. that same day president obama had a principals' meeting about the incident. at this time, there were no apparent oil leaks, but 100,000

potentially affected communities along the gulf coast. -- sunken rig was found on the ocean floor. the nrt ordered to plan ahead in case this situation 24, bp found the first two weeks and alerted the federal the first three locations were

commander.

above the surface, we continue to conduct controlled burns, skim oil, and apply chemical dispersants to reduce the amount of oil and break up the slick offshore. we are deploying boom to affect cleanup or in other ways can we are ensuring that this --

communities, and businesses that result of this bill. can be filed on line. been filed by affected looking ahead, the strong response that we have environment, economy in the gulf questions.

i kept referring to mms by the it is the mineral management service. but the records show. -- let the record show. it is really quite enormous. the government is involved in the government is involved in. i want to go back again to some of the questions i raised in my opening statement, and this really goes to preparedness uniquely for our problem with a deepwater well. i will ask you, madam secretary, and this may be technical stuff, but here is the question, and let me speak to someone who has as we watch the company, the to figure out how to close this

prepared to deal with this kind of problem. in fact, as the company said quite honestly, they had capped concluded or anyone in the >> let me divide it, if i might, mr. chairman, into before the

before the blood while it is clear that there was an i have read some of the same have been extensive plans prepared under the national there are area contingency from state localities and parishes. those plants not only exists, but are exercised on a regular indeed, i think there was an area response plan for an oil-

commander for that exercise.

>> we now have to enormous problems, but i do not believe we were ready to deal with and the company was not either. what you do when the people -- when the oil under the water, which is now accumulating in this massive plume -- does the coast guard -- i know you do a lot of drilling. do you do anything to deal with -- trained to deal with the consequences of a deep water well explosion? >> we do not drill this specific scenario, mr. chairman. what the secretary was referring to was a spill of national significance. we do drill for massive oil

releases. in this case, we did drill in 2002 for massive oil relief. it was not like the specific scenarios. >> wasn't as deep as this? >> no. it was not. >> my understanding is that, increasingly, in the gulf and other where -- other places, we're using deepwater drilling increasingly? >> i do not know the exact number of deepwater wells. it is about 1% of all of the wells. i would have to refer to someone else for the exact amount. there is increasing activity in the deeper parts of the under continental shelf. >> you have the responsibility for improving oil spill response plans from what i would call the rig. the minerals management service

from the interior has to approve those plans, no matter the depth of the well. i wanted to ask you two things. one of them is going back to something from my opening statement. does it make sense that bp was enabled to file just original response plan? that presumably would cons -- cover both deepwater and more shallow water wells, as opposed to a specific response plan, particularly the deepwater wells? >> we require specific response plans for each vessel that we think might have the potential to discharge. >> that is very important. you have a different approach than mms does on that? >> yes, sir. we do. >> my time is winding down.

i think the secretary said it correctly and i agree with it from what i have looked at. there was total reliance put on this blowout preventer. in the end, it is a piece of equipment. they fail. there was evidence that the blow out printer had failed in the past, not in large numbers, and never with the result of this kind. because the coast guard has a responsibility for marine oil spills, what do you think should be done to try to have all level of preparedness that allows the possibility, which may be rare -- we have seen the consequences are enormous. >> senator, this spill raises a lot of questions like that that we have to take a good, hard look at. this is clearly beyond what we

anticipated being something that could happen. we never anticipated an ongoing release of this magnitude over this period of time. is is a very real question that has to be addressed. we have to go -- this is a very real question that has to be addressed. we have to go back and look to review our various contingency plans. >> madame secretary i know you are working -- madame secretary, i know you are working with secretary salazar on this short- term investigation that the president has asked you to do. i'm sure you were doing it already. i hope you will look closely at this special requirement for protection. it seems to me that we have now all learned it applied to deepwater drilling, including a broad -- including the blowout preventers, which were not applied by mms before. the mr. chairman, whatever incidents that occurs, we learn lessons -- >> mr. chairman, with

every incident that occurs, we learn lessons. the president has been very clear that further thewater drilling permits will not be issued until this -- deepwater the drilling permits will not be issued until this has been investigated and things have been changed -- deepwater drilling permits will not be issued until this has been investigated and things have changed. what happened here? what should we -- what powers should we have that we did not have? what powers did we not exercise? was there over reliance on the b.o.p.? i think that we may perhaps -- there may be a few lawyers that it involved in some of that as litigation happens. the president was absolutely

right last friday to say, this is not about who is responsible for paying. our work is to make sure that this well is capped, to make sure that it is cleaned up, to make sure that oil is prevented from making landfall, and when it does, that it is cleaned up, that all claims are paid and paid promptly. that is the definition of this response right now. >> thank you. senator collins. >> thank you, mr. chairman. there was responsibility for approval of the oil response plan between mms and the coast guard. in my statement, i raised the question of why would you not have the coast guard -- the coast guard have some sharing of information with the mms, such that the coast guard would be

responsible for some sort of concurrent approval of the plan? it does not make a lot of sense at first blush to have one agency responsible for approving the plan above the water for the vessel, and one -- a different agency in a different apartment -- different department responsible if the plant applies to the wellhead. has there been any thought to at least broadening the coast guard's responsibility in this area, madam secretary? >> senator collins, there will be a lot of different things that we looked at as to who has what a 40 and what authority needs to be adjusted in light of this -- who has what authority and what authority needs to be adjusted in light of this. that is one of the questions we're looking into. >> i concur with the secretary.

moving forward, we need to look at whether or not there needs to be a definitive statement with regard to that. we do have memorandums of understanding with the mms which would allow us to review those plans, but there is no requirement to do so. >> this catastrophe is the first to be classified as a spill of national significance, since that term was coined in the wake of the exxon valdez disaster in 1989. during the intervening 20-plus years, some have expressed the concern that because our nation has not been forced to respond to a major oil spill in such a long time that we have lost the expertise and institutional knowledge that is necessary for a quick and effective response. indeed, in 2004, when the coast

guard did an exercise in this area, the after action report had some troubling conclusions. i want to read from that. the after action report concluded, "oil spill response personnel did not appear to have even a basic knowledge of the equipment required to support salvage or spill clean-up operation. there was a shortage of personnel would experience to fill key positions. many mid-levels bill management staff had never worked on a large spill, and some had never been involved in an exercise." i know there have been two subsequent exercises since then, including the one hosted by the state of maine this spring, for which the after action report has not yet been written.

what is your assessment of the expertise that we have today in government and in the industry to deal with a major oil spill? >> senator, i think you are referring to the 2004 drilling in los angeles and long beach harbor. i was a unified commander for that exercise. those were my recommendations that you just read that came out of that. but you tend to agree with them. >> i did at the time. -- >> you tend to agree with them. >> i did at that time. we have done a lot to improve our ability. if you look at the subsequent exercises in the intervening periodic annual and try annual exercises that we do, -- triannual exercises that we do, we have learned a lot. we have not had a major oil spill, but that does not keep us from preparing effectively for

it. >> do we have that expertise now? >> clearly, if you are actually cleaning up oil, there is an expertise at you develop that cannot be developed in any other way. i think we have the capability now. we have a lot of people who look at this over an extended time period. you the capability in the private industry with respect to the organizations who are required to maintain expertise. we still have a number of ongoing minor spills that provide opportunities for training people in responding. we have the capability. in the case of this oil spill, i have been very impressed. i've spent quite a bit of the last couple of weeks down in the gulf, around the area and at the command center, and watching the operations. i have been very impressed with what i have seen.

>> madam secretary, you mentioned the federal resources that have been brought to bear on this catastrophe and the fact that the cows are -- the coast guard was on seen immediately. there have been some questions about whether resources -- the coast guard was on-scene immediately. there have been some questions about whether resources were dispersed immediately. search and rescue was not focused on containing the oil spill. what is your assessment of the resources, the adequacy, and the timeliness, of the resources that british petroleum and its partners brought to the task in those initial days?

ask thought you're going to a different question. >> i thought about asking you whether you were satisfied with the federal response, but i have a feeling i know what the answer to that would-b, so i decided -- would be, so i decided to ask you about the private sector response. >> i want to give you the, "of the federal response. recognizing that that -- i wanted to give you the ticktock of the federal response. you can go on the 24th -- we began to see signs of leaking oil. on the 28, you had signs of the third week from the -- third leak from the riser. this was an evolve in a spill. -- an evolving spill.

i would like to reserve judgment on the adequacy of the private- sector response. i will say that british petroleum leadership -- the american head of british petroleum and the international head were in washington very quickly. there were immediately assuming responsibility -- they were immediately assuming responsibility, which they should and have done. they have been in the command centers and in the staging areas. they have been working, in terms of cleanup, and hiring local fisherman to help deploy a boom and the rest. whether the exact hours around the explosion and sinking of the vessel they should have had more or different equipment there or more different kinds of expertise there, it would be premature for me to say.

>> thank you. >> thank you very much, senator collins. senator mccain in senator landrieu -- and senator landrieu. >> thank you for being here. what is your best-case scenario and worse-case scenario about this crisis right now? >> obviously, we would like to see the insertion pipe continue to work and lift the oil off of the surface. we would like to see when and if the top killed methodology works and if the oil

>> we, on the other hand, have from the beginning, not planned our response based upon numbers or based on 25,000 barrels. our response is geared to what is necessary to fight the oil on d.c., to prevent it from hitting land and if it hits, to clean it up immediately. >> worse case scenario? >> that is we will be at this for quite a while. >> where do you think we are in either scenario? >> the insertion is in right now and if it begins to lift oil, it looks promising, and they are able to do the film, that would happen by the end of the week. in terms of the drilling of the relief well, we are some weeks

away, well into the summer. there is a bp witness after me. you might ask him. >> where is your level of optimism? >> i am taking it day by day and i think that is what we need to do. i think we need to say that we are in the middle of this crisis. we are not at the beginning. we have been added one month. -- at it one month. our job is to keep moving and to keep assembling, deploying, preparing, cleaning, and keeping track of what we are spending because ultimately, the taxpayer should not have to bear this cost. >> if you have dispatched 17,000 natural guard to help all and cleanup? >> there have been up to 17,000

that have been authorized. i believe there are about 1000 that are actually working right now. >> what do you expect? >> it depends. it depends on whether we continue to see oil reaching the shore. it depends, we have to start rotating people in and out, in terms of the wing flights over the boom and monitoring it and replacing it. it does not last forever out there. it is broken. we have to replace people with staffing, the four operating centers, and the like. over the course of this summer, we will see a number of the card deployed in those types of capacities. >> if you will indulge me, we think we have another crisis on the border and i sent you a letter on april 6 -- excuse me,

back in march. he set me a letter back on april 9. and response to our request that the guard be sent to the arizona-mexico border. i quote and your response that the guard has the capabilities to assist in the law enforcement missions. the use of the guard to support law enforcement options are -- efforts are one of the options being considered. i will keep you informed as to our force multiplication along the southwest border continues. do you have anything to keep me informed about? >> i do. we have been working the southwest border issue constantly. if i might, senator, we will

give your staff for have not already a more extensive bruising -- briefing. i will use as my start date the date of the murder of the rancher near douglas. we have increased flight hours to 50% over the tucson sector since the day of that murder. we have 24/7 coverage of their and we continue to increase the fixed and wrote her wing aircraft we are flying on the tucson sector. we have moved, and i will give you exact numbers come up mobile surveillance -- >> i did not mean to interrupt. i know all those things are going on. i want to know as to whether you will send the guard to the border or not. >> as you know, let me give you

one other thing we have added to numbers. that will be starting at the end of this month. we are beginning the process of interior repatriation of anybody we pick up. with respect to the guard, those requests involve the department of defense, homeland security, the white house. that request and that analysis remains in that interagency process do we have any ideas as to when that decision might be made? >> i would like it to be made as soon as possible but i cannot give you a certain date. >> meanwhile, people's homes are being violated and their families cannot take kids to the bus stop. you are familiar with the issue

because you asked the guard to go to the border back in 2006. i do not know what it takes for us to get a decision on it. it least the people in my state have the right to know whether, since this is a longstanding request, it was requested back in 2009, i think they have their right to know whether they will be sent or not. i would hope that you would expedite that process and at least telling us whether they are going to be sent or not. finally, if i might ask, have you had a chance to review the new law that this passed by the state of arizona? >> i have not reviewed it in detail. i certainly know of it. >> you are not prepared to make a judgment on it? >> that is not a law, let me

just say this, as you well know, that is not the type of law i would have signed. >> for what reason? >> because i believe that it is a bad law enforcement law. i believe that mandates that requires local law enforcement or puts them into a position they did not want to be placed in. when i was dealing with laws of that ilk, most of state law enforcement agencies in arizona at that time were opposed to such legislation. >> i would be pleased and right thing to hear what specific aspect of the law would impede or harm law enforcement since the majority of law enforcement in arizona strongly supports this legislation and unfortunately, both the president of the united states

and others have betrayed a as somebody cannot go out to the ice cream -- without being harassed and that is one of the most every just statements i have ever heard. the attorney general condemned the lot and then said he has never even read it. this is an important issue not just in arizona but around this country. i would hope that we would at least have a decision about if the guard will be sent to the border and of like to have the specifics, if you have time. i know it is not in your area of expertise but i know is a former governor, you have a significant interest as to what particular aspects of that law that you would find objectionable thank you. >> thank you for being here.

i appreciate that you are here and look forward to your questions. >> thank you. my job is made somewhat easier because of the work that you and the ranking member had done and i mean that sincerely. thank you for calling this hearing. i encourage deep collins of hearings by a variety of committees because the people i represent would like answers. they are extremely concerned. everybody along the gulf coast, particularly those along the coastal communities. i would like to begin by saying that the questions that you asked in your opening statement, i hope we get answers to them. i thought that they were excellent and right on point. secondly, madam secretary, i want to thank you for your multiple visits to louisiana over the last several months before this incident happened, working on the last incident that happened as well as your time focused on this one and the

many senior level officials that have been on the ground from the coast guard to the interior department to noaa to the epa. have not just sent the mid managers or newly appointed directors but your cabinet officials have been there and continue and i get a good feedback from the public officials because of that. i want to on their behalf express our thanks. i would say that the people and louisiana are very interested in a couple of important questions, some of which you hit. when will this uncontrolled flow be stopped? is everything being done to possibly be done? when will claims be paid? will they be transparent? will they be adequate? what are the long-term impact to our fisheries? how can this industry be made

safer for the future? i not going to ask you to respond to all four of those but in writing, i would like some response. i would like to take a minute of my questions to put some things into perspective for this situation. i think it is important. i did this of the oversight hearing on energy and at the oversight hearing for the epw and i would like to do today. there are over 42,000 wells that have been drilled in state and federal waters in the gulf of mexico alone. the first deep well was drilled 31 years ago. the first deep well, 31 years ago, in 1979. from that time and can predict until 2008, there have been 2239 deepwater wells drilled averaging approximately 133

wells per year. in 1990, only 4% of the oil coming from the gulf of mexico was responsible in the deep water. today, 60% of the oil coming from the gulf of mexico comes from deep water and alter the water. the record will show that from 1947 until 2009, only 1000 -- 175,000 barrels had been spilled out of 16 billion produced. that is about 1000 of 1% of production. until this happened, the record was good. the problem is, this blowout is putting more oil in the water in one and a half days that has been put in the water in the last decade. that is startling to those of us who are fairly familiar with the industry. we are extremely concerned and want it to be safer.

i support the president's 30 date look. i certainly support tighter controls over deep water wells and would say to the committee that we pioneered this technology. it is important that we get this right because it has a major impact on how these are drilled around the world. if ours are safe, most other countries will be safe. we have an obligation not just to ourselves but to the people of the planet. let me ask a couple of things. i am extremely interested in how much money to our government has spent on research and development either through homeland security, epa, noaa, or interior door? do you have a record for your own agency? do you know if any money and if so, the dollar amount or what percentage is spent on response to a catastrophe like this?

if you do not have that number, could you give it to me in writing and perhaps comment generally on if you think homeland security is doing what it needs to do to be better prepared for an incident like this? >> as i said earlier, you learn from every incident. you begin with a plant then you exercise the plan but as any incident coordinator will tell you, you have to work the problem at that point. that is what we have been doing. i will tell you that we are accumulating the costs that we are expending in our response. that includes the coast guard. it would not be an insignificant sum. we have asked that the nrt other federal agencies keep track of the costs of the money they are

spending. since we are in the middle of response, i think you would be premature to give you an estimate. >> i just want to restate on this, i note that we did not have the full estimate of the costs. i am assuming that bp is going to step up as they have said and cover all of these costs for individuals, businesses, the government at every level and i know that they have been forthcoming with some of the request, $25 million up to $1 million to some of the counties which has been impressive. we may need more than that. it is the research and development dollars in these major agencies and i am wondering, considering this industry, for bonuses and severance, have contributed $165 billion to the federal treasury since 1955.

what percentage of our budget and their budget, i will be asking them, go to safety, equipment, new technology and clean up? we may need to invest more money to make sure this never happens again. we are going to try to collect that data. my time has expired. thank you. >> thank you. >> thank you. thank you for leading the effort on this. if i may, let me start with the secretary. i am assuming that you have already done quite a bit of work with the governors to understand the scope and the nature of their request and could you give us an outline on what you think these next few weeks might

look like? >> we have representatives of the governor's and all of the various command centers. we have a daily call with the governors. we are working with them now on what the claims process should be for states and localities. we are cognizant of long-term costs that may occur, such as fisheries that have been closed already. we are working our way through that. this comes under another statute altogether. the difference is huge because under the stafford act, the taxpayers of the west pay for the response. under this one, the responsible party is going to pick. we are in the process of making

sure there is a good and easy procedure for those claims to be made. >> let me ask the rear admiral neffenger, if i may, fema for example might burn to resources very rapidly on a major disaster. is that true with your agency and how you are dealing with this? >> as it -- as the secretary mentioned, we are spending money every day to manage this response. as she also mentioned, with the act for 1990 provides is the ability to reach into the oil spill liability emergency trust fund to fund some of those initial response actions. there is an initial $50 million available. we can take a onetime transfer of another $100 million into that fund, which we have done

and have been granted. that provides $150 million to the federal government for its response action. if that is primarily paying for coast guard activities at this point. >> either in this committee or other committees, we talk about the coast guard and was shot down on the gulf coast and many times. in many ways, you are under and you have older ships that you're trying to update and replace. has the fact you have been hampered from a budgetary sense, can you see this and how are you able to respond to this? our budget situation has not hamper a response initially to this. for any agency, long-term sustained response is something

that becomes a challenge. that would be the case no matter how many people you have. sustainability is one of the critical concerns we are looking at. how do you do this if it were to go on for an expanded -- extended period of time? at some point, we have to look at the impact and the risk position we take throughout the rest of the country as we pull those resources from other parts of the country. >> i know that your office and fema and many other federal and state and local agencies try to anticipate various disasters and run through exercises to try to understand what would happen, will have you been doing this in years past with a major oil event like this? >> every three years, summer in the country, we do what we call a spill of nationals

significance. that is a full-scale deployment exercise where we stimulate a massive oil discharge of some sort the most recent one was on the northeast off the coast of portland, maine. we did a spill of national significance simulating a tanker oil spill. the one that senator collins referred to was one i have participated in off the southern coast of california. we do exercises for massive oil discharges periodically throughout the country. every zone where there is a done contingency plan, there is a cycle of exercises that are required to be conducted on an annual, biennial, and try annual basis. if we exercise quite a bit but those full-scale exercises are every three years and not necessarily in every zone. >> it sounds like those exercises have paid off and how

you responded to this. >> i think they have. the response that we were able to mount to this spill is a significant improvement over what you might have seen 20 years ago prior to the exxon spill. there is a robust exercise oversight program that we have and they manage this program to about this country and watch the results. there is a lessons learned process for feeding what we have learned from those exercises, and we fight to -- we try to feed that into the way we would respond. my guess is more or less depending upon how well we can feed that in. we think that we have a pretty robust exercise program. it is one that connects federal, state, and local officials and the private sector to the extent

that they can participate so you at least talk the same language and spend time together. >> thank you. thank you very much for your answers. i would like to note that in our subcommittee, the state, local, private sector prepared this subcommittee, we are having a hearing on may 25, to go into more detail about what each group has been doing. >> thank you. i would like to ask you if you would stick with us and we will do a second short round of no more than five minutes each. as i hear the questions back and forth, it seems that post-exxon valdez, the government and the oil industry worked together to get very good at dealing with a major spill at the surface but i still remain to be convinced that we did enough to prevent

this deep water accident in the well from occurring and that we are ready to deal with the unbelievable consequences of it under water. in that regard, we have been reading in the last few days that there are scientists who believe and are reporting giant deep sea plumes of oil in the gulf as a result of this accident, one of which measured 10 miles long, 3 miles wide and 300 feet thick in spots. what are we capable of doing to try to break that up? if we do not, what is going to happen to it? the consequences for the environment are potentially very

severe. >> indeed, mr. chairman. first of all, we have to be careful right now about what is being assumed about the undersea plume. the head of noaa put out a statement this afternoon saying that some of those early reports that had been made were not based on observation and have not been verified and confirmed. >> that is important for us to hear. >> we obviously need to continue to watch the undersea plant to the extent one develops in addition to the top of the sea spill. that process is being looked at with a consortium of government scientists that continue to look at what is going on underneath the surface of the ocean, what

is happening there, and i think the noaa director responded very strongly that some of these early statements have not been verified and seemed inaccurate. secondly, the epa has approved the undersea use of dispersants. as i mentioned, this is very novel. it is being done in a very controlled wait because every time we do something like that, you have to explore the environmental trade-offs that is being made. epa has a very rigorous protocol for how that will be done and continuous monitoring will happen. and those undersea dispersants are being injected and have been injected over the last few days. >> i appreciate hearing that. it sounds like we are experimenting because this is something unprecedented and on

anticipated by the regulatory process. admiral, but me ask you in so far as the coast guard has supervision over marine oil spills, is there not a danger that these enormous plumes will be taken by the current and moved far away from the actual source of the spill and that could have very wide ranging and that instrumental effects? i think you are referring to the loop current. we have been watching that very carefully. noaa is helping us to model the location. it currently shows to be somewhere in the neighborhood of 40 to 50 miles from the southern edge of this bill. as a result of that, we are preparing for potential impact

on the southern florida coast. the other piece of that is it is likely that the kind of oil that will be picked up will be heavily weathered oil. if you are likely to see things like tar balls forming on the beaches which are a bit easier to manage. this is not saying this is a good thing. i think it will be a more manageable peace than what we are currently looking at out in the gulf. >> let me quickly ask you, have you encountered any underwater sea plumes of oil of the dimensions being discussed? >> no, sir. this is the first time i have seen the light that poses these types of complex ideas. >> secretary? >> i was just going to mention that in respect to the loop current, the numbers are being

monitored very closely. and we are treating it as if it were its own coastline. in other words, if we were to see that the oil rally was beginning to move toward the loop current, we would begin doing some things by way of dispersant and plumbing as if the loop current itself or a piece of the coast. >> thank you. senator collins. >> thank you. admiral, to follow up on the chairman's line of questioning, one of the concerns that i have is that nobody seems to really know what to do when you have this big of a spill under water. when we followed the events in the press of the various ways that are being used to try to contain the spill, and plug the well, the impression that you

get is that there is no plan. . . the first trip i made to the gulf was to a houston to find a solution. i would say that in the end this series of technological improvements we're seeing play out. we need to determine what was actually going on down there

because there is no human access to the site. everything we're seeing is through the lens of a remotely operated vehicle. that makes it challenging just to initially assessed what you actually have going on. i think the complexity it that you have a blowout preventer of that failed as it was designed. we do not know why that happened. will take some time to determine that. it may remain that be the solution that we could get that to the surface. we have a complicated 5000-ft riser across the seat for work -- along which there are a number of leaks. that complicated the determination and how best to approach it. and then a hard determination of the pressures that may be inside there. it will take time to accumulate the knowledge necessary to know that next afford. if this had happened on the surface, you would see a much

more rapid ability to come to closure on it. it's the death of below the service that makes it so challenging. the relief well has been held out of -- as the ultimate solution, whether it is the approach is that you have right now. is the relief well a sure thing? it is going to take a long time to bring it about. has this been done before? >> that is the question you want to address to the bp witnesses. >> i will, but i would like to know the admirals' opinion on that. >> i am not a pulliam -- petroleum engineer or geologist, but in talking to those that are, they have done relief wells before and i concur with the secretary that that is a good line of questioning for bp.

the top kill, the technology they are using to plump the fluid into it, is attested fluid -- method. they have used that many time. when you're just done with the well, you put this in. i understand that that is a regular method for doing so. particularly for the blowup route as far as the relief well, i note that it is a challenge and the secretary alluded to the challenge to have a small well for at a distance of 18,000 feet. >> madam secretary, i just wanted to comment -- this includes $200 million for civilian and criminal trials of the detainees at guantanamo bay in the united states. since the coast guard keeps coming to the rescue over and over again, and since it is very

difficult to find anyone who agrees with the plan to try guantanamo bay detainees in major cities, does it not make sense for the administration to submit a revised budget to support the coast guard using those funds? >> i would be happy to transmit that message to the white house. >> sounds like the beginning of a meeting of minds. i hope. senator landrieu. >> madam secretary, could i comment -- could you comment on a letter that i understand you received about a question we ask about the in addition to fulfill their obligations. a copy of that letter is in public record. would you comment on your understanding about what they

wrote, which is pretty clear? we are prepared, they say, to pay $75 million on these claims and will not seek reimbursement from the u.s. government or from the trust fund. we reserve our right to recover from other parties that may be responsible. you have received this letter. what is your understanding of their response? >> my understanding is that they are going to pay all of the legitimate claims. i think they mean non-fraudulent claims. and without respect to any cap, whether or not it applies, but they seek the right to recover contribution of the likewise from other entities such as transocean. >> let me ask you about claims. there are thousands of individuals and businesses that are concerned. some have already been directly affected. some are thinking they may be

affected, and because there is somewhat uncertain about the situation, we do not know how long it will go on. it is important, i think, to try to be as clear as we can about how people might actually received assistance. a reading of the oil pollution regulations act indicates that the trust fund may not reimburse clients for the costs they incur in repairing and filing their claims -- preparing and filing their claims. i know you are trying -- your office the reports to you is trying to make this process as simple as possible, and i have been told by bp that they are trying to make it as simple as possible, but i am wondering if you can comment on the availability of technical assistance under the existing claims regime -- it is clear that people cannot be and

reimburse for an accountant that they might have hired to get the documentation in order, they cannot be reimbursed for x, y, and z. we're trying to keep people from being out of pocket on anything. are you familiar have on how these claims are actually being paid? can you give any comment and get support from additional resources to help people? >> the continual and involving nature of this event and some of the questions that are being posted day are of all the answers as well. but there is a claims process, there are 800 numbers, there are roll over numbers if you cannot get through on that. bp has opened the way to file a claim on the internet. the issues you will raise -- how does someone get reimbursed for -- let's say you own a small business and you have had to hire someone to come in and get your records together about what

lost properties you have had, because you're not able to sail during the season. those of the kinds of issues that we will now begin looking through. we have had some great people on the ground there working through these issues in the unified command center. you are right -- they do report to me. they're the same people that help us with cleaning up the remaining katrina claims that were there when i came into office. so those of the kinds of things that we are working our way through. they are the kinds of things that i suggest that if your constituents are asking you, if you would fall or those questions to us so that we know -- the question has arisen out there, what is the answer? if there is not an answer that we can shoot it to you, it means that we're not work our way through it.

>> i will submit it because we found this to be very helpful in providing some grant assistance to nonprofits and others on the ground assisting fishermen and small businesses, because the documentation is important. you have to verify your claims are legitimate. but if you do that to some of these businesses, it costs them money to prepare these documents and we want to make sure that we do not put businesses in the gulf coast at any more of the disadvantaged that they already are. they also need help applying for aid from other government programs like sba loans, and this is money that has been appropriated. so i thank you for your comments. my time has expired. i will for those request to you. >> thank you, senator landrieu. senator pryor has indicated he has no more questions. so secretary napolitano and rattled neffenger, thank you for your comments today.

secretary, what you're doing with secretary salazar to come out with a reform package, the best way i can think about it, to make sure that we'd better prepare -- we'd better -- we better prepare for a deepwater exploration of this type, and for now thank you very much for what you are doing every day. we won all called to the stand our second panel, lamar mckay, chairman and president of bp america. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010]

>> mr. mckay, good afternoon. i appreciate you being here. you've heard but the questions and answers and that testimony of secretary napolitano and admiral neffenger. >> members of the committee, my name is lamar mckay and i am president and chairman of bp america. we have experienced a tragic set of events. nearly one month ago, 11 people were lost in the deep water rise and rick -- horizon rig and 17 others were injured three my deepest sympathies go out to the families and their friends who suffered such a terrible loss.

those in the gulf coast communities are being severely impacted by this. and their livelihoods are being terribly impacted every day. i have seen the response first and. i have talked with the men and women on the front lines. there is a deep and steadfast resolve to do everything we humanly can to stop this. to stop the leak, to contain the spill, to fight it off shore, to fight it at the shoreline, to clean it up, and to deal with the economic impact that it has caused and will cause. as a responsible party we will carry out our responsibilities to mitigate the economic impacts of the incident. our efforts are part of the unified command that was

established within hours of the incident. it provides a structure for our work with the department of interior, the department of homeland security, other federal agencies as well as state and local governments. we have pledged our commitment to work with president obama and members of his cabinet and the governors, congressional members, state agencies, and local communities of mississippi, alabama, louisiana, texas, and florida. we appreciate the leadership, direction, and resources that they are all providing. i want to underscore that the global resources of bp are committed to this effort and have been from the outset. nothing is being scared. everyone understands the enormity of what lies ahead and is working to deliver an effective response. at the wellhead, on the water, and on the shore head. before i describe our our round-

the-clock response to these events, i want to reiterate estimates to find out what happens. the are really two the lines of inquiry here. first is what caused the explosion and fire on board the transocean are rising region horizon rig. and why did the blowout preventer, the key fail-safe mechanism, fail? we're cooperating with the joint inquiry as well as investigations by congress. in addition, bp has commissioned an internal investigation whose results we plan to share so that we all learn from these terrible events. in the meantime, we cannot draw any conclusions before all the facts are known. we will continue full speed ahead with our investigation, keeping all lines of inquiry open until we find out what

happened and why. at the same time, we are fully engaged in our response to the devastating event. now our sub sea efforts to stop the flow of efforts are advancing on several fronts. our immediate focus is on the riser injections insertion to that we talked about just prior. this involves placing a tapered riser to into the existing damaged riser, which is a primary source of the late, until the water tight closure is a cheap -- gas and oil then flows on moderate its own pressure up the roster to to the enterprise drill ship on the surface. we have successfully tested and inserted the tube into the leaking riser, capturing some oil and gas, and although this test was temporarily halted when the tube was dislodged, we of sense successfully reasserted the tube. we're now in the early stages of stabilizing the system aboard

the enterprise. that is 5,000 feet above of the water surface. are additional effort is known as a top kill, a proven industry technique to capping wells that had been used worldwide, although never at 5,000 feet of water. it uses a tube to inject an mixture of fibrous material directly into the blowout preventer to block the flow. this procedure is ongoing and the attempt could take one to two weeks. we also developed a modified containments on strategy. as you know, initial efforts to place a large containments some of them may -- over the main the leak song was suspended because of methane crystals. a second smaller containment dome, being called a top hat, is

actually on the sea bottom. it is designed to mitigate the flow of large volumes of hydrate. the technology has never been used at this depth. we're working to address the remaining technological and operational challenges, should we need it. we also tested injecting disbursement directly at the leak, on the seafloor, under this anbar model protectants the agency and cause court approval. it first acts by separating oil into small droplets that can break down more easily through natural processes before it reaches the surface. some are testing in areas of photographs showed encouraging results. the unified command supported by the epa and other agencies has approved additional sub-sea applications subject to ongoing protocol. we also began the drilling of two relief wells on sunday may

2, and as of may 16, this well had reached approximately 9,000 feet below sea level. a second drill ship has arrived on site and yesterday began drilling a second relief well. the entire relief well operation could take approximately three months. finally, we have succeeded in stopping the flow from one of the three existing lead points on the damaged well. all this may not affect the overall flow rate, it should reduce the complexity of the situation to be dealt with on the seabed. on the open water, we have a fleet of more than 750 response vessels that had been mobilized. in addition to using approved by a degradable disbursement at the weak point, we're attacking this bill with epa and coast guard approved disbursements on the surface. to protect the shoreline, we are implementing but the u.s. -- what the u.s. coast guard has

caused the most massive shoreline protection effort ever mounted. awesomely 1.7 million of boons were not deployed with that additional be available. 17 staging areas are in place and many volunteers have come for to offer their services. to ensure the rapid implementation of state contingency plans, we provided $25 billion to louisiana, mississippi, alabama, and florida. we recognize that beyond the environmental impact, there are also economic impact in many of the people who rely on the gulf for their livelihood. bp will pay all necessary cleanup costs and is committed to paying all legitimate claims for other loss and damage is caused by this bill. -- this spill. we are expediting payments to individuals and small-business owners whose livelihood have

been directly impacted by this bill. the men and women who are temporarily unable to work. we paid out over $13 million to claimants, mostly in the form of lost income interim payments. we continued to replace this income for as long as the situation warrants. we're responding to claims as quickly and efficiently as possible. starting this week, we will have been placed on online claims filing system, and our call center is open 24 hours a day, seven days a week. we have 12 walk-in claims offices opened in louisiana, mississippi, alabama, and florida, and we will open at least five more this week. their staff by nearly 700 people with almost 350 experienced claimed adjustors working in the impacted communities. we will continue adding people, offices, and resources for as long as required. we're striving to be responsive

and fair. we're taking guidance from the establish regulations and other information provided by the u.s. coast guard, which handles and resolve these types of claims. tragic as this accident was, we must not lose sight of why bp and other energy companies are operating in the offshore, including the gulf of mexico. the goal provides one in 3 barrels of oil produced in the united states. it is a resource our economy requires. bp and the entire energy industry are under no illusions about the challenges that we face. we know that we will be judged by our response to this crisis. we intend to do everything in our power to bring this well under control, to mitigate the environmental impact, and to address economic claims in a responsible manner. no resource available to this company will be spirit. i can assure you that we and the

entire industry will learn from this terrible event and emerge from its stronger, smarter, and safer. thank you for the opportunity to appear before you today. i stand ready to answer your questions. >> thanks, mr. mckay. i appreciate your statement. i know that the company has been doing everything that it has been asked to do and sometimes more since the accident occurred. i want to come back to the line of question that worries me as we try to learn what happened. the fact is that in recent years bp and other energy companies have been increasingly drilling for oil in deep water. and as bp representatives had indicated, including yourself, i think, in this crisis, deep water presents a different sets of challenges from other

offshore oil drilling. as i look at this process, it seems to me that the mineral manages -- minerals management service did not ask us enough of you and other companies doing deep water drilling. the companies did not do enough themselves, including bp, to prepare for an accident just like the one that has occurred. very briefly by way of background, i noticed there was the study referred to me the other day, financed at least in part by bp -- you may be familiar with it. it said that blowouts' will always happen no matter how far technology and training in dance. another press report which i have not confirmed but i believe

is correct says that blowout preventers have failed in as many as 14 other accidents since 2005, although obviously none has consequential -- none as consequential as this. so the metal management services required an oil spill response plan. but if i looked at it, if mostly tends to be all plan related to effects on the surface. although in one part of it, you were required to address the effect of anon "-- uncontrolled blowout resulting in oil flowing for 30 days from deepwater, i do not think at this depth. there is nothing in the plan that ic that addresses -- i see that addresses how you stop the

leak under the water. so my question is, as you look back at this now, as your company has been jolted, and even though it is a massive company, its economic strength has been threatened by this accident -- why wasn't more done as more of deepwater drilling was done to deal with the consequences of an accident if it occurred at that depth? >> this as you know is a unique and unprecedented event. the spill response plans that are required by regulation are extensive. i could talk about that in detail. in the sub-sea, as you rightly

point out, there are no major regulations requiring sub-sea intervention plans. as we look at this accident in hindsight, we will have to look at what kind of sub-seat intervention capability is planned or could be available. i would like to say that as the sub-seat resources are tremendous, we have to read deep water rigs working simultaneously in an unprecedented situation. >> i do not all of you on the research situation. i know that you've done everything it possibly could. but to me, the tragedy of this is that when that. >> was first lowered over the leak -- that a dome was first lowered over the leaked at such temperatures and high pressure, it struck me that if you had than ask by government or chose

yourself to test that system before an actual blow out, you would have known that gas hydrates would form and that would be ineffective. we have been watching and you must feel as much distress as the rest of us at how this scurrying around to try to find a way to close elite at -- the leak at that depth. i feel that the government -- i did the government should have demanded, the mineral management services should have required it before giving a permit that there be a plan to deal with this kind of explosion, or you should it your own economic focus should have done it yourself. >> could i comment on that? >> please. >> the work that is going on is

multiple parallel, simultaneous to try to get this under control. he mentioned the hydrates, we knew that hydrates could be a problem for that is something that we could try and get going and try to get it to work. this fluid is very specific in you do not know until you try it. one of the complicating factors in this situation, we've got a blowout preventer that should have worked. we've got manual intervention at the man it -- if the blowup prevented it did not work. and now we have riser package on top of that that did not release. in many blowout situations, you mentioned 14 around the world, there have been more. you can get on top of the blowout preventer. this event has lakes along the riser. it is very unique. understanding sub-sea intervention capability and what are the plans, the plan as a model --

where the resources, how'd you get them -- i agree that that needs to be looked at. >> i appreciated and i agree that that is the case. we also agree that too much reliance was put on a blowout preventer. i am not an expert and i know more than i did before come but as i see a blowout preventer, it is a piece of equipment that sometimes fails, particularly operating in unusual environments like 5,000 feet under the water surface. as you look back, did you in the government put too much faith in the blowout preventer as the last line of defense? >> it is one of several lines of defense. it is considered a fail-safe mechanism when you get into an emergency situations. there are other lines of defense that have to fail before you get there like the cement casing,

and then well control procedures, and the blowout preventer is considered to be the methodology when you get in trouble to shut the well and release the rig and let it get away. i cannot comment until we know what has happened. double final question and then i will yield to senator columns. on the relief wells being dug, it's quite remarkable that there are two of them -- two ways to get to where the problem is way under the surface under the water. which one gets there first -- two quick questions. the same question i asked the coast guard -- do you have a high degree of confidence that if everything else fails before then, that this is the one that that that will work? >> we do have a high level of

confidence that the relief well will be -- will work. relief wells are used to control blowouts and permanently seal weld. yes, we have a high degree of confidence. >> i appreciate hearing that. if as you said quite openly and directly that it could take three months, if all else fails this well could be spelling water into the gulf -- do you account from the day of the accident or drilling started? >> roughly three months to drill each well. >> this could take us to the end of july or august. >> we are doing everything that we can. and trying to stop a head of that. >> understood. >> mr. mckay, i know that bp is

trying it can think of to stop as well from gushing. it feels like you are making it up as you go along, that no one really knows what will plug this well, what will stop the oil from gushing, particularly since this has been so complex because you are dealing with a leak in the riser pipe. it is not one source of leaking. what i am trying to better understand is the response plan. i do not doubt at all that you were throwing everything possible at this problem and you have extremely talented people working night and day and that you are fully cooperating with the government', but i am concerned that it seemed that no one had really planned for this particular scenario.

is that accurate? is that perception correct? >> let me first say that this is an industry effort, not just bp. we have over 90 companies working just in the houston office to get the intervention that we are talking about done. there was not a response plan for saying -- per se for riser blow out on the relief bed. the plan for relief wells was not cemented but was available to be worked up very quickly. the other options that we're pursuing, the first and foremost was to get the blowout preventer closed. we had to do that in a situation where it has never been done before and we run into some issues with a blowout prevention that did not allow that to happen. while we're doing that, we were pursuing containment and collection systems, one that did not work very well, relief

wells, and the surface responses that we plan. as well as a way to kill the well from the top of the blowout for vendor. one thing the admiral mentioned earlier that i want to highlight, it has taken awhile to see inside that blowout preventer and understand the pressures. you can raise and pressure probes to understand what is happening. then we can delineate and reduce risks for the next set of interventions. unfortunately we are frustrating -- we're frustrated as anyone that it is taken this time toward we want a risk analysis at around everything that is important and we're being diligent about that. it is transparent as well so everyone sees exactly what we're doing. i would say that we're not scrambling around three know, i cannot say that we have a plan to head all of these intervention at this but those were triggered from day one to get going on all of these options as quickly as we

possibly can. >> bp did file a regional response plan for the gulf of mexico. in that plan, the worst case scenario that you present for offshore drilling is one of high as capacity well experiences an uncontrolled flow out volume of 250,000 barrels per day. that is way more than this terrible blow out. what is different? is it that debt of the water -- the depth of the water? was this plan for shallow water? >> the response plan you mentioned contemplates worst- case scenarios. the planning itself envisions what resources are available in the gulf coast, how would they be organized, how would they be

deployed, details about who would be called win, and how the resources would be blocked in. whether it was a higher rate volume or other, we're enacting the plan with the coast guard and homeland security and other agencies, noaa, as you have heard. that plan has formed the basis for what we're doing. that plan has been robust and i think it is the largest effort ever mounted, and i think it has had an impact on what happened with this bill. >> but did that plan seek -- speak to how you contain the oil once it has billed as opposed to how you stop it? >> no, i am sorry, that particular plan is under current regulations more surface spill response plan for you are correct. >> that is my point. it seems like we're now in the scenario that was not envisioned.

>> i think what i would say is that we are learning a lot from this and i think we will have to revisit what these plans mean in terms of intervention and the ability to contain or deal with something like this. >> i am told that two countries -- norway is in brazil -- require a backup mechanism to communicate with blowout preventers known as a cook -- and acoustics which rigid -- an acoustic switch, which is not required in the u.s.. should it be? >> we do not things up, because we had three triggering systems for the blowout preventer and then a manual intervention. this acoustic devices essentially another triggering device. it would have to be looked at through the investigation to see a fact that at some positive

redundancy into the system. i do not know but i do not believe that it would have made a difference. >> do you think that u.s. regulations should be reformed to require this as a backup? even if it would not have helped in this situation? >> i think the regulation should be looked at. anything that would make this a lower probability in safer should be looked into. >> there has been reports that the battery on a blowout preventer was dead. have you confirmed that to be the case? >> a blowout preventer on the rig in the riser and all of the equipment are the property of transocean. i am not familiar with the condition of the batteries. obviously the investigation -- multiple investigations will look into that. >> you do not know whether or not -- to learn know, i do not. >> are there other special requirements that mms should

impose on companies that are drilling in deep water that are different from the requirements for shallow water drilling? >> there are extensive regulations around deep water, very extensive. >> are there additional ones that you think we should take a look at? >> we are learning what this and we're going to share everything we learned with industry and the government. i do think that some of the topics that we should look at have already been talked about. testing blowout preventers in enhanced ways, maybe extra redundancy and various systems, those of the questions that are being asked and the investigation will help us understand what happened. and i am confident we will figure out what happened. that is a very important thing and i am confident of that. >> thank you. >> thank you, senator collins. >> first like to submit senator

landrieu's questions for the record. >> without objection, we will for them to the witnesses. >> thank you, mr. chairman. i had some questions of mr. mckay. if you cover this in your opening statement i may have missed it. does bp havoc estimate of the cost of the company? >> no. >> the law says that bp is the responsible party and you have confirmed that to date. i appreciate that. you have mentioned that you will pay for the cleanup and all legitimate claims. that sounds good and all of that but a year from now, will we be sitting here in this committee or through constituent services like senator landrieu has, will be sitting here and learning of industries that are not covered by this and may be in direct

losses, things like that? >> our intention is to cover all legitimate claims associated with this incident. we've been very clear that the bp resources are behind this. we are clear to accept our duties as a responsible party. we intend to fully, fully lived up to that. we intend to stick with it. we're being what i think it's fair, responsive, an expeditious about how we're addressing claims. we continued -- we intend to continue that. our intention is exactly as stated. >> let me ask you about what might be the definition of a legitimate claim but also might be subject to argument, and that would be a seafood restaurant. it gets its food from the gulf and if this is disruptive to them, what they qualify for a

legitimate claim? -- will take guidance from agencies, and the coast guard has acted for years in determining the legitimacy of clams and we will look to that for guidance. >> i understand that the way these drilling platforms worked out in the gulf coast is that bp's name is the big name but there are lots of co-contractors and other companies involved. will bp will be looking to those companies as well or individuals looking to those companies separately? tell us how that works? >> a me say very clearly. we are concentrating on two things, to get the leak stopped and cleaned up, and then secondly, we as the responsible party will do with the economic impact. we will put blame a liability -- that is not our concern right now.

>> let me ask you about the environmental damage that this bill will cause. like senator lieberman said a few moments ago, there are additional reports about the woes of well under water. to me, that is counter intuitive because i thought oil was lighter than water and it goes up to the surface. can you tell us about that? >> i am not familiar with the details of the claim. i understand that noaa put out a press release questioning what that means. this oil does dispersed naturally as it is rising in the water column. not all that makes it to the surface. those particles are very small and they disbursed to the currents and through the water columns and gradually dissipates. i think what we're interested again, if someone has data on a plume to the terms of its extent, we would want to get that data. but we should be conscious --

cautious about defining what kind of plumes route there. >> you have mentioned sonar. can you determine sonar to determine where the oil is in the water? >> to a certain extent. we have used it at the sub-sea leak. you can tune it to different sizes of particles. yes, it is helpful. right at the leak point, it has been helpful. >> and the disbursing agent that you're talking about, there have been some reports that these might be more toxic than the oil. >> the dispersals that had been used, they are preapproved, those are biodegradable, they are less toxic than the oil spill, and to let everyone know, one of the things about sub-sea is the efficiency of the

disbursement for volume of oil content is quite a bit lower than at the surface. >> i do have a concern and others do as well about the existence -- the impact this will have on sea creatures like coral and sponges that act as filters for the assertion and that these may not survive in the oil-type environment. do you any estimate on what we're looking at here? >> note, we do not but we are in the process to understand that and that is noaa as the lead trusty in the study that we're participating in to do a natural resources assessment. that includes baseline as well as potential damage. but it's easy to think about oil that washes up on the shore and beaches. is that the way old as on the sea floor? does it claim to the sea floor for some are -- does it cling

to the sea floor? >> some well and some will make it to the shore. this is a very light oil, so even in the current, it goes to an emulsion. what we have seen where we have seen anything at all our emotions. >> there are ways to collect those in the water. >> in the water, i cannot say. >> is it safe to say that the environmental consequences of this bill may go on for years? >> we do not know the length of the consequences but we do know that we will be working with the federal agencies to understand, monitor, and deal with those consequences. >> i hate that as this next question but we have to. what with the attacks of a hurricane bay?

-- what would be a fax of a hurricane be? the lawyers we are aware that hurricane season is upon us and we're doing everything that we can to get the stock before then. should the hurricane occur, it would be difficult to project but we will be dealing with it in the best way that we can with moving resources out of the way and dealing with any of the impacts of this all going ashore. >> mr. chairman, i have one last question this round. it it follows with that last question and it would be -- today, what percentage of the oil has been recaptured? you have a chart that shows different ways to get rid of the oil or recapture the oil? what percentage of did have we been successful in getting rid of today? >> i do not have a number but i think it is a relatively small percentage. >> thank you, senator pryor.

mr. mckay, thanks. i appreciate your testimony and all you're trying to do. i must say that in terms of lessons learned here, i end up where i began which is that oil companies have been doing a lot more deep water drilling. you're doing it to respond to a demand and in some sense we are all benefits. our economy and people are all benefiting from this production of oil from offshore in american territory. we went ahead and did debt -- that without proper preparation for how to respond if there was an accident that deep under the water, and this has been -- to call it a wake-up call is 7 horrendous understatement.

i wish that you had done more to prepare for this but i must say as a member of the u.s. senate i hope that the federal government responsible for continuing to issue permits for deep water drilling without demanding that the companies to receive those purpose be prepared to deal with the effects of an accident, an explosion, to be better prepared to stop the leak under water then obviously you are now because you have never had to do this before. and also to deal with the environmental consequences and to be prepared not only to stop the leak but to deal with the accumulation of water if those steps in a way that is not clear -- accumulation of oil what those steps that is not clear to

me that we are able to do. those of the big lessons learned. they are painful lessons learned including your company. to restate what i said before, i hoped and prayed that everything you are trying to do to stop this oil from foreign oil into the gulf works. -- from the warring -- pouring oil into the golf course. >> mr. chairman, i wanted to make one final comment. all of us have raised -- have questions today. we are obviously cons -- extremely concerned about the crisis and the long-term implications. but in the interest of fairness, i do want to the knowledge that bp and mr. mckay have fully cooperated with our inquiry, have not tried to get

out of testifying today, and sadly that stands in stark contrast with the government agency, the mms, which refused to come testify today. i think it is only fair to knowledge, and happy though we are that the situation that we're in, that mr. mckay has fully cooperated with their inquiry. >> thank you for bringing that up, centered collins. i appreciate your cooperation and i do not appreciate the failure of mms to come. secretary salazar will testify tomorrow before the senate energy commission. i understand the broad of seed -- the prerogative that the agency has to go before its committee of jurisdiction first. i hope those committee members will ask about the conduct of the mineral management service and the kind of demands they

make for oil spill response plans, and just to restate the intention of senator collins and me to all the minerals management service's before our committee at some appropriate time in the not too cute -- too distant future to answer those questions if they are not answer to more. in the meantime, i thank you. the record of this hearing will remain open for 15 days for the submission of our -- -- of other statements. with that, the hearing is adjourned. thank you.

>> tonight on c-span, campaign events from the special event in pennsylvania's 12th congressional district. the first rally for a democrat with bill clinton and johnstown, pa. 3 our rally for republican can hearns with massachusetts senator scott brown in washington, pennsylvania. but candidates are running to serve out the remaining term of the late representative john murtha. that is tonight on c-span.

>> but thinning the united states again cyber attack. tonight, homeland security deputy undersecretary reitinger with the work and the role of private networks inside security. "the communicator's" on c-span2. >> c-span -- our public affairs content is available on television, radio, and online. you can also connect with us on twitter, facebook, and youtube. sign up for schedule alert e- mails at c-span.org. >> the state department said today that efforts to impose new sanctions on iran will continue, despite a deal with brazil, turkey, and that country over their program 3 details remain to be worked out. iran may transfer some of its material to turkey for processing which would prevent that material from being used in a nuclear bomb. that briefing is just under 40

minutes. >> good afternoon and welcome to the department of state. we have a number of issues to talk about before taking your question. today secretary clinton led the department of state in a moral service honoring the embassy port-au-prince earthquake victims. it recognized the service of u.s. embassy staff that died in the january 12 earthquake and acknowledge the extraordinary work of embassy personnel in the aftermath. we had to american and six locally employed staff that died as a result of the earthquake that tell more than 230,000 people. two american officers and a center for disease control member. in additional to the embassy employees one major was killed as well as his wife and two children to read and or -- an

air force officer and many families of our local haitian staff. assistant secretary dallas love gave awards to those people in a ceremony following the ceremony. secretary clinton dropped by for a few minutes this morning in a meeting between bill burns and the deputy prime minister as they discussed various bilateral and multilateral issues, including iran, the new start treaty, and the 123 agreement. they noted the smooth operation of the agreement reached last july with regard to afghanistan. the secretary remarked during her brief. with them -- brief period with them to success in a relationship between the united states and russia, and a

positive view of the direction of our relations. the minister came to washington from serving -- observing the launch of a rocket at cape canaveral. cernan -- turning to senior legal writ -- senior little trouble, one met with a group to improve democracy and governance 30 launch a new program for sustainable agriculture called food and effectiveness and a former project, and visited a usa ided-funded health clinic. he risked -- you're right over the weekend -- he arrived and visited the camp of displaced people supported by usaid humanitarian assistance in dark for. he held a series of meeting with international partners in south

darfur to discuss challenges with the world food program, and the u.n. population fund and other un agencies and humanitarian ngos. the undersecretary for global affairs is on route to indonesia where she will engage this week with government officials, non- governmental organizations, in a range of security issues for political, economic security, to environmental, human rights, and other issues, the range of which the united nations and indonesia can cooperate. this evening, george mitchell departs for the next round of proximity talks he leaves the united states tonight and will have meetings with palestinian officials on wednesday and israeli officials on thursday. also in the region, an assistant